A mortgage holiday — also known as a mortgage payment holiday or payment deferral — is a temporary pause in your mortgage repayments, agreed between you and your lender. While the name might suggest a welcome break, it's essential to understand what it really means for your finances before you consider taking one.
In this guide, we'll explain how mortgage holidays work, who can apply, and what the long-term implications might be for your financial situation.
What Is a Mortgage Holiday?
A mortgage holiday allows you to temporarily stop or reduce your monthly mortgage payments for a set period — typically one to six months. It's an arrangement made directly with your lender and is usually intended for borrowers facing a short-term financial difficulty.
Crucially, a mortgage holiday is not free money. Interest continues to build on your outstanding balance throughout the break. This means when your repayments resume, your total mortgage balance will be higher, and your future monthly payments are likely to increase.
How Does a Mortgage Holiday Work?
When you take a mortgage holiday, your scheduled monthly repayments are deferred for the agreed period. Once it ends, your lender recalculates your remaining mortgage balance — which now includes the interest that accrued during the break — and spreads the new total across your remaining mortgage term.
This means your monthly payments after the holiday will be slightly higher than before, and you'll pay more interest overall across the life of your mortgage. It's a short-term solution with a long-term cost.
Who Can Get a Mortgage Holiday?
Each lender has its own eligibility criteria, but you may be able to apply if:
- You are up to date with your mortgage repayments.
- You can demonstrate a genuine short-term financial difficulty, such as redundancy or a significant drop in income.
- You have sufficient equity in your home (some lenders require this).
- Your mortgage is not already in arrears.
If you are already struggling to make your mortgage payments and have fallen into arrears, a standard mortgage holiday may not be available. In that case, contact your lender as soon as possible — there are often other support options available.
Will a Mortgage Holiday Affect My Credit Score?
This is one of the most common concerns. In general, if your lender formally agrees to the mortgage holiday, it should not negatively affect your credit score, as the missed payments are recorded as agreed deferrals rather than arrears.
However, if you simply stop paying without notifying your lender, your account may be recorded as being in arrears — which will damage your credit history. Always agree any holiday formally and get written confirmation.
How to Apply for a Mortgage Holiday
- Contact your lender early: Reach out before you miss a payment — ideally as soon as you anticipate a problem.
- Explain your situation: Be prepared to outline why you need a break and for how long.
- Get it confirmed in writing: Any agreed arrangement should be documented so both sides are clear on the terms.
- Plan for afterwards: Think ahead about how you'll manage the slightly higher repayments once the holiday ends.
Alternatives to a Mortgage Holiday
A mortgage holiday isn't always the best fit. Depending on your circumstances, one of these alternatives might suit you better:
- Switching to interest-only temporarily: Some lenders will let you switch to an interest-only arrangement for a period, significantly reducing your monthly payment without pausing it altogether.
- Extending your mortgage term: Extending your mortgage term spreads your outstanding balance over a longer period, reducing your monthly payment on an ongoing basis.
- Remortgaging to a better rate: If your current deal is coming to an end, remortgaging to a more competitive rate could reduce your monthly outgoings significantly.
- Using overpayment reserves: If you have previously overpaid your mortgage, some lenders allow you to draw on this reserve to cover a period without making payments.
- Speaking to a mortgage advisor: A qualified mortgage advisor can assess your full situation and recommend the most appropriate option.
The Bottom Line
A mortgage holiday can provide genuine breathing space during a difficult period — but it comes at a cost. Interest continues to accrue, your balance increases, and you'll pay more overall. It should be viewed as a last resort rather than a first option.
Before making any decision, it's always worth speaking to a mortgage advisor who can help you weigh up all your options. If you'd like personalised guidance, get in touch with our team today — we're here to help.