How do I take a break from the mortgage?

Q I am thinking about a mortgage holiday as I have made an unexpected large purchase. I have used my savings, have a loan that will be paid off in a year and have an ?85,000 mortgage on a property worth ?170,000.

I pay my credit card bills before accruing interest and am generally in control of my finances. I don't want another loan but need four months breathing space. How do mortgage breaks work and what do you think about taking one?

SE

A The ability to stop making mortgage payments for a few months - aka taking a payment holiday - is usually advertised as a feature of flexible mortgages.

It is typically available only after you have been making mortgage repayments for six to nine months after taking out the mortgage, although with some lenders you may not be allowed to take a payment holiday until you have had the mortgage for at least three years.

There can also be conditions such as being allowed to suspend payments only if the size of your mortgage is no more than 80% of the value of your home at the end of the mortgage holiday.

However, even if you don't have a specially-packaged flexible mortgage, you may still be granted a four-month payment holiday so I suggest you contact your lender to find out how flexible it is prepared to be.

But bear in mind that taking a payment holiday isn't a cost-free option since the interest you put off paying is typically added to your mortgage loan so you will end up paying interest on interest and - unless you increase your monthly mortgage payments after the holiday - this may lengthen the term of the mortgage as well. So in effect, taking a mortgage holiday is the same as taking out another loan.

But that assumes that your lender is prepared to let you suspend payments. If not, do not be tempted simply to suspend payments without permission. Not only would you risk having to pay charges for getting into arrears but your credit rating would suffer too.