A mortgage payment holiday lets you pause or reduce your mortgage payments temporarily. It can be a lifeline during financial difficulty, but it comes with costs you need to understand.
What Is a Mortgage Payment Holiday?
A payment holiday is a temporary break from your mortgage payments, agreed with your lender. During the holiday:
- You make no payments (or reduced payments)
- Interest continues to accrue on your outstanding balance
- Your mortgage balance increases
- After the holiday, payments resume — usually higher or over a longer term
When Can You Get a Payment Holiday?
| Situation | Likely Approval | Notes |
|---|---|---|
| Job loss / redundancy | High | Contact lender before missing payments |
| Illness or injury | High | May need medical evidence |
| Maternity / paternity leave | Moderate-High | Some lenders specifically allow this |
| Temporary income reduction | Moderate | Evidence of the reduction needed |
| General financial difficulty | Moderate | Lender will assess your situation |
| Lifestyle choice (holiday, etc.) | Low | Not designed for this purpose |
Eligibility Requirements
Most lenders require:
- Payment history — at least 6-12 months of consistent payments on this mortgage
- No arrears — you should be up to date when you apply
- Proactive contact — you ask before missing payments, not after
- Evidence — some lenders require proof of the financial difficulty
How Much Does It Cost?
Interest doesn’t stop during a payment holiday. The unpaid interest is added to your mortgage balance (capitalised), meaning you pay interest on interest.
3-Month Payment Holiday
| Original Mortgage | Rate | Monthly Payment | Interest Accrued (3 months) | New Balance |
|---|---|---|---|---|
| £150,000 | 4.5% | £760 | £1,688 | £151,688 |
| £200,000 | 4.5% | £1,013 | £2,250 | £202,250 |
| £250,000 | 4.5% | £1,267 | £2,813 | £252,813 |
| £300,000 | 4.5% | £1,520 | £3,375 | £303,375 |
6-Month Payment Holiday
| Original Mortgage | Rate | Interest Accrued (6 months) | New Balance |
|---|---|---|---|
| £150,000 | 4.5% | £3,413 | £153,413 |
| £200,000 | 4.5% | £4,551 | £204,551 |
| £250,000 | 4.5% | £5,688 | £255,688 |
| £300,000 | 4.5% | £6,826 | £306,826 |
Impact on Future Payments
After the holiday, the extra balance is spread over the remaining term:
| Scenario (£250k mortgage, 25yr remaining) | Before Holiday | After 3-Month Holiday | Increase |
|---|---|---|---|
| Monthly payment | £1,267 | £1,289 | +£22 |
| Total extra interest over remaining term | — | ~£6,600 |
Or your lender may extend the term by approximately 3-4 months instead of increasing payments.
Credit Score Impact
| Type of Holiday | Credit Score Impact |
|---|---|
| COVID-19 payment holiday (2020-2021) | Protected — no negative mark |
| Lender-agreed concession | Usually not recorded as missed payment |
| Missed payments without agreement | Serious negative impact (stays 6 years) |
| Formal arrangement (debt management) | Recorded — visible to other lenders |
What Future Lenders See
Even if your credit score isn’t directly damaged, a payment holiday may affect future borrowing:
- Lenders may ask about payment holidays on mortgage applications
- Your mortgage balance will be higher than expected for the loan age
- Some lenders’ affordability models account for previous financial difficulty
How to Apply for a Payment Holiday
- Contact your lender immediately — don’t wait until you miss a payment
- Explain your situation — be clear about why you need it and how long
- Provide evidence if requested — redundancy letter, medical note, etc.
- Ask about alternatives — reduced payments or interest-only may be better
- Get the agreement in writing — confirm the terms, duration, and impact
- Set a calendar reminder for when payments resume
- Resume payments on time — missing the restart date can cause problems
Alternatives to a Payment Holiday
| Alternative | How It Works | Best For |
|---|---|---|
| Reduced payments | Pay less than normal for a period | Temporary income drop (not total loss) |
| Interest-only period | Pay only interest, no capital | Moderate reduction needed |
| Term extension | Extend mortgage to 30-35 years | Permanently reduce monthly payments |
| Overpayment reserve | If you’ve previously overpaid, your lender may let you drawdown | Those with existing overpayment buffer |
| Income protection insurance | Replaces income during illness/redundancy | Covered by existing policy |
When a Payment Holiday Is a Good Idea
- You’re between jobs and expect to be re-employed within 3-6 months
- You’re on maternity/paternity leave with a clear return date
- You have a temporary health issue affecting your ability to work
- You’ve had a sudden unexpected expense and need breathing room
When It’s Not the Answer
- You’re in long-term financial difficulty — a payment holiday only delays the problem
- You want to free up cash for non-essential spending
- You haven’t explored reducing other expenses first
- You’d be better served by a debt advice service (StepChange, Citizens Advice)
If You’re Struggling with Mortgage Payments
If a payment holiday isn’t enough, get free help:
| Organisation | What They Do | Contact |
|---|---|---|
| StepChange | Free debt advice | stepchange.org |
| Citizens Advice | Benefits check, debt advice | citizensadvice.org.uk |
| National Debtline | Free telephone debt advice | nationaldebtline.org |
| Your lender | Tailored forbearance options | Your mortgage lender’s number |
| Shelter | If you risk losing your home | shelter.org.uk |
Lenders are required by FCA rules to treat customers fairly and explore options before repossession. Contact them early — it’s always better than ignoring the problem.
Related Guides
- Mortgage Types UK 2026 — Fixed, Tracker, Offset, Interest-Only Explained
- What happens if you miss a mortgage payment
- Can’t afford mortgage — what to do
- Remortgage step-by-step guide
- Mortgage types explained UK
Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance, not financial advice. Seek independent mortgage advice before making decisions about borrowing.