The Financial Helpline brought to you by Walfrid Private Limited is a pop up website to help the public with any financial worries they have. Through video and e-briefs we aim to give you an impartial view of what is going on in the banking world in relation to mortgages. The bottom line is that help is on its way. The banks are offering interest only periods and moratoriums. Please read this guide carefully. It is subject to change without notice and does not constitute financial advice. Please feel free to contact us for any information you require. We are experiencing a high volume of calls and email so please check our videos and e-briefs in the interim.
The COVID19 mortgage landscape
Our retail banks (AIB, Bank of Ireland, KBC, Permanent tsb and Ulster Bank), non-bank mortgage lenders (Finance Ireland and Dilosk/ICS Mortgages) and credit servicing firms (Investec Private Finance Ireland Ltd, Lapithus, Link Group, Mars Capital, Pepper and Start) have put in place measures to help personal customers and businesses including not-for-profit businesses/organisations (retail banks only).
The following are the key elements:
- A payment break for up to three months is available to both personal and business customers. This can be followed by ongoing reviews depending on the scale and extent of the situation
- Court proceedings are being adjourned for three months
- Various working capital facilities and supply-chain supports are available to businesses
What is a payment break?
Mortgages (for private dwellings and buy-to-lets), Personal Loans and Business Loans may be frozen for up to three months, to be followed by ongoing reviews depending on the scale and extent of the situation.
Payment breaks can take a number of forms depending on what best suits your specific situation.
1. ‘Moratorium’ Payment Break – generally this means that your full loan repayment is postponed for an agreed period of time so you do not pay any capital or interest.Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan – see How does a payment break operate?
2. ‘Interest Only’ Payment – you pay only the interest due on the loan during the agreed payment break. You do not pay any capital which means that your repayments will be less but also that your loan balance will not reduce during this period.Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan – see How does a payment break operate?
Am I eligible for a payment break if my existing loan is in arrears?
Lenders are committed to supporting all borrowers – including borrowers who are already financially distressed and have had their loan restructured. You or your appointed adviser should contact your lender to see what further relief measures can be put in place.
How does a payment break operate?
A payment break effectively gives you breathing space – a period of time during which you do not have to make repayments on your loan. For example, if you take a mortgage payment break of up to three months, your lender will ordinarily spread your repayments over the remaining, outstanding term of the existing mortgage so that your mortgage is repaid within the original term.
Where you have the capacity to do so, another option which may suit you would be to pay the interest as it arises during the payment break.
Either way a payment break will give rise to higher repayments spread out over the remaining term of the loan.
The following illustrates how a payment break would work out in practice:
How do I apply for a payment break?
Not all customers will need a payment break and it is important that customers who can afford to continue making repayments should do so – that way debt is not built up unnecessarily.
Not all customers will need the same form or length of a payment break; and lenders may need to try to tailor something different depending on individual circumstances.
Contact your lender to request a payment break. Each lender is putting in place as streamlined and simplified an application process as possible; this may vary across lenders as between online, email, telephone or paper based. All lenders are dealing with a considerable increase in queries and applications at this time, so you may need to try a number of times to make contact.
Please understand that staff at all lenders are themselves working in very challenging circumstances and are doing their best to deal with all customer cases as quickly and efficiently as possible.
What happens at the end of a mortgage payment break?
At the end of a payment break your ongoing payments will be recalculated to include the interest charged during the payment break. These payments will be higher – reflecting the three missed payments and the interest charged – see How does a payment break operate?
Will my mortgage rate change as a result of using a payment break?
No, your mortgage rate will not change due to your availing of a payment break.
Will a repayment break affect my credit record?
As confirmed by the Central Bank of Ireland, there will be no impact to the Central Credit Register (CCR) credit records of customers who avail of a payment break as a result of being financially impacted by Covid-19.
Helpful links for further information relating to Covid-19
**** Source; Banking and Payments Federation Ireland