What to consider when deciding to take a Mortgage Payment Holiday
If you have an existing Polish Mortgage you are probably aware that one of the many financial reactions to the current coronavirus pandemic is a possibility to suspend your monthly mortgage repayments for up to three months.
As at the time of writing, not all Banks have announced their procedures or parameters for qualifying or availing of the payment holiday so we will just look at the option generally. We will also look at issues you need to consider when deciding.
Should you take a Polish Mortgage repayment holiday?
As a stand alone question, the answer is a resounding yes. This is one of the easier things the Banks and Government can do to alleviate suffering in the economy as they will just extend your repayment period. This means that in 20/30 years you will have an extra three months to pay than you do now. The reducing value of money means that your repayment of zl. 100 in 20 years time will be a lot lower as a percentage of your salary then as compared to now.
In addition to this, the future still remains very uncertain. Will you have a job at the end of this? Will you have the same salary? Even if you are not concerned now about your financial future, it's never a bad idea to have as much cash saved as you can. We would view a payment holiday as a way of having a buffer for the future.
Things to watch out for -
The banks have said that they will not charge fees for any of these changes and will make the process simple. Take the time to read the new contracts as it is not beyond the Banks to make changes to benefit themselves. Make sure you are happy with any changes they make to your terms. After the last recession, many Banks worldwide played fast and loose with contract changes regarding fixed rates etc.. In some cases, the Bank may not offer to extend the loan period but instead add the suspended amounts to future monthly repayments.
Amongst other things, your mortgage margin (Interest rate = Wibor Central Bank Rate + Margin) is defined by your credit rating. Again, the Banks have said that accepting the offer of a repayment holiday will not affect your credit rating. Be aware that the onus is on you to make sure it doesn't. Look for details on this in the terms of each individual Bank offer.
As the pandemic grows and eventually shrinks, we will try to keep you informed of the financial issues you need to know about. Let's keep in touch.