Calculate the Cost of a Payment Holiday
Frequently Asked Questions
How does a mortgage payment holiday work in the UK?
A mortgage payment holiday is an agreed break from making your monthly mortgage payments. During the holiday, interest continues to accrue on the outstanding balance and is added to the loan. After the holiday ends, you either pay a slightly higher monthly amount for the remaining term or your term is extended slightly. You must apply to your lender in advance and obtain formal approval — you cannot simply stop paying.
Will a mortgage holiday affect my credit score?
If your lender properly records an approved payment holiday (marked as a formal arrangement), it should not directly damage your credit score. However, some lenders report payment holidays differently, and future lenders may view a payment holiday on your credit file with caution when assessing a new application. The Financial Conduct Authority issued guidance during the COVID-19 pandemic period requiring specific treatment, but standard payment holidays may be recorded differently by individual lenders.
How much does a mortgage holiday cost in interest?
The interest cost depends on your outstanding balance, rate, and the length of the holiday. For example, on a £200,000 mortgage at 4.5%, a 3-month holiday accrues approximately £2,270 in interest. This amount is added to your balance, meaning you pay interest on interest for the rest of the term. The total lifetime extra cost is typically 3–5 times the immediate interest accrued, depending on remaining term length.
Can I take a payment holiday on a fixed rate mortgage?
Yes, many fixed-rate mortgages allow payment holidays, but the terms vary by lender and product. Your mortgage offer document will state whether a payment holiday is permitted and any conditions such as minimum overpayments made in advance. Some lenders require you to have overpaid by at least the holiday amount before granting a break. Others only allow payment holidays after a minimum number of years into the mortgage.
How many mortgage payment holidays can I take?
Most lenders allow one or two payment holidays during the life of a mortgage, and typically limit each holiday to three to six months. Some lenders allow rolling holidays if you have made sufficient overpayments. There is no universal rule — the number and duration of permitted holidays is set out in your individual mortgage terms and conditions. Always check your specific product terms before applying.