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Mortgage Payment Skip

As you know, due to the coronavirus pandemic, this week the banks announced that they will offer mortgage customers a break from monthly repayments up to 3 months, some banks say 6 months, or interest-only payments in certain circumstances.

The detail

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.

Currently what happens is that these repayments are made up over the remaining term of the mortgage.
If we assume you have 12 years remaining on your mortgage, when the moratorium is up, your repayments will increase, for the remaining 12 years, to repay the money not paid.
The downside to this 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 live 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?

The lenders have not provided any information on the process yet, so, for now you will need to call your lender directly. I presume they will come up with a streamlined process shortly. Once we know more, we will update you.

Questions

If you have questions or need advice, we are happy to answer your questions.

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