COVID-19: How to get a payment holiday from your mortgage

Natasha Hatherall-Shawe, a British expatriate in Dubai who owns a marketing, PR and events agency, is among several UAE residents who has opted for a payment holiday to cope with the impact of COVID-19 on her finances. She secured a one-month payment holiday on her mortgage with Abu Dhabi Commercial Bank (ADCB). She took out a mortgage to buy an apartment on the Palm Jumeirah in 2015.

Her business bore the brunt in the first two weeks of the lockdown announced by the UAE government in March to stem the curb of the coronavirus. Typically, companies tend to cut down or pause all spend on marketing, PR and events when they face a cash crunch.

“So, my business lost around 70 per cent of customers within two weeks of the lockdown. Among the remaining clients, no one is parting with money since they are all facing cash flow challenges. That has put a lot of pressure on my business. My priority is to ensure that my 20-member team continues to get paychecks. I won’t be taking any salary out of the company while this is going on. The opportunity of a payment holiday is, therefore, very necessary to maintain a cash flow to pay my staff and keep my business alive,” Hatherall-Shawe added.

It was easy to get the first month’s payment relief without submitting a lot of documentation. The approval came through in five days

- Natasha Hatherall-Shawe

On seeing news reports that her bank was offering a payment holiday, the entrepreneur approached her relationship manager at ADCB. It was easy to get a one-month payment holiday from her mortgage commitment in April.

“The bank understands that a majority of their customers are impacted in some way or the other. For the first month, the bank offered the payment relief as a goodwill gesture to most affected customers. Hence, it was easy to get the first month’s payment relief without submitting a lot of documentation. The approval came through in five days. All I had to do was send an email formally requesting for relief and it was granted,” she explained.

She was, however, disappointed at only getting a one-month payment holiday while other banks have been offering payment relief for three to six months.

List of documents to request for payment holiday

For business owners

For employees

“These subdued business conditions won’t go away in one month. With the onset of Ramadan and then summer, business will take a while to get back to normal,” she said.

The interest on her mortgage will continue to accrue during the deferment period. Also, Hatherall-Shawe said the remaining loan tenure is likely to increase as a result of the deferment. However, ADCB has fully waived off the services fees for the deferment request on her mortgage payment.

If you’re employed, it’s a lot easier since you only need to provide a letter from the employer citing your salary cut or contract termination

- Natasha Hatherall-Shawe

The bank has instructed her to furnish more documentation if she needs to apply for further relief from her loan payments. Being a business owner, Hatherall-Shawe needs to submit her six-month bank statements, contract cancellations and expenses incurred by her company to prove how business has been affected by COVID-19. It took her around two to three hours to put together all this documentation.

“If you’re employed, it’s a lot easier since you only need to provide a letter from the employer citing your salary cut or contract termination,” she said, adding that banks are undertaking due diligence so customers do not take advantage of such waivers.

The Central Bank of the UAE has launched a Dh256 billion Targeted Economic Support Scheme (TESS) for banks to provide temporary financial relief for individuals, SMEs and other private businesses affected by the pandemic. Banks are encouraged to use these funds to extend payment relief to customers.

Most leading banks have advertised COVID-19 relief for customers’ mortgage, car loan, or personal loan on the website homepage. Some banks have set up specific landing pages to put in such requests and have separate teams to handle the volume of payment holiday applications.

“If you are in a situation where you can meet your payment obligations, it’s good to be on track. But, I don’t think we have seen the worst in terms of redundancies as yet. If you sense any risk to your job or finances in the months ahead, it is prudent to apply for a payment holiday. You might not need to use it but it is good to be prepared, especially if you are in an industry that has been impacted by COVID-19,” she suggested.

Hatherall-Shawe, who started the agency in 2012, has also benefitted from a three-month rent waiver from her office landlord.

“Since we are a long-term tenant, the landlord offered us relief in these circumstances. I sent them an email and they have offered not to encash our next rent cheque,” she informed.

How a mortgage broker can help?

Mortgage brokers are also helping a lot of their customers to benefit from payment holidays on their house loans. In such circumstances, mortgage brokers do not usually charge a fee to facilitate a loan deferral for their clients.

The interest due over the 3-month payment holiday is rolled up into the remaining term of the loan, so once the monthly payments re-start, it will be fractionally higher

- Arran Summerhill, director of Holo mortgage broker

“These payment breaks do not come with any hidden charges as such. The interest due over the 3-month payment holiday is rolled up into the remaining term of the loan, so once the monthly payments re-start, it will be fractionally higher. All banks we have dealt with on this have been very accommodating, asked very few questions to justify the payment breaks and have helped people out in these times of need,” said Arran Summerhill, director of Holo, a mortgage broker in Dubai.

Citing examples, Summerhill referred to one of his customers, a landlord with 10 properties rented out, who was asked by his tenants for rent relief. When approached, the lender deferred the payment for three months.

“Another customer is based in the UK and their tenant has asked to vacate the property. Because of this, their lender has granted the payment relief for three months,” he explained.