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Residential mortgage payment holiday

What is a payment holiday?

Payment holidays (also known as Payment Deferral) and partial payment holidays are designed to help you if you are finding it hard to make payments because of coronavirus. A payment holiday means you don’t have to pay your residential mortgage for up to 3 months. You will still accrue interest (unless you are told otherwise), and you will have to repay any deferred payments at a later date.

A ‘partial payment holiday’ is where you make reduced payments.

How will a payment holiday impact my monthly payments?

It’s important to remember that due to the increase to your mortgage balance, you will repay more over the remaining term of your mortgage. This means your monthly repayments will increase.

If you decide that a payment holiday is right for you and you choose to proceed, we will write to you regularly, providing you with a summary of the impact on your new monthly repayments and changes to your mortgage account.

If you’d like to find out what your new repayments might look like before taking out a payment holiday, an example of an independent online calculator is available here. You will need some account specific information to use the calculator. If you don’t have all the information required, please get in touch with us and we can provide this for you. You can call us on 0345 149 7764, or if your mortgage completed before 2010, then please call us on 0345 849 4060.​

Does this impact my credit rating?

Whilst taking advantage of a payment holiday, we do not report your deferred payments to credit reference agencies. This means it does not have an adverse effect on your credit file and any arrears status from before your payment holiday won’t increase.

However, we are required to report your account balance and any interest we charge to the credit reference agencies. Please also remember that whilst your payment holiday will not be registered as arrears with the credit reference agencies, it may be taken into consideration by lenders, along with other information provided by you or your bank, when making lending decisions. It is important to note that once your payment holiday ends, if you miss any of your monthly repayments, we will report these to the relevant agencies.

What should I do when my payment holiday ends?

We will contact you before your payment holiday ends to let you know the approximate new monthly payment. At the end of your payment holiday we will contact you again to confirm the exact figure. If you are concerned about the new payment amount you should contact us to discuss the other options we may have available.

If you can start repaying your residential mortgage, you should start to make repayments as this is in your best interest to do so.

The capital amount repayable over the term of your mortgage will also increase by any interest charged during the holiday period.

If you are concerned about being able to make your payments when your mortgage restarts, then please contact us to talk about the various options available to you.

What are my options when my payment holiday ends?

If you choose to capitalise your deferred payments and the accrued interest, we will recalculate your monthly payments over your remaining mortgage term. This means your monthly payment will increase to make sure you pay off your mortgage within the original term.

If you choose to extend your mortgage term, your monthly payment may remain the same. However, you will be paying off your mortgage for a longer period of time. Therefore, the total amount you pay back will increase.

If you choose to pay off your deferred payments and the accrued interest as a lump sum, your monthly payment and term may remain the same as before your payment holiday. You may also choose to pay a lump sum for part of the deferred payment or interest. You can combine lump sum payments with the other repayment options outlined above.

If, due to your circumstances, you’re unable to restart making payments towards your account, you should contact us straightaway so we can discuss the options available to you.

What if I’m still experiencing financial difficulty when my payment holiday ends?

If you’re worried about paying the new monthly amount when your payment holiday ends, then please contact us as soon as possible. We can talk about other options available to you, such as:

  • Extending your current loan term
    We may be able to extend your current loan term to make your monthly payments more affordable for you. However, this will increase the total amount you repay over the remaining term of your loan

  • Paying off your deferred payments monthly
    We can also offer a monthly payment arrangement, to help you repay your deferred payments from your payment holiday. This means your normal monthly payment will remain the same, but you’ll pay an additional amount to clear the payments accrued during your payment holiday

  • Making a lump sum payment to pay off your deferred payments
    You can pay off the deferred payments from your payment holiday in full as a lump sum. This means your normal monthly payment will remain the same, but you will still have a small amount of interest to pay at the end of your loan term

We can also let you know the impact this will have on your credit file and we may ask you to complete a financial assessment. This will help us to assess your affordability and make sure we agree the right solution for you and your circumstances.

However, if you are concerned about your finances at any point, then please don’t hesitate to get in touch with us before your payment holiday ends.

What if I need to extend my payment holiday?

If you can start repaying your mortgage, you should do so; even if you only make partial repayments. However, if you can’t afford to make any payments on your account, we can offer you a further 3-month payment holiday.

However, we need to make sure this is the right option for you, as an additional 3 month payment holiday will cost you more money in the long run.

You should view payment holidays as a temporary solution, as you will need to pay back the outstanding amount later.

If you are concerned about your repayments, then a payment holiday might not be suitable, and we’re happy to discuss alternative solutions.

Which option is right for me?

We can’t give you advice on which option is best for you, so we recommend you seek free, impartial financial advice. However, we can provide an overview of the options available for you to choose from.

  • A payment holiday – up to 3 months where you don’t have to make your usual monthly payments. However, we will still continue to charge interest on your account during this time, unless we tell you otherwise. A payment holiday is not recorded negatively on your credit file and you won’t accrue arrears
  • A partial payment holiday – up to 3 months where you make a reduced payment. We will still continue to charge interest on your account during this time, unless we tell you otherwise. However, this will not be recorded negatively on your credit file and you won’t accrue arrears. The impact of making partial payments to your account would be proportionately less than making no payments at all
  • Non-payment – up to 3 months where you don’t have to make payments. We won’t charge interest on your account, however this non-payment may reflect badly on your credit file as you continue to accrue arrears
  • Reduced payment – an arrangement up to 12 months where you make a reduced payment on your account. We report this on your credit file as an arrangement and you will accrue arrears. We may also continue to add interest to your mortgage balance
What if I am on a concessionary rate?

If we have agreed a reduced rate of interest on your account, this won’t change. When your concessionary interest period is coming to an end, we will contact you to let you know how this rate change will affect your monthly payments and any steps you’ll need to take.

Organisations that offer help and advice

We understand that these are very difficult and uncertain times. If you do have any concerns about your financial situation, we recommend you seek free independent advice.

For further guidance on the support available during the coronavirus pandemic, you can contact one of the following organisations.

Money Advice Service Coronavirus

For support, visit www.moneyadviceservice.org.uk/en/articles/mortgage-payment-holidays

FCA

For information on dealing with financial difficulties during the coronavirus pandemic, visit www.fca.org.uk/publications/finalised-guidance/information-consumers-financial-difficulties-coronavirus

Here are also the details of some of the organisations which offer free, confidential and impartial debt advice.

Money Advice Service

For free, easy-to-use money tools, information and advice, visit www.moneyadviceservice.org.uk.

You can also phone 0800 138 7777 to speak to a money expert, use typetalk at 18001 0800 915 4622, or add +44 7701 342744 to your WhatsApp to send a message.

Citizens Advice

For advice and information on debt and other topics, contact your local Citizens Advice or go to www.citizensadvice.org.uk

PayPlan

For free debt advice and management plans, call 0800 280 2816 or visit www.payplan.com.

Mental Health and Money Advice

For clear, practical advice and support for issues with mental health and money, visit www.mentalhealthandmoneyadvice.org.​

AdviceUK

Member centres offer debt advice including specialist advice for minority communities and people with disabilities. Visit www.adviceuk.org.uk

Christians Against Poverty (CAP)

For free debt advice. Check postcode coverage at www.capuk.org then call 0800 328 0006.

National Debtline

If you live in England, Wales or Scotland phone 0808 808 4000 or visit www.nationaldebtline.org for debt advice and information.

StepChange Debt Charity

For free debt advice throughout the UK phone 0800 138 1111 or visit www.stepchange.org

Money Advice Scotland

If you live in Scotland, visit www.moneyadvicescotland.org.uk where you can use webchat to speak to an adviser.

Advice NI

If you live in Northern Ireland, phone 0800 028 1881 or visit www.adviceni.net

Business Debtline

If you are self-employed or a small business owner, phone 0800 197 6026 or visit www.businessdebtline.org for debt advice and information.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551