Mortgage Payment Holidays

The COVID-19 pandemic will affect the incomes of many Irish households. Mortgage payments are usually one of the biggest household expenses and many people will struggle to make the payments if their income is reduced.

All the banks in Ireland can offer a range of financial supports such as payment breaks on mortgages or other loans.
This applies to mortgages on private dwellings and buy-to-let mortgages.

Mortgage Payment Breaks:

AIB Bank of Ireland KBC, Permanent TSB and Ulster Bank were originally offering payment breaks for mortgages up to three months.  All these banks have now said – that they can extend these payment breaks for to up to six months for households and businesses that require it.

If you have been affected by COVID-19 and are worried about making your mortgage repayments, you should contact your bank directly to discuss the options available to you.

Bank customers who require a break from repaying their mortgages or loans because of the impact the Covid-19 crisis is having on their finances will have to apply for one by 30th September 2020.

Landlords can also request payment breaks – so hopefully this will help tenants to negotiate something similar with their landlords during this crisis.

How Much Extra Will A Payment Break Cost You ?

Any missed payments are usually added on to the mortgage balance. So you will end up paying the missed payments eventually – but spread over the length of the mortgage.

The amounts involved will vary for each person depending on the mortgage amount outstanding and the length of time remaining on the mortgage.

Example 1
On a 3% mortgage with €100k remaining over 15 years.
The repayments would currently be €691 a month. Of that – €250 would be interest. So by missing 3 months of payments you will owe €750 in missed interest payments.
This €750 will then be spread over the rest of the term of the mortgage – and after the “holiday”, you’ll owe £100,750 over 14 years and nine months, meaning a new monthly repayment of £705. Which is an extra £14 every month. (But you did avoid paying €2073 during the holiday).
This would mean an increase in the total amount repayable of €395 compared to what it was before the payment break.

Example 2 You have £20,000 left on a mortgage at a rate of 4% over four years .
You are paying €452 per month, and about €67 per month of that is interest. So, after taking a three-month payment holiday, you’ll owe £201 of interest. This will then be spread over the rest of the mortgage. You will now owe £20,201 over three years and nine months, meaning a new monthly payment of £484. That’s an extra £32 every month.

In May – the banks said that both business and mortgage customers will now have the option of having the term of their loan extended instead of increasing the balance .
This would mean they wouldn’t face a rise in repayments when they start paying again but they will have an extra month or two repayments added to the end of the mortgage.

Personal Loans and Credit:

Flexible finance arrangements such as payment breaks are also being offered on personal loans and credit (credit cards, overdrafts, hire purchase, PCPs).
If, due to the COVID-19 situation, you are struggling to make your repayments and you wish to avail of a payment break, contact your bank or financial provider as soon as possible to discuss your options.

The Central Bank of Ireland have confirmed there will be no impact to the Central Credit Register (CCR) credit records of anyone who avails of a payment break as a result of being financially impacted by Covid-19.
These changes will not increase the burden on non-performing loans on the banks.
Find out more here about how to check your credit record.