First of all we at Property Deals Insight hope you and your families are all safe amidst all the mayhem caused by recent COVID-19 outbreak.
The UK Governments and Banks have made various announcements and my known friend – Lisa Orme, Advised on Rent & Mortgage Payment Holidays. – Thought it will be good for all the landlords and tenants in the group to understand this. She is a Mortgage Broker.
I want to clarify what we know so far on this and also bust a few myths.
Mortgage lenders have collectively agreed to a maximum three month payment holiday.
Payment holidays will apply to buy to let mortgages as well as residential mortgages. And includes HMOs and Limited Company lending.
Landlords are expected to pass on any payment holidays to tenants via rent reductions.
This is NOT a waiving of payments; they will simply be deferred to the end of your mortgage or added to your subsequent mortgage payments along with all interest that would have been payable during that time.
This will increase the overall cost of the mortgage you have to pay back, potentially extend the term of your mortgage or increase future monthly payments.
It is important that you confirm with your lender in writing (or record the phone call) that payment holidays will not be marked as missed payments on your credit file. They often are under normal circumstances and lenders have only stated that they ‘will do their best’ in this regard.
Once this has all settled get a copy of your credit report to check for any issues.
For more information you need to speak to your lender directly; mortgage brokers, solicitors, etc can’t assist in this regard.
Please bear in mind this is a Government directive issued only in the last day or so; lenders will still have to put systems and procedures in place so bear with them. In addition their staff will also be affected so there are staff shortages and phone lines are going to be extremely busy.
Tenants should note that rents are also a payment holiday and not a waiving of rent. The rent is still owed and depending on the terms of your tenancy agreement you could also be charged fees and interest.
If your rent is £1000 and the landlords mortgage is £700 then they will only be able to defer £700 of your rent. The £300 is still payable. The landlord will have other property related expenses to meet and the surplus rent may also be their income, for some it could be their only income and just like tenants they may have their own mortgage, bills and kids to support too.
Do NOT stop paying your rent without discussing this with your landlord or letting agent first.
It is likely your lender, landlord or letting agent will want evidence that this is related to the virus ie you’ve been laid off work for example.
Lenders and the rental industry are putting a stop on all possessions and repossessions for three months but if you simply stop making payments with no discussions then you are simply kicking the can down the road.
You are still obligated by the terms of your mortgage or tenancy and missed payments that have not been agreed could still result in adverse credit, CCJs or even bankruptcy. Missed payments on your credit file will affect your ability to get future credit, loans and mortgages for many years.
Students should take particular note; just because the Uni closes doesn’t negate your rental payment responsibilities. You cannot simply walk away, you or your guarantor may end up having to find the rent or face the consequences.
This whole situation has only just started; if you’re that desperate that less than 48 hours after the announcement you need to stop payments then you have a bigger problem than this is going to solve so please seek specialist financial help.
If you can afford to pay your rent or mortgage then do even if you have to dip into your savings. This is not an opportunity to take advantage and spend the money elsewhere; it is not free money or a handout.
None of us know how long this is going to last or how long you may be short of income and you may need that payment holiday in a few months far more than you need it now.
it is important to keep talking to your lender, landlord or letting agent about your situation. Lenders don’t want to become landlords and landlords don’t want to lose good tenants.
As things stand at the moment there are no holidays or deferment of council tax, utilities or taxes. Stay on top of these and adhere to the same advice as for mortgages and rent ie talk to the provider and beware the affect on your credit file.
Finally don’t lose your rag; the people you’re speaking to are likely as concerned about their jobs, income and family as you are.
Stay safe and let’s hope for a speedy resolution in these unprecedented times.”
Keys Mortgages – www.keys-mortgages.com
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