Mortgage Payment Break FAQ
Mortgage Payment Break FAQ
Updated: 6th May 2020
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The retail banks, non-bank mortgage lenders and credit servicing firms (sometimes called "vulture funds") have announced a further 3-month extension on mortgage payment breaks. Borrowers’ now have the option of a 6-month payment break.
If you have already applied for a 3-month break, you can extend it to 6 months. The same extension is available if you are yet to apply for a payment break. While a payment break can offer assistance to those who need it, it does come at an extra cost on the mortgage.
"The advice of MABS is to engage and pay whatever you can. Apply for a payment break as a last resort, and to contact MABS for support in assessing your situation before applying for a break. This is not free money, and will have to be paid in the future, which may incur an extra cost" - Michelle O'Hara, Regional Manager for South Leinster MABSTweet #Tweetable
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- What is a payment break?
- Why put a payment break in place?
- What type of payment breaks are available?
- What does a payment break look like?
- If I’m in mortgage arrears, can I get a payment break?
- I'm in a PIA or DSA and I need to access a payment break, what should I do?
- I'm in an alternative repayment arrangement (ARA) and I need to access a payment break. What should I do?
- I’m not in arrears, should I apply for a payment break?
- Will a payment break affect my credit rating?
- Are there any supports to help me deal with my lender?
- Are there other supports available for those already in mortgage arrears??
- How do I apply for a payment break?
It is a freeze on payments for up to six months, followed by ongoing reviews depending on the scale of your individual situation.
A payment break frees up your financial resources, meaning you can focus on essentials for your family such as food and utilities. This can help to remove some of the stress and anxiety you may be experiencing. If you are experiencing these feelings, the HSE have created a useful guide titled "Minding your mental health during the Coronavirus outbreak".
Moratorium Payment Break: This means full loan repayments stop for an agreed period. Once this moratorium period has finished, future loan repayments on the mortgage will increase. This happens because the loan must be repaid in its full during the agreed term.
Interest Only Payment: This means only interest is paid on the loan during the agreed period. Your monthly repayments will be less during this period, however, because you are not paying any capital (the amount you borrowed), your loan balance will not reduce during this period.
Bonkers.ie has created these 3-month and 6-month sample payment breaks to demonstrate how much extra you could be paying towards your mortgage over time. The below are based off a borrower paying an interest rate of 3.2%:
Note, these are only samples. The effect of applying a payment break on your mortgage might be different, meaning that the cost could vary from the example above.
Each application is reviewed on a case by case basis but, lenders are committed to supporting all borrowers during COVID-19, even those already in financial distress. Contact your lender directly. If you can't speak with your lender, then contact MABS where a dedicated adviser will be able to assist.
You should contact your Personal Insolvency Pratitiioner (PIP) immediately if you think you will not be able to make your personal insolvency arrangement (PIA) or debt settlement arrangement (DSA) repayments.
I'm in an alternative repayment arrangement (ARA) and I need to access a payment break. What should I do?
If you have an alternative repayment arrangement (ARA) that you've negotiated on your own, then contact your lender directly. If the ARA was negotiated with the help of MABS, then contact your adviser. If you are unsure, then we advise that you contact an adviser from MABS.
You should only apply for a payment break if you are out of work and are likely to fall into mortgage arrears. If you can survive financially and can continue making repayments as normal, it is recommended you do so. This prevents the unnecessary build up of larger future repayments. If you are concerned about your future financial stability, then we recommend that you speak with an specialist adviser from MABS. Money advisers from MABS are expert at reviewing your financial situation and will provide independent, confidential and non-judgmental advice.
Deferred payments are usually spread over the term of your loan but will result in an increase to the cost of credit on your loan. This means that when your repayments start again they will be for a higher amount as your lender will add the deferred payments to your overall loan balance and keep the term the same. Your lender will agree repayment terms with you on a case-by-case basis.
If you agree to a payment break with your lender under a COVID-19 application, your credit history will not be affected.
On March 30th, the Central Bank of Ireland (CBoI) has confirmed that there will be no impact on a consumer’s credit rating if they take part in the mortgage repayments breaks. Information on measures introduced by the main banks and credit servicing funds, or so-called “vulture-funds” was announced by the Banking and Payments Federation of Ireland (BPFI) on the 19th March 2020.
The full CBoI update is available here.
Yes – if you are unsure about your situation and next steps to take, it is always worth talking to someone about it. Contact your local MABS office to speak with an experienced adviser. If you struggle to engage with your lender, MABS can contact them on your behalf, taking some stress away from the situation.
Yes – borrowers can get free financial and legal advice through Abhaile. It is a Government funded scheme that provides support to people in long-term mortgage arrears. MABS is the gateway to Abhaile and working with the Insolvency Service of Ireland (ISI) and the Legal Aid Board (LAB), the scheme provides a wide range of help. To date, it has helped thousands of borrowers in mortgage arrears keep their home.
If you have assessed your situation, and think you need a payment break, contact your local MABS office or through our live chat to speak with an experienced adviser as you may have other options. If you've spoken to an adviser and have made the decision to take a payment break, the following lenders have introduced online applications for borrowers seeking a payment break:
The following lenders have introduced online applications for borrowers seeking a payment break:
To request a payment break with following lenders and loan owners, you must contact them directly:
This FAQ blog does not represent legal advice and is intended for guidance only. If you are concerned about your current or future personal financial situation then please contact a money adviser from MABS. All face-to-face consultations are currently suspended, however advisers are available by phone and email and through our live chat. Contact details are available here.
Originally Posted: 25th March 2020
Source: Bonkers.ie - Here's what a moratorium on your mortgage payments could end up costing you. (opens in a separate window)
Source: BPFI Press Release 25th March 2020 - COVID-19 Crisis - Banking and Payments Industry Support>. (opens in a separate window)