How does it work?

How does it work?

Example

Example

Contact us

Contact us

How does a mortgage payment break work?

How it works and what happens on your account?

On a mortgage account, interest is accrued or charged each month. And each month the customer makes a monthly repayment on the mortgage.

This is how a typical mortgage works: the interest charge increases the balance on the mortgage while the monthly repayment from the customer reduces the balance on the mortgage.

When a customer has a Covid-19 payment break, the interest continues to be charged to the account (increases the balance). However at the same time there are no monthly repayments because the customer has taken a ‘break’ from repaying because of the circumstances they are in. This means at the end of the payment break the balance is higher and therefore the total amount a customer pays back to the bank over the lifetime of the mortgage is also higher.  

Why do my payments increase?

The term of your mortgage (the time from now to your final monthly repayment) does not change because of the payment break.

Therefore, at the expiry or end of the payment break, there is less time remaining to repay your mortgage in full. 

So as the balance has increased over the time of the payment break and there is no increased time to pay (no increase in term) this means you will see an increase in the monthly repayment.

Guide to Payment Breaks​

The Banking Payments Federation of Ireland (BPFI) and the member banks have prepared this handy Guide to Payment Breaks which you may find useful.

 

Covid-19: Mortgage Payment Breaks

What is ‘Cost of Credit’? How is it impacted?

The ‘Cost of Credit’ are words to describe the interest you pay for the funds or money you have borrowed over the life (term) of the loan. 

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. At the end of the payment break a customer can request a term extension which would reduce the increase in monthly repayments.

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

Covid-19: Payment Breaks

Here when you need us

For loan and mortgage payment breaks you can contact us on 1850 93 02 35 or email covid19enquiries@kbc.ie. We are all working hard to maintain the best service we can.

Please be aware that our phone lines are very busy at the moment so please bear with us and we appreciate your patience in getting in touch. If you have already spoken to one of our team please rest assured that we will call you back.
 
If you are an existing KBC customer and have financial concerns not related to payment breaks our customer service team is here 24/7 to help you out. Call us on 1800 93 92 44.