Mortgage holidays a last resort

In the past, some mortgages have allowed borrowers facing financial difficulties to take a "mortgage holiday" for up to three months. Now at least one bank is offering a repayment break of up to 12 months.

You don't pay anything during this period. So it may feel like you are taking a holiday. But interest is still being charged to your mortgage. This means that unless you lift your repayments after the holiday, the mortgage term will be pushed out and you'll pay more in interest overall.

For this reason, repayment holidays are best used only as a last resort.

If you're having trouble making ends meet, the first thing is to put together a budget to see where your money is going. Use the Sorted Budget calculator or order our free Budgeting booklet.

For personal advice, contact the NZ Federation of Family Budgeting Services. Their service is free and confidential. Call them free on 0508 283 438 or look in the White Pages under “Budget Advice Services”.

If you think you'll miss a mortgage payment, get in touch with your lender quickly. They can fill you in on all your options.

A better way to ease your situation may be to pay just the interest on the loan for a few months, until you've got your finances back on track.

Find out more about Managing your mortgage.

Published 16 April 2009.