A payment holiday, sometimes called a payment deferral, is a period where your lender agrees you can pause or reduce your mortgage payments, usually because of a temporary difficulty. Because it is agreed with your lender in advance, it is generally treated differently to arrears, which is when payments are missed without an agreement in place. How it shows on your credit file can still vary, so it is worth checking rather than assuming it will have no effect at all.
This page looks at how an agreed payment holiday differs from ordinary arrears, how it may be recorded, and what to check before you remortgage. If your payments were missed without an agreement, see our main page on mortgage arrears instead.
On this page
This page covers
- Credit issue
- Mortgage arrearsUsually stays on your credit file for 6 years from the date recorded.
In short
- A payment holiday is agreed with your lender in advance, unlike arrears, which are unarranged missed payments.
- How a payment holiday is recorded can vary, so check your own credit file rather than assume.
- A balance increase from a payment holiday, through added interest, may still affect your loan to value.
- Lenders assessing a remortgage will usually want to understand what the payment holiday was for.
How is a payment holiday different from arrears?
Arrears happen when you miss a payment without your lender agreeing to it in advance. A payment holiday is the opposite: your lender agrees beforehand that you can pause payments, reduce them, or in some cases add missed interest to your balance, usually for a set period. Government-backed mortgage payment holiday schemes have been offered at points in the past, such as during periods of widespread financial disruption, but agreed payment deferrals between a borrower and their lender happen outside of any such scheme too, as one of several forbearance options.
Because it is agreed in advance, many lenders record it differently to an unarranged missed payment. Exactly how it is recorded is a decision for each lender, so this is one of the areas where it is worth checking your own file rather than assuming either way.
What should you check on your credit file?
| What to check | Why it matters |
|---|---|
| Whether the holiday shows as a missed payment or is marked differently | Affects how a new lender is likely to read the period |
| Whether interest was added to your balance during the holiday | Affects your current balance and loan to value |
| Whether payments since the holiday ended have been on time | Shows the arrangement has not led to ongoing difficulty |
| Whether the same difficulty led to arrears afterwards | A holiday followed by arrears is a different picture to a holiday that resolved things |
General illustration. Check your own Experian, Equifax and TransUnion reports for how your holiday specifically shows.
Does a payment holiday affect your loan to value?
If interest continued to build during the payment holiday and was added to your balance, your outstanding mortgage will be slightly higher than it would otherwise have been. This can push up your loan to value a little, which is worth factoring in alongside a current estimate of your property’s value when you look at remortgaging.
If the payment holiday was followed by genuine arrears, rather than a return to normal payments, see our page on cleared mortgage arrears or currently in arrears, depending on where things stand now.
What should you tell an adviser?
Explain clearly that the period was an agreed payment holiday, not unarranged arrears, and when it started and ended. An adviser can then check exactly how it shows on your file and how different lenders are likely to view it, which can vary more for this than for straightforward arrears.
If money is still tight, free and confidential help is available from MoneyHelper, StepChange and National Debtline, and it is worth talking to your lender again before a temporary pause turns into ongoing arrears.
What may affect options after a payment holiday
| Factor | Why it matters |
|---|---|
| How the holiday is recorded | Whether your file shows it as a missed payment or something else affects how a new lender reads it. |
| Length of the payment holiday | A short, one-off holiday is usually viewed differently to a long or repeated one. |
| What happened afterwards | A return to normal payments reads very differently to a slide into arrears once the holiday ended. |
| Effect on your balance | Interest added during the holiday can slightly increase your loan to value. |
| Time since the holiday ended | A longer clean run since generally helps, similar to any other credit history question. |
| Reason for the holiday | Being able to explain what the holiday was for can help an adviser present the position clearly. |
| Income and affordability now | Whether the situation that led to the holiday has genuinely resolved. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Written confirmation from your lender of the payment holiday, including its dates
- Recent mortgage statements covering before, during and after the holiday
- Recent copies of your Experian, Equifax and TransUnion reports
- A short explanation of what led to the payment holiday
- Proof of your current income and outgoings
- An estimate of your property’s value
Frequently asked questions
Does a mortgage payment holiday show as arrears?
Not usually in the same way as unarranged missed payments, because it is agreed with your lender in advance. Exactly how it shows can vary by lender, so check your own credit file to see how yours has been recorded.
Will a payment holiday stop me remortgaging?
Not on its own for most people, particularly if payments returned to normal afterwards. It is one factor an adviser will want to understand alongside the rest of your credit file.
Does interest still build up during a payment holiday?
Often, yes, depending on the type of holiday agreed. This can add a small amount to your mortgage balance, which is worth factoring into your loan to value when you remortgage.
What if my payment holiday turned into ongoing arrears?
That is a different situation to a holiday that resolved cleanly. See our pages on current or cleared mortgage arrears, and speak to your lender and a free debt adviser if payments are still difficult.