If you are taking a payment holiday from your mortgage or credit-card debt, tread carefully. Not paying your bills – even with the approval of your lender – could lead to problems with your credit rating and cost you hundreds of pounds.
So far 1.6 million homeowners have taken a repayment holiday on their mortgage. It means you won’t have to make your monthly repayments for a few months, which could come in very handy during lockdown. But your bank is going to do very well out of the arrangement.
Lenders are set to make at least £821m in extra interest as a result of people taking a break from their mortgage repayments. The average borrower will save £2,256 in repayments over a three-month mortgage holiday. But they will ultimately pay £500 more than without the break because of the interest accrued on the unpaid sum.
Anyone taking a mortgage holiday also needs to be careful it doesn’t lead to problems with their credit report. Don’t cancel your direct debit until your lender has confirmed that your application for a repayment break has been accepted. Banks are struggling to cope with the number of customers wanting a mortgage holiday, leading to delays in approvals.
Those who miss a mortgage payment because a break has not yet been confirmed by the lender could be marked as going into arrears. This could affect their credit score and result in extra interest being charged. Even if you do everything by the book, a mortgage repayment holiday could affect your future ability to get a mortgage.
The Financial Conduct Authority, the City regulator, has confirmed that banks could take a holiday into account when they decide whether to offer a mortgage. The same advice applies if you are stopping your credit-card repayments. Your interest will continue to build, so you will owe more when you restart paying and it could affect your credit rating, even though it shouldn’t.
Some borrowers are taking a hit to their credit report as lenders accidentally report repayment breaks as missed payments. Pre-empt this by waiting until you have received formal approval for a payment holiday before you cancel your direct debit. If you have taken a repayment holiday keep an eye on your credit report.
Motivational Quote Of The Day
“Ambition, I have come to believe, is the most primal and sacred fundament of our being. To feel ambition and to act upon it is to embrace the unique calling of our souls. Not to act upon that ambition is to turn our backs on ourselves and on the reason for existence.”
Alternative Quote Of The Day
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Do You Have Hidden Assets?
Just read something, aside from being fascinating, may provide a ‘light bulb’ moment for someone.
BT’s network has 75 million miles of copper wire. At today’s price that’s worth around £50 Billion – which is more than three times the company’s market capitalisation of around £15 Billion!
So the company is worth far more in scrap value than it is for it trading and profitability potential.
Now I know the company aren’t about to throw in the Telecom’s towel and go into the scrap metal business, but that got me thinking; How many individuals and companies are sitting on big assets which they don’t really think about?
And is there a way they could capitalise on these assets outside of their regular trading activity. Perhaps it’s worth thinking about your own hidden assets. They may be more modest than BT’s but that doesn’t mean they can’t be life changing for you.
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