24th
Apr 2020
According to a business mortgage broker it has only received “a handful” of landlords phoning in asking for advice as to whether it is in their best interests to take a ‘mortgage holiday’ whilst the Covid–19 crisis is ongoing.
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Undoubtedly there are landlords encountering financial hardship because of the pandemic, however the majority of landlords who have spoken to the firm do have just enough funds to get them through the next few months.
Steve Olejnik, managing director of company said: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful of are raising legitimate concerns about how to pay their mortgage in the face of the COVID-19 pandemic. Quite apart from the moral implications of abusing an emergency mortgage repayment scheme brought in at a time of national crisis, it could play out badly for the landlord.”
Olejnik says that landlords must seriously consider whether they should request a mortgage payment holiday and should only be taken as a last resort. He explains that any landlord who submits a request will affect any of their future applications, as lenders will be far tougher with those who have taken a payment break from their current mortgage.
Olejnik says: “Landlords must be aware that any requests could potentially damage any approaches to that lender. Lenders expect landlords to be able to cover void periods under normal circumstances – where a property is empty, and a landlord isn’t getting any rent – so they won’t take kindly to landlords trying to take advantage of them just to build up some cash reserves. One borrower with three live cases with their lender approached them for repayment holidays on another, existing loan. The lender immediately cancelled all three. Smart landlords, who want to capitalise on short-term house price falls and expand their portfolios when the lockdown is lifted, should think long and hard before approaching their lender.”
Another consideration for landlords is that they will have to prove to BTL lenders they are in financial hardship before they will be allowed a payment ‘amnesty’. If a landlord’s tenant/tenants are unable to pay their monthly rent(s), the landlord will likewise have to prove to the lender that they will not be able to pay their mortgage repayments.
Olejnik concludes: “The message is simple. Do not approach lenders for payment holidays without first taking advice and thinking about the longer-term consequences. Don’t jump on the repayment holiday bandwagon! Any deferred payments will have to be made at some stage and it could create problems down the line – especially when you come to refinance or grow the portfolio.”
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