Mortgage payment moratorium: Pause repayments for 3 months

With the recent outbreak of the worldwide COVID-19 pandemic, many property owners with mortgages are faced with reduced incomes.

To alleviate the financial burden for consumers who have monthly mortgage payments, the German government has stepped in with a new law (Art. 240 §3 EGBGB) that was passed on March 27th, 2020. 

The law stipulates that anybody who has closed a mortgage before March 15th, 2020, is entitled to pause its monthly mortgage payments (interest + repayment) for the 3-month period between April 1st, 2020, and June 30th, 2020. 

What is the key requirement to pause mortgage payments?

The key requirement to pause mortgage payments is that the borrower must have suffered a reduction in their income as a direct result of the pandemic. 

A qualifying income reduction for employees can be short-time work (“Kurzarbeit”) or job loss. Freelancers and self-employed consumers can argue that their revenue has dropped due to clients canceling orders/services.

In addition, it is also necessary for consumers to prove that it is no longer reasonable for them to pay the mortgage owed due to the loss of income. In other words, the borrower has to show that they can no longer provide a reasonable standard of living for themselves and their dependents. 

What happens after June 30th, 2020?

The lender and borrower should agree on adjusting the loan contract, notably on the payments after June 30. If the parties cannot agree, the moratorium can be extended by three months. 

There is no (explicit) expectation that the loan extension is free of charge. Presumably, the same interest rate will apply. In other words, expect that the unpaid interest is rolled into the loan amount, resulting in a marginally higher repayment for the remaining loan period. 

The moratorium does not need to be complete: If the consumer can pay part of the loan, they can agree with the lender. In practice, it would make sense to avoid unnecessary conflict with the lender.  

How Hypofriend can help you

As a mortgage broker who has helped hundreds of clients sign a mortgage over the last three years, we at Hypofriend want to help all our clients get through this financially stressful situation. 

This is why we have prepared a German template you can send to the bank when you have your mortgage. You can also make use of the above law to pause your mortgage payments for the 3-month period. All you have to do is create a copy of the Google Doc file, fill in the blanks with your personal details, print the document, sign it, and send it via post to your bank. 

Here, you can find the template for employees, freelancers, and self-employed people.

If you have any questions about filling out the above documents, please get in touch with the Hypofriend advisor who assisted you with your mortgage. If you have more general questions about how this process works, write us a brief message at info@hypofriend.de.

We at Hypofriend hope that this temporary mortgage holiday will help you get through these difficult times.