Mortgage Payment Holidays. With a mortgage payment holiday you agree with your mortgage lender to stop all payments for upto 6 months. Usually, this requires at least 6 months of mortgage payments to have been made already. During the period of a mortgage payment holiday, interest will continue to accumulate and the overall final total cost of the mortgage will be greater. During this period you will continue to accumulate interest but do nothing to pay off the mortgage capital. A payment holiday could be invaluable during a period of temporary unemployment. But, there is a definite limit to how much you can make use of payment holidays. Ideally they should be seen as a fall back option, rather than a desirable feature.
If you are having difficulties with making your mortgage payments there are also options, less severe than taking a mortgage payment holiday. These include:
- Extend Mortgage Term. Reduced monthly repayments in return for longer period of repayment. Will increase total cost but make it more affordable in the short term.
- Interest Only Mortgages. This means you only pay the mortgage payments on your outstanding debt, leaving you with a small mortgage repayment, but higher total cost.
- Reduce spending. There are always various ways that we can reduce our total overall spending.
As an alternative to mortgage payment holidays, you may wish to consider take out insurance against unemployment. This will provide security for making interest payments even during times of extended unemployment.