Covid 19 Mortgage Repayment Skip, how does it work?
As you know, due to the coronavirus pandemic, the banks announced that they will offer mortgage customers a break from their monthly repayments originally up to 3 months, there was an update to this on 01/05/2020 where lenders agreed to extent this repayment skip for a further 3 months, so up to a 6 months repayment skip is now available for those who have had their income effected by Covid 19 pandemic For more on this extension click here
The lenders have not confirmed the detail of how this will work yet.
What is a Payment Skip?
The banking term of a payment skip is a Moratorium. This is not something new that the lenders have come up with, payment skips have been used for a long time now when people get into financial difficultly to give a little breathing space until the situation resolves itself.
So, how does a moratorium work?
Basically, you don’t pay the mortgage repayments for the term of the moratorium. It is important to realise though that those repayments don’t just go away. You will have to repay that money at some point.
When Ireland re-opens and work starts again, the lenders will assess whether mortgage holders can afford to repayment the skipped monthly repayment over the remaining term of the mortgage or does the mortgage term have to be extended. Currently they say both options will be available. Which option is best will dependant on your affordability.
If we assume you have 12 years remaining on your mortgage. When the moratorium is up, if you can afford to repay the months skipped on top pf your regular repayments, your repayments will increase, for the remaining 12 years, to repay the money not paid.
If we assume you have 12 years remaining on your mortgage. When the moratorium is up and after assessment it is shown that you can’t afford a higher repayment to make up for the months skipped, your repayments will not increase but your term will be extended by 6 months.
The downside to both options is that interest is being charged on the repayments skipped, for the remaining term of the mortgage.
The application process for a payment break is still cumbersome, involving long forms. Lenders are currently working to streamline this process.
Will your Credit Rating be affected?
Currently, a payment break does affect your credit rating, but the lenders are meeting with the Central Bank of Ireland to resolve this, as this is an unprecedented situation.
Should you take the moratorium or not?
Even though the option to take a payment skip is there should you take it?
There are financial implications to availing of a payment skip but sometimes life gets in the way of our plans, like now.
If you have lost your job or had your income reduced and are struggling financially than absolutely take the moratorium.
Peace of mind is the most important thing here, don’t let your mortgage repayments add more stress to an already stressful situation.
If your income hasn’t been affected yet, then don’t take a moratorium.
How do you avail of the payment skip?
If you need to apply of a mortgage repayment skip due to Covid 19. Our guide is correct as of 01/05/2020.
All lenders have now said they will be offering up to a 6 months (as of 01/05/20202) repayment skip to people where their income has be reduced or have lost their job due to Covid 19.
Please be aware that this is not a blanket skip for everybody and that proof will be required to show your income have been affected.
We have listed the lenders and have outlined how each lender wants you to interact with them to apply for the repayment skip.
Some lenders have an online form & some want to call them.
We have also listed some of the Mortgage servicing companies in this how to guide.