Landlords are being urged to seek advice before taking a mortgage holiday through concerns many are leaping into the ‘break’ without considering the full consequences.
According to broker, Mortgages for Business, only ‘a handful’ of the landlords who are contacting its switchboard to discuss mortgage holidays have legitimate concerns about making repayments.
It said most of the landlords it has been speaking to since the government offered the three-month payment deferral due to Covid-19 have enough means to get through the difficult period.
The broker is concerned about not only the moral implications for abusing the emergency mortgage repayment but also that doing so could ‘play out badly’ for the landlord.
Indeed, taking the three-month break from repayments could impact current and future applications, it said. What’s more, lenders were reconsidering applications when a landlord had asked for a repayment holiday on their existing loans.
Steve Olejnik, managing director of Mortgages for Business, said: “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.”
Proof of financial hardship
Most buy-to-let lenders will ask landlords for proof they are in financial hardship before granting any holiday request.
Mortgages for Business explained even where a tenant is in distress and unable to make payments, to qualify for the scheme landlords must also need to be unable to meet their mortgage repayments.
What’s more, it’s essential any landlords in genuine financial hardship do not just cancel their direct debit payment as this will be classed as a missed payment and will impact their credit file. The advice is to speak with your lender first and get the payment holiday authorised first.
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.”
