Covid-19: Mortgage Payment Breaks

The ‘Cost of Credit’ describes the interest you pay for the money you have borrowed over the life (term) of the mortgage or loan resulting in an increase in the monthly repayments. If you availed of an interest only payment break, the remaining balance at the end of the payment break will also be higher than it would have been if you had not had a payment break as your capital balance has not reduced over the 6 month term of the payment break .

As interest continues to be charged through the payment break period, this increases the balance by the end of the payment break period.  This new higher balance has to be repaid over the remaining term (which will now be a shorter period of time) resulting in an increase in the monthly repayments. If you availed of an interest only payment break, the remaining balance at the end of the payment break will also be higher than it would have been if you had not had a payment break as your capital balance has not reduced over the 6 month term of the payment break .
At the end of the payment break you can request a term extension which would reduce the increase in monthly repayments.

If you decide to avail of a term extension at the end of the payment break, this would result in less of an increase in your revised repayments, but you would be repaying your mortgage or loan over a longer term and so there would be a further additional cost of credit in addition to the cost of credit you incurred for availing of the payment break.

The ‘Additional Cost of Credit’ is the difference between the original total cost of credit on the mortgage or loan from now until maturity without the payment break and the revised total cost of credit with the Covid-19 payment break applied.

A payment break gives you a break from repaying your mortgage or personal loan. Under a payment break agreed with your lender, the loan repayment is postponed for an agreed period of time. Any repayments not made during this period will continue to be charged with interest and must be paid back in the future. What this means for your repayments is explained later in these FAQs.

Your monthly repayments are reduced during the arrangement. After the arrangement ends, there will be an increase in your monthly repayments due.  The reason for this is that, depending on the type of arrangement you availed of, there will be an amount of capital and/or accrued interest that you will have deferred the repayment of during the arrangement. 

These deferred repayments will need to be repaid over the remaining term of your loan, and so your monthly repayments will be adjusted at the end of the arrangement to take this into account. Before your arrangement ends, we will contact you to let you know what the increased monthly repayment will be. Depending on your circumstances, we may be able to extend the term of the loan by the number of months of which you availed of the Covid-19 payment break. This will result in less of an increase in your revised scheduled repayment but it will mean that your loan term will be longer and it will involve additional cost. 

Further information on this option can be found  in the answer to the question 'I didn’t apply for a payment break before the 30th September. What options are available for me?'. We can discuss the option of a term extension with you as you come to the end of your arrangement.

Yes.  Where you take a payment break (moratorium), you are deferring the payment of both interest and capital. Where you avail of an interest only arrangement, you are deferring the payment of capital only.
 
Interest that accrues during the payment break will be capitalized and repaid over the remaining term of the loan. As such, it attracts interest in the same way as the loan advances until repaid in full.

In addition, the capital repayments that are deferred under a payment break or interest only arrangement means you are repaying the loan more slowly than originally scheduled. Interest is still be charged on those deferred capital repayments. Together, these represent an additional cost of credit.  
 
Where you have availed of a payment break (deferred interest and capital) or an interest only arrangement (deferred capital only), we confirm the total additional cost of credit in writing to you.

If you are a mortgage customer, it is important that you review your Life Assurance policy to ensure that you have enough cover in place taking into account your payment break.  Your Mortgage Protection policy (a form of life cover) needs to be able to repay the loan in the event of a death. 

If this is your family home we would strongly encourage you to ensure your life cover is adequate to repay the loan, protecting you and your dependents.

Additionally, if you have a payment protection policy in place, you should engage with your provider to discuss the impact this temporary payment break may have on your policy.

If you are a mortgage customer and where you qualify for TRS, if you have availed of an Interest Only payment break, there will be no impact on your TRS and you will continue to receive this.  However, if you make any additional payments to your mortgage during the payment break, you will not receive TRS on these additional payments. This is because any additional payments will be applied against the capital portion of your mortgage, as opposed to against interest due.
 
If you are a mortgage customer and where you qualify for TRS, if you have chosen to fully defer your repayments during the payment break, you will not receive TRS during the term of the payment break.  As no interest will be paid during the payment break, no TRS will be due. If you make any additional payments to your mortgage during the payment break, you will not receive TRS on these additional payments. This is because any additional payments will be applied against the capital portion of your mortgage, as opposed to against interest due.

If you still have unanswered questions about the options available to you, our experienced and dedicated team is available to answer any queries you have, please get in touch by calling us on 1850 93 02 35,  Monday – Friday : 8.30am – 7:00pm.