Landlords: should you be asking for a mortgage payment holiday?

 

Mortgage holders across the UK can request a mortgage payment holiday if they’re struggling to cover their costs. The same goes for landlords, but is it a wise choice?

As of the end of last week, an estimated 1.2 million people – or one in every nine mortgage-holders – had taken a mortgage payment holiday. Currently, people can apply for a three-month pause on their payments, thanks to a government-backed scheme. This is designed to help people who are unable to keep up with their outgoings as a result of coronavirus.

The concept of a temporary mortgage payment holiday is not a new one. Most lenders already offered this option for people whose circumstances had changed. This could include job loss, unexpected costs like house repairs, or maternity/paternity leave. At the discretion of the lender, a payment break could be arranged for a short period of time.

Missed payments are added to the mortgage balance. This means your monthly payment and amount of interest you pay will increase for the remaining term of your mortgage.

All mortgage holders can apply

Right now, mortgage payment holidays are an excellent option for some borrowers. The coronavirus lockdown has led to some people losing their jobs, for example. For those who are unable to make ends meet and keep up with monthly payments, a pause in mortgage outgoings is likely to help in the short term.

Buy-to-let landlords are not immune to the situation, either. Some tenants may be asking their landlords for a rent payment holiday due to the current climate. For others, a failed property sale that might have added to a landlord’s cashflow, for example, could leave them struggling to pay their mortgage.

Mortgage payment holidays for landlords work in the same way as for owner-occupiers. Landlords must apply to their lender, who will be able to accept or reject the application.

Should you apply if you’re a landlord?

Whether you should try and get a mortgage payment holiday obviously depends on your individual circumstances. For those who will genuinely be unable to cover their outgoings, or will have to choose between a mortgage payment and other essential items, it could be a good option.

However, some brokers are advising landlords against this if they can possibly help it. According to Mortgages for Business, a lot of landlords enquiring about mortgage breaks are not actually unable to cover their payments.

Steve Olejnik, managing director of Mortgages for Business, says: “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.”

The downside of taking a payment break

When the government introduced the measure, it reassured people that their credit scores wouldn’t suffer. Though this is the case, it could still affect how lenders view borrowers.

Olejnik adds: “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.”

Think carefully before applying

This argument is reiterated by Chris Sykes, who works at mortgage broker Private Finance. He asserts some lenders will be less keen to take on customers who have had mortgage payment holidays. It could be a way of alerting lenders that you are in financial difficulty, he argues.

He adds: “One lender has even told us, if a borrower has requested a payment holiday on an existing loan, any new cases will automatically be declined. Be warned they won’t be alone.”

In the rental sector, tenants have been urged to only ask for help from their landlords if they really need it. The message from the industry is that landlords should be “sympathetic” to their tenants’ needs. However, on the flip side, tenants must not use coronavirus as an excuse to not keep up with their rent payments.

The same goes for mortgage payment holidays. For the majority of landlords, tenants should continue to pay their rent. If you still have the financial means, therefore, to pay your mortgage, it is advisable to carry on as normal. This could come into play down the line, when it is time to refinance or grow your portfolio.

CityGreens, Solihull, Birmingham

City-style apartments directly on Birmingham's largest park

  • Limited pre-launch prices.
  • ZERO ground rent
  • Excellent tenant demand

£182,000 - £419,000

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

UK house prices

Landlords: should you be asking for a mortgage payment holiday?

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.