Covid-19: Mortgage Payment Breaks

If you are experiencing financial difficulties now as a result of Covid-19, the deadline for applying for a Covid-19 payment break has passed (30th September 2020) However, we do have a range of solutions designed and tailored to support customers experiencing financial difficulty. Please check out the Managing Your Debt section here for more information.
 
If you are in a position to continue making payments it is in your financial best interests to do so rather than take a payment break.  A payment break may result in higher monthly payments over the term of the mortgage / loan / facility. 

We fully understand that you might be concerned about your financial situation and we’re committed to supporting all of our customers and we have a range of tailored solutions available depending on your personal circumstance. We are here for you and will work to help you during this challenging time. 

How does a mortgage and loan payment break work?

How it works and what happens on your account?

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

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

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 or loan is also higher.  

Why do my payments increase?

The term of your mortgage or loan (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 or loan 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 repayment. 

Depending on your circumastances, we may be able to extend the term of your mortgage or loan in line with the number of months of your payment break.

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.

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Here we have included examples of how a payment break will work for a number of different scenarios.

You can review the example which reflects your own personal circumstances. These examples are for illustrative purposes only and the details will change depending on your own personal circumstances. For this reason please get in touch with us and we can take you through how your payment break will work and what will happen to your mortgage or loan after the payment break. 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 so please bear with us.

  • 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 worked example


    Current Mortgage Balance €175,000 15 years (180 months) 



    Current Customer monthly repayment €1,251.04



    Current Interest Rate 3.5%



    Payment Break sought 6 months – no monthly repayments by customer



    New monthly repayment after payment break €1,307 (with no term extension).

  • A worked example


    Current Mortgage Balance €175,000 15 years (180 months) 



    Current Customer monthly repayment €1,251.04



    Current Interest Rate 3.5%



    Payment Break sought 6 months – interest only payment break for 6 months with a 6 month term extension.



    Monthly repayments after the payment break remain the same (with a 6 month term extension).

     

  • Note: Figures have been rounded to the nearest Euro where relevant.

     

    A worked example


    Current Loan Balance €7,500 3 years (36 months) 



    Current Customer monthly repayment €237.24



    Current Interest Rate 3.5%



    Payment Break sought 3 months – no monthly repayments by customer



    New monthly repayment after payment break €242.40 (with a 3 month term extension).

     

     

  • Note: Figures have been rounded to the nearest Euro where relevant.

     

    A worked example


    Current Loan Balance €7,500 3 years (36 months) 



    Current Customer monthly repayment €237.24

    Current Interest Rate 3.5%



    Payment Break sought 3 months – no monthly repayments by customer



    New monthly repayment after payment break €242.40 (with a 3 month term extension).

     

     

FAQs

About a Covid-19 Payment Break

  • While Covid -19 payment breaks are no longer available, we do have a range of solutions designed and tailored to support customers experiencing financial difficulty. As these solutions are different from a Covid-19 payment break we will require further information and documentation from you. You can find out more in our Mortgage Support Section.

    You should be aware where you do not make full repayments on your Mortgage or Personal Loan, it means that your credit record will be impacted. We are required by law to report all outstanding loans to the Central Credit Register (CCR). We’re also required to report outstanding loans to the Irish Credit Bureau (ICB). A poor record on either register may impact your ability to get approval for credit in the future.

    On receipt of your documentation, a member of our experienced team will contact you to talk to you about your personal circumstances and application.

    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.

  • 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.

Coming off a Covid-19 Payment Break

  • There are a number of options available to you once your Payment Break has ended.
     
    You can opt to extend the term of your mortgage or personal loan by the same number of months for which you availed of the payment break.  This would result in less of an increase in your revised monthly repayment.  This option is available to you whether you are returning to annuity repayments or if you are returning to your previously-agreed long-term reduced repayment arrangement.
     
    Availing of this term extension would not have any adverse effect on your credit record with the Irish Credit Bureau or on the Central Credit Register.  However, it would mean that the term of your loan would be longer and there would be a further additional cost of credit as you would be repaying your loan over a longer period of time than originally agreed.  This cost is in addition to the cost of credit that you have incurred as a result of the payment break implemented on your account.  We have set out some examples of how a term extension of 3 or 6 months would impact an average mortgage and personal loan by clicking on the 'Example' tab above.  We would encourage you to consult these examples to ensure you fully understand how a term extension works.  If you would like to discuss this option further, please contact us on 1850 930 235 and a member of our team will be happy to help you.
     
    If you are not able to resume your scheduled repayments, even with a loan term extension, then we will need you to contact us as soon as possible on 1850 930 235 and send us a completed Standard Financial Statement (for mortgage customers) or an Income and Expenditure Form (for personal loan customers) and provide us with supporting documents.  We will then discuss your circumstances with you to determine the most appropriate option for you. The documentation you’ll need to provide is:

    • Standard Financial Statement form (for mortgage customers).  This form can be found here in our Mortgage Support Section. You can also call us to ask us to post a copy to you.
    • Income and Expenditure form (for personal loan customers).  This form can be found here. You can also call us to ask us to post a copy to you. 
    • Your most recent 3 Months Bank Statements – These can be originals or copies of originals.  Internet statements are accepted where your name is included on the statement
    • Evidence of Income:
      • Your 2 most recent consecutive payslips or
      • Confirmation of Social Welfare Payments  (2 payslips or letter), or
      • Employment Detail Summary, or
      • Revenue Commissioners Notice of Assessment, Chapter 4 Revenue Certificate with fully completed Form 11 or written confirmation of income from a practising Accountant  (if you are a self-employed customer)
  • If you have availed of a Covid-19 Payment Break that is coming to an end, and you need additional support tailored to your individual circumstance, we will require supporting documents from you to progress an assessment of your circumstances. The supporting documents required are listed below.

    Where your Covid-19 Payment Break has ended and you do not resume full repayments on your Mortgage or Personal Loan, it means that your credit record will be impacted – we are required by law to report all outstanding loans to the Central Credit Register (CCR). We’re also required to report outstanding loans to the Irish Credit Bureau (ICB). A poor record on either register may impact your ability to get approval for credit in the future.

    On receipt of your documentation, a member of our experienced team will contact you to talk to you about your personal circumstances and application
    .
    Our 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.

    Documentation Requirements

    • Standard Financial Statement form (for mortgage customers).  This form can be found here in our Mortgage Support Section. You can also call us to ask us to post a copy to you.
    • Income and Expenditure form (for personal loan customers).  This form can be found here. You can also call us to ask us to post a copy to you. 
    • Your most recent 3 Months Bank Statements – These can be originals or copies of originals.  Internet statements are accepted where your name is included on the statement
    • Evidence of Income:
      • Your 2 most recent consecutive payslips or
      • Confirmation of Social Welfare Payments  (2 payslips or letter), or
      • Employment Detail Summary, or
      • Revenue Commissioners Notice of Assessment, Chapter 4 Revenue Certificate with fully completed Form 11 or written confirmation of income from a practising Accountant  (if you are a self-employed customer)

Other FAQs

  • 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.

Contact us

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 to help you out. Call us on 1800 93 92 44.