Mortgage Holidays your questions answered

Coronavirus and mortgage payment holidays – your questions answered

Thank you to Jenni Browne from What Mortgages website for this information

The government’s pledge to allow payment holidays on residential and buy-to-let mortgages for people struggling with repayments during the Covid-19 crisis have thrown up many questions.

From concerns over the impact on credit scores to dealing with a tenant already in arrears, huge numbers of people are seeking clarity on the new measures.

We put some of your questions to our mortgage expert, Jeni Browne, of Mortgages for Business, to provide some early guidance on some of your concerns.

Impact on my credit score

Q: I need to take a payment holiday from my mortgage – how will this impact my credit file?

A: Any payment holidays taken during this challenging time will not impact your credit file. However, please do take care to understand the longer-term implications of taking the payment holiday.

In essence, the unpaid interest may be added to the mortgage balance and as such, increase the amount you owe and therefore subsequent payments.

Affordability problems

Q: How will the payment holidays work for people who only just manage to pay their monthly mortgage? How will they manage if their payments go up after, say, the minimum of three months mortgage holiday break?

Will the amount be added to the end of their term, by say another three months?

A: The best advice we can give at this stage is to have a conversation with your lender so you can figure out how you can arrange an affordable structure.

Lenders are required to be sympathetic and support you, and the feedback we have received to date has been really positive in so far as lenders wanting to work with their borrowers to support them during this time.

Changing circumstances during the ‘holiday’

Q: What happens if I obtain, say, a three month mortgage holiday and later find I only needed two months and could pay month three.

Would the lender recalculate the added interest if I ended up only needing two months? This may happen if the government do come up with the support for self-employed.

A: If you have an agreement for a three month payment holiday but do not need to ultimately utilise all of this you should, once you are quite sure that you will be ok, contact you lender and advise them of this.

Invariably, they will want to facilitate this as it will be better for both you and your lender.

Tenant behind with rent before coronavirus

Q: Do you know what the situation is if our tenant is already in arrears?

A: From the government announcement, no new proceedings for eviction can be undertaken for three months.

They are keen that landlords work with tenants to arrange a repayment plan for missed payments.

Additionally, there is an option to speak to your lender about the three month payment holiday. I would recommend seeking legal advice for clarification on the government’s proposal.

We have lost our income, so has our tenant – what now?

Q: Due to the pandemic my husband and I are unable to work and will have absolutely no income. So we would like to apply to have a mortgage holiday on our buy-to-let mortgage as our tenant has also lost her job. Please help.

A: Your lender will be ready to help.  You need to call them up and explain the situation, and they will be able to talk through your options.

They will likely want you to provide some verification around the situation; for example, a letter from your tenant’s employer confirming that her employment was terminated, plus a copy of your tenancy agreement.

Your lender may/may not ask for this but its best to be ready just in case.  I wish you well with this.

Proof of tenant’s inability to pay

Q: What evidence should we request to establish that the tenant is unable to pay and what are a landlord’s right in repayment to what is, in effect, a loan to a tenant?

A: Currently, a tenant is expected to pay their rent. If they are unable to do so contractually, any arrears accrue and are still due to the landlord.

However, at the moment, I would suggest that your best course of action is to open dialogue with your tenant, understand their situation, see what they can afford to pay and also whether they have looked into financial assistance.

Right now, repossessions are not possible because of rent arrears, so the best solution is that you and your tenant work together to see what can be done. We are expecting further announcements from the government to set out how they are going to assist landlords and tenants during this time.

Impact on retirees

Q: I am a landlord and have a tenant already in arrears, I do not have a buy-to-let mortgage but need income from the property as I am retired due to ill health. What help can I get?

A: The government are yet to confirm their approach towards supporting self-employed people and also their policy for Tenants and Landlords (as alluded to last week).

To this end, I am afraid that we do not have the answers you need just now, but we are expecting news on this during this week. However, as a starting point, you may be able to apply for Universal Credit,

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