Hi,

Is it madness to consider taking a mortgage repayment holiday to help save for a deposit for a new place? We had the amount for a deposit in our current property but with the price drop we're now well short of what we would need so have taken the flat off the market but are still desperate to move. We want to save as much as possible as quickly as possible.

Any advice appreciated.
Thanks

Hi,

Taking mortgage payment holidays will not allow you to save up a deposit. What they do allow you to do is to not make and payments from your bank for the agreed period of time. These payments you don't make though will be added onto your mortgage each month, so what you will find is you may have more funds available in your bank account, but you will also have less equity in your property. swings and roundabouts for what you are looking to do unfortunately.

Michael

Well, it's the funds in our bank account we're after for a while, but will in then increase our monthly repayments or the length of the term of repayment? Bearing in mind that when we buy we'll be increasing our borrowing any way.

Thanks,
Nina

Nina,

As Mick pointed out if you take a payment holiday the size of your mortgage balance will increase therefore reducing your equity so therefore cancelling out any savings you have deposited in your bank account. If you've taken your flat off the market I assume you are going to let it out if you buy somewhere else. If this is the case I doubt whether your existing lender will allow you a payment holiday and even if they do you will struggle to get a decent new mortgage deal without a deposit of at least 10%. If you do buy another property you will then have 2 properties with very little/no equity in them, 2 mortgages to service and I assume no savings behind you and don't forget we're in a falling housing market. As much as you say you are desperate to move you may be stuck until the market improves.

Hi,

We would put the flat on the market again and sell. So, if we have balance of £131K and repayments of £750 pm, by missing 5 months could we not save the £3750 and the balance remain at £131K? Sorry if I'm missing the obvious - this is why I need the advice! We would then have enough for a £17k deposit for a new place and increase our borrowing to £153k.

Thanks,
Nina

Would 3 months of mortgage payments really increase that deposit? If you are renting your place just move into friends/family for 3 months, saves you the cash and in a position to purchase no chain etc?

Shanks

Nina,

If you missed 5 payments at £750 the mortgage balance would go up by £3750 plus interest so roughly your balance would be around £135k so the extra £3750 you have in the bank will have been cancelled out by the increase in mortgage balance. You need to realistically consider what you can sell your flat for, take into account all moving costs (solicitors, estate agents, stamp duty etc), then work out what sort of deposit this will leave you to put down on your new property. If this is less than 10% of the intended purchase price you may struggle to finance your move. This may not be what you want to hear but alot of people are in the same position at the moment.

Hi,

Thanks for all the advice - just what we needed to know. Patience and the lottery are the answer!

Cheers,
Nina