Mortgages for Business says only “a handful” of landlords contacting its switchboard about mortgage repayment holidays are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.
The commercial and residential mortgage broker acknowledged there are landlords in geniune difficulty. But said most of the landlords it has been talking to since the scheme was opened do have sufficient means to get them through a difficult period.
Steve Olejnik, managing director of Mortgages for Business, commented: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful 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.”
Landlords need to think long and hard before submitting a request for a payment holiday to their mortgage lender. They shouldn’t ask for a payment holiday unless they need it, if only because it could affect current and future applications. Lenders are reconsidering applications when a landlord has asked for a payment holiday on their existing loans.
Olejnik said: “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.”
Additionally, Mortgages for Business points out that most buy-to-let lenders will ask landlords to prove they are in financial hardship before granting any holiday request. While a landlord’s ultimate tenant may be in distress and unable to make rental payments – to benefit from the scheme, landlords also need to unable to meet their mortgage repayments.
Olejnik added: “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.”
Landlords facing genuine financial hardship, who cannot afford to meet a mortgage repayment, should not cancel their direct debit payment to lenders, assuming a repayment holiday will be granted. Lenders will class this as a ‘missed payment’ and it will affect a landlord’s credit profile.
By Joanne Atkin
Source: Mortgage Finance Gazette