How do you fancy a mortgage mini-break?

Take a break at home - more of us are holidaying at home as the credit crunch bites but how about taking a holiday from the cost of your home? Major events such as the arrival of baby or a change in career can have a dramatic effect on our finances making it difficult for us to meet the mortgage repayments. Fortunately, despite the credit crunch and the mortgage draught, mortgages over the years have become more flexible than they used to be and many lenders will allow you to take a mortgage holiday.

Lenders have realised that our lives don't run in straight lines. Things happen - babies arrive, we get wed, we change jobs and repairs need to be done to our homes - and we can't always stick to the same old regime of paying the mortgage every month at the same time for 25 years.

Could you keep up your mortgage payments if you lost your income through accident, sickness or unemployment? Check out how to protect your mortgage payments here.

Flex your mortgage

Over recent years we have seen the arrival of the flexible mortgage. At the time it was quite a revelation - you can overpay and then underpay when you it suits you or even drawdown funds. A holiday break is different in that you don't actually pay anything but do please note that the interest is still rolling along.

To find out if you are eligible for a mortgage break all you need to do is check the terms of your mortgage. These days around 60% of fixed, discounted and variable rate mortgages currently on the market also have flexible options.

Breaks available on offset as well

You can also get payment breaks on offset mortgages. Here your current account and savings are linked and all the funds are used to offset interest on your mortgage. The idea is that you repay your mortgage faster. However, it is designed to be flexible and you can underpay or take a break as long as you don't go over your credit limit.

You can't just take a mortgage break when you want otherwise you would be defaulting. You have to apply in writing giving your lender at least one month's notice. But the process is fairly straightforward. All you have to do is complete a form.

Moneyextra's mortgage calculators can help you work out what you can afford

Watch out for restrictions

There are restrictions attached to mortgage breaks and it's not something you can do on a regular basis; with many mortgages you'll only get the chance once in the lifetime of the mortgage. The length of time of the break depends on the lender but some do go up to a full year over the lifetime of the mortgage.

The mortgage holiday option isn't designed for people with debt problems. You would need to ask your lender for other options if you have problems paying the mortgage. They would offer you other options such as extending the mortgage over more years perhaps 35 or 40 years or you could switch to an interest only mortgage to cut your outgoings.

However, the government has been holding talks with lenders about offering borrowers likely to default mortgage breaks and more flexible mortgages.

21 May 2008 © Moneyextra.com

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