What is a mortgage vacation and who is it for

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

It is possible not to pay the loan for up to six months, but not always and not to everyone.

What is a Mortgage Vacation?

From July 31, 2019, the borrower may temporarily not pay on the mortgage or reduce the amount of payments of his own free will for up to six months. It is not required to negotiate this with the bank - you just need to notify the financial institution.

Not everyone can count on a mortgage vacation. Several factors need to be matched.

Who can use them?

The grace period is introduced to help people in difficult life situations. Moreover, the law specifically states which one:

• You lost your job and registered with the employment service.
• You are recognized as a disabled person of the first or second group.
• You have been ill for more than two months.
• Your income in the last two months has decreased by more than 30% compared to the previous ones. At the same time, the amount of mortgage payments is more than half of the new salary.
• You have more dependents (this includes minors, disabled people of the first and second groups, relatives under guardianship). At the same time, income over the past two months has decreased by more than 20%, and the amount of mortgage payments is more than 40% of the new salary.

This is a complete list of difficult situations. The rest of life's difficulties, although they can hit the budget hard, do not give the right to a grace period.

But that's not all. Mortgage vacations can be obtained only if:

• A home on a mortgage is your only one; you do not own other apartments or houses. Moreover, if you have a share that is less than the local rate for the provision of housing under a social tenancy agreement, then it will not be taken into account and you will not be denied a mortgage vacation. Check the standard on the website of the regional executive authority.
• The mortgaged property is used for your personal needs.
• The loan amount does not exceed 15 million.
• The terms of the loan agreement have not been changed earlier at your request.

Under one mortgage agreement, a vacation can be taken only once.

When can I go on a mortgage vacation?

You can apply for a mortgage vacation at any time. Moreover, for those loan agreements that were concluded before July 31, 2019. The main thing is to meet all the criteria for receiving the grace period.

How to arrange everything?

The law recently came into force, so there is no worked out mechanism. So you can create a free-form requirement. It must indicate:

• What is the reason for the grace period. Better to use language straight from the law.
• In what form do you intend to exercise the right to the holidays - to stop payments or reduce them. If the latter, indicate the amount. You choose it at your discretion.

You can also write:

• When you want to go on a mortgage vacation. By default, the date of the grace period will be counted from the date of contacting the bank. However, you can choose it yourself - but no later than two months from the day you sent the request to the financial institution.
• How long do you take your mortgage vacation. The maximum period (aka the default period) is six months. You can take a shorter vacation, but not a longer one.

Documents must be attached to the request. Their exact list is also specified in the law. The bank has no right to ask for papers in excess of this. You will need an extract from the Unified State Register of Real Estate about the housing that you own, and a document confirming that you are in a difficult life situation. It can be:

• Help from the employment service.
• Certificate confirming the receipt of disability.
• Sick leave.
• 2-NDFL certificates, indicating a change in income.
• Birth certificate, or adoption certificate, or the appointment of a guardian or trustee.

To understand how to submit documents, it is better to re-read the loan agreement. If there are any restrictions on the ways of interaction, then transfer the papers only in the manner indicated in it. If this is not agreed, you can bring the package of documents in person or send it by registered mail.

How do you know when your mortgage vacation has begun?

The bank has two days from the date of receipt of the documents to request additional papers from you, but only those specified in the law. The rest is optional, but you can do it if you wish.

Within five days from the date of contact, the bank must inform you whether you have been granted vacations or not and why. If you have brought any documents, then five days are counted from this date.

If there is no response from the bank within 10 days, it is automatically considered that your requirements have been satisfied.

How do I pay my mortgage during and after vacations?

It all depends on whether you decide to suspend payments or reduce them.

If you chose the first option, then you will have a break for the duration of the vacation. When they run out, you will continue to deposit money as before. And the bank will simply add the missed payments to the schedule at the end. As a result, the term of your loan will increase during the holidays. But you will not pay any fines or additional funds for this.

If you chose the second option, the mechanism will be approximately the same, only you will be paid less.

The bank is obliged to provide a new payment schedule before the end of the holidays.

Plus, you can end your vacation at any time and start depositing money. The early payment will be used to pay off missed payments.

How will this affect your credit history?

Mortgage vacation will be reflected in history, but it will not make it worse. However, much will depend on the position of specific banks - how they will treat those who have exercised their legal right.

Are there any additional expenses?

No. Borrowers who enjoy the right to a mortgage vacation were exempted from paying state fees associated with changes to the mortgage agreement, and personal income tax for possible benefits due to the grace period.

What to remember

• A borrower with a mortgage on the only home who is in a difficult situation can take advantage of the credit holidays. At the same time, the size of the loan should not exceed 15 million.
• Holidays do not spoil your credit history and do not require additional fees.
• The maximum vacation period is six months.
• The debt does not disappear, you just have to pay it off later.