Mortgage Holiday Advice

To support in a time that’s proving to be financially difficult for both landlords and tenants alike, lenders representing banks, building societies and other specialist lenders came together in March to announce additional support for homeowners and residential landlords. Landlords can apply for a payment holiday of up to three months if their tenants are experiencing issues with their finances, as either a direct or indirect result of coronavirus. From 19 March 2020, it was also announced that there will be a restriction on repossessions to provide buy-to-let landlords with the reassurance that they will not have their properties repossessed at this difficult time.

What exactly is a mortgage holiday?

Mortgage payments tend to be the largest outgoing month-to-month in the majority of households. When things become difficult financially for whatever reason, this is often the first thing we begin to worry about paying.

A mortgage holiday is a three month period where you won’t have to make your scheduled mortgage payments. This is not a new concept, and most lenders already offered this option for people whose circumstances had changed, such as losing their job. Applying for this mortgage payment holiday will not affect your credit rating. Once the payment holiday has finished, the monthly mortgage payment will increase to repay the missed months and the additional interest that will have accrued. To qualify for a mortgage holiday, you’ll need to meet two requirements; your tenant must have been directly or indirectly affected by coronavirus, and thus cannot afford their rent, and secondly you as a landlord must be up to date with your current mortgage payments.

Should I apply for a mortgage holiday?

For landlords whose tenants have unfortunately lost their jobs and are unable to make ends meet and keep up with monthly payments, a pause in mortgage outgoings will help in the short term. Whether or not you should apply depends on your individual circumstances and the extent to which you are struggling to meet your mortgage repayments. There could be some implications down the line if you choose to take a mortgage holiday. Although the government has reassured people that their credit scores won’t suffer, it could still affect how lenders view borrowers. This is because lenders expect landlords to be able to cover void periods under normal circumstances, for instance when a property is empty and no rent is coming in. Applying for a mortgage holiday could alert lenders to the fact that you are having or have had financial difficulties.

There is also a worry that many landlords will take advantage of this opportunity when they don’t actually have legitimate concerns about paying their mortgage during the Covid-19 pandemic. Mortgage holidays are great for those in need, but carefully consider whether it is right for you before approaching your lender.

My tenant is affected and can’t pay their rent

Of course, mortgage payment issues start when a tenant becomes financially affected by the pandemic and cannot pay their rent. Landlords are being urged to remain flexible with their tenants if they have been directly or indirectly affected by the pandemic. Although you are not expected to offer rent-free periods for your tenants, you should ensure that they are given flexible payment options. If your tenant can’t afford rent, it might be tempting but you can’t use their security deposit before the tenancy has ended. You can however claim rent arrears at the end of the tenancy, and the deposit can be put towards covering it then. If you speak to your tenant and they are concerned about being able to pay their utility bills, encourage them to contact their various providers. A number of emergency measures have been put in place to ensure that vulnerable tenants won’t have their utilities suspended during this period.

Also, during the pandemic, landlords will be restricted in regaining possession of their property to prevent any tenants becoming homeless. In most cases, notice periods are now extended to three months until September 30th 2020, and could be extended for a further six months in future. All current possession proceedings are suspended for at least 90 days from March 27th 2020 and it won’t be possible for anyone to be granted a possession order or enforce a possession order until the end of June at the earliest. This does not apply to notices served once the legislation comes into force. Tenants are being urged to only ask for help from their landlords if they really need it. If your tenant comes to you with their worries, it’s important to be sympathetic and try and work things out with them. If they still have the financial means to pay their rent, they should carry out as normal - just as landlords should if they can still pay their mortgage.