Important information and support for Buy to Let clients
The Covid-19 outbreak is having an increasingly profound impact on the UK housing market. As a landlord, you’ll be aware that this is having significant implications within the Buy to Let market.
Whether you were planning to make an imminent property investment; are a professional landlord with a portfolio of properties or own just the one property, you’ll be keen to understand what’s happening and where this leaves your Buy to Let investments and decision making. The key message is that despite all the difficulties, we are open for business and there are still lenders looking to lend!
To hopefully help put your mind at ease, and to perhaps save you some additional time looking for answers elsewhere, I wanted to try and answer some of the questions many landlords are asking. I hope the information below is helpful.
If you do still have any other questions that have not been answered already, please do not hesitate to contact me.
Summary of important Buy to Let market changes
The Government have introduced the Coronavirus Act (2020) which establishes a set of guidelines for tenants and landlords to follow. They have stated that there is not a ‘one size that fits all’ approach to dealing with specific landlord-tenant situations and that frank, honest conversations are needed to establish the needs of the tenant to allow landlords to assist and provide support.
The Government has also announced the extension of the provision of three-month mortgage repayment holidays to include Buy to Let mortgages.
Alongside government guidelines, lenders are doing all they can to offer some support through mortgage repayment holidays.
Frequently Asked Questions (FAQs) are available on most lenders’ websites specific to Covid-19 and helplines/online chats are available providing clarification as to how borrowers can request a repayment holiday.
In many cases lenders are providing specific information for Buy to Let borrowers, whose circumstances may come with more complications than a residential mortgagor.
There has been a noticeable decrease in the availability of mortgage products over the past couple of weeks particularly, those designed to support more specialist requirements including Buy to Let. In some cases, lenders have chosen to withdraw Buy to Let products altogether or to cap the loan to value (LTV) they are willing to lend up to.
The key challenge for lenders is the suspension of the ability to undertake the physical valuations of properties. However, an increasing number of lenders are moving rapidly to offering “desktop” valuations, involving a valuer assessing the property using online data. We are already seeing the result of this move with more higher LTV products starting to emerge. This trend will increase over the coming weeks, which should help ensure more products become available.
Some frequently asked questions
Can I get a mortgage holiday with my Buy to Let mortgage?
The Government has recognised the financial pressure that landlords are facing with the Covid-19 outbreak. They have announced that a three-month mortgage holiday will be valid for Buy to Let mortgages as well as residential mortgages. This will alleviate the pressure on landlords and tenants who will be concerned about paying their mortgage and rent.
If you are looking to re-mortgage in the next six months, but will require a payment holiday, please speak to me before engaging your lender, as this may influence the mortgage products available to you.
I’m a limited company, can I apply for a mortgage holiday?
Yes, UK Finance, which represents the banking industry, has confirmed that the mortgage holiday for Buy to Let landlords will also apply to those who have mortgages through limited companies.
Should I take a mortgage holiday?
If your finances have been affected because of coronavirus and you have consent from all named participants on the mortgage, you are able to apply for a three-month mortgage repayment holiday.
However, I would stress that this is not free money and that you will need to make up the missed payments in due course. At the end of the three-month holiday, you will need to agree higher repayments moving forward with your lender or extend the term of your mortgage. As such, taking a holiday will cost you more in the longer-term. My recommendation would therefore be to not take a holiday unless you really need to.
My tenants can’t pay their rent, what do I do?
Responsibility falls onto the landlord to reach out to their tenant(s) to establish whether they are under financial strain and therefore unable to pay their rent. Landlords are encouraged to show compassion to their tenants and help them to remain in their homes.
Both the Building Societies Association and UK Finance have announced that there will be no repossession actions taking place for the next 90 days, this applies to homeowners and landlords. In addition, tenants cannot be evicted from their home over the next three months.
In the case that renters are unable to keep up with monthly payments, landlords and tenants are encouraged to work together to come up with a repayment plan, while taking into account the tenants’ specific circumstances at the end of this period.
Can I also claim for a mortgage holiday if my tenant is still paying their rent?
Those tenants who can still pay their rent should continue to do so as normal. If your tenant is still paying their rent but your main source of income from a full/part-time job has stopped and you are unable to pay off your mortgage/outgoings, then you are able to apply for a mortgage holiday providing you have been paying your mortgage in a timely manner up to this point.
What is the position on repossessions?
If you have not been, or are unable to, make payments then following government intervention mortgage lenders have suspended possession orders and will not start new court actions for three months (as of 19 March).
Your property may be repossessed if you do not keep up repayments on your mortgage.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.