Independent Financial Advisors for IT Contractors
Published on 2nd February 2009
Mortgage payment holidays are enjoying a spot in the limelight at the moment as thousands of worried homeowners try to save money while times are hard. Simon Foster discusses whether payment holidays are a help or a hindrance and how Contractors can benefit.
A mortgage payment holiday is available on many mortgages. This is an overdraft style facility that allows you to take advantage of a break in repayments and can be used by homeowners that are going through a change in circumstances such as the arrival of a baby, getting married or pursuing a life dream such as travelling.
We have advised thousands of clients as to the merits of such flexi-mortgages and over Christmas many Contractors used the payment holiday to absorb a time between contracts.
It is important to realise that payment holidays are simply a deferment period however and that any repayments or interest deferred will have to be paid back at some point in the future.
How do payment holidays work?
Your ability to take a payment holiday depends on your mortgage provider and the type of mortgage that you hold as some providers will not offer this facility. If you hold a standard mortgage then payment holidays must be applied for and will be issued according to your individual status.
If you have a flexible mortgage then you are able to take payment holidays as and when you choose, without applying to your provider each time. With a flexible mortgage, you can over pay or under pay depending on your circumstances each month, which makes it an ideal option for Contractors.
Unlike many permanent employees you can probably afford to overpay on your mortgage when you are working on a contract which will enable you to build up a 'reserve' on your mortgage to be used for a payment holiday. Overpaying when you can will allow you to take a payment holiday if you have a period between contracts, offering you the flexibility to suit your career.
Should Contractors take a holiday?
If you find yourself between contracts and need to take a break from your mortgage until you start your next post, then there is no reason why Contractors should not take advantage of a payment holiday. Contractors should remember that interest and repayments are only deferred and are not wiped out, which means at some point you will have to pay for your holiday.
For many, payment holidays are not a sensible option but Contractors are in a unique position to take advantage of this facility , hopefully without suffering long term damage to their financial health because when you return to the contract market or rates improve then you can start overpaying to get back on track.
Steve BirchallThe whole process was so quick and easy with no worries...
Nick WilliamsI would have no hesitation in recommending your company to others...
Copyright © ContractorMoney, 2000 - 2007. All rights reserved.
Please Note: Financial advice on these pages is given by ContractorMoney, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Services Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Click here for Important Legal Information which should be read. Click here for a copy of our Private Client Agreement. Click here for a copy of our Initial Disclosure Document.
All rights reserved and E & OE.