Be careful about casually applying for a mortgage payment break

[Brendan Burgess]

Unless you really need a mortgage payment break, you probably should not apply for it.

Although it won't formally impact your credit rating, it might well impact you if you try to switch lenders or trade up.

And you don't save anything as they will continue to charge you interest.

Switching vs Covid & Payment Break

Just got notified when about to switch that the bank want me to sign a new declaration warning me that if after switching I request a payment break it will be dealt with as an arrears issue and affect my credit score. So, if I switch and suddenly lose my job I'm now screwed?! They want my latest...

askaboutmoney.com

Brendan

 

[Baby boomer]

It depends on the circumstances. If one was carrying 3k credit card debt (obviously not a good idea but it happens) and also paying a mortgage of 1k per month, then it makes sense to accept a three month break on the mortgage and divert the money into clearing the credit card.
You're replacing debt at 15+% with debt at about 3%. Maybe less with a tracker.

Usual caveats about not building the credit card debt up again apply.

 

[Brendan Burgess]

You're replacing debt at 15+% with debt at about 3%. Maybe less with a tracker.

That would not be a good enough reason to take a payment break.

€3k @15% = €450 a year. , or at 12% = €360 a year.

While it makes arithmetic sense, if it makes it harder for you to switch mortgages or get a trade up in a couple of years, then it's not a good idea.

And, as you hint t, anyone who has built up €3k "permanent" balance on a credit card, is very likely just to let it build up again.

I would only apply for the payment break if it were to stop me from going into arrears.

Brendan

 

[Baby boomer]

While it makes arithmetic sense, if it makes it harder for you to switch mortgages or get a trade up in a couple of years, then it's not a good idea.

I would respectfully disagree. If you're carrying €3k of semi-permanent credit card debt, you'll find it pretty hard to trade up or switch anyway.
Conventional wisdom is it's easier to get out of debt by paying off the highest interest rate debt first.