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How the residential and buy-to-let mortgage payment holidays will work

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  • 19/03/2020
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How the residential and buy-to-let mortgage payment holidays will work
The last two days have seen an unprecedent response from government and mortgage lenders to help support borrowers during the Covid-19 outbreak which is expected to sweep the country for the next few months.

 

Three-month payment holidays have been announced for all lenders that are members of UK Finance and the Building Societies Association (BSA), along with a moratorium on repossessions.

Lenders can offer a payment holiday of up to three months without the need to assess borrower circumstances and applications can be made on a self-certification basis.

However the trade bodies emphasised that landlords should pass on the relief to their tenants during this period.

Some of the biggest lenders have already set out details of how they will respond, including Lloyds Banking Group, NatWest, Barclays and Nationwide.

However, lenders may extend their flexibilities in different directions or under varying means.

UK Finance and the BSA have set out the underlying principles of how the schemes will operate for owner occupiers and landlords, but highlighted contacting the relevant lender as soon as possible was vital.

 

The key points

  • A payment holiday will be available to all customers who are up to date on their mortgage payments.
  • A payment holiday will also be available to all buy-to-let landlords whose tenants have lost income because of the impact of Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.
  • Customers will still owe the money where a payment holiday has been granted and interest will still accrue, so if borrowers are able to make part of the normal mortgage payment to reduce the money owed or interest charges then they should consider doing so.
  • Firms will make every effort to ensure that the payment holiday does not negatively impact on borrower credit files.
  • If already in arrears, borrowers should contact the lender as soon as possible. Lenders will review any change in circumstances to ensure that payments remain sustainable.
  • If borrowers are already experiencing financial difficulty, lenders have also agreed a three month moratorium on residential and buy-to-let possession action, meaning that no homes will be repossessed at this difficult time.

 

Common questions

 

What is a payment holiday?

With a payment holiday, borrowers will not have to make any monthly mortgage payments for a set amount of time, in this case up to three months.
However, it is important to remember that the money is still owed and the interest on the mortgage still accrues during a payment holiday.
At the end of the payment holiday the lender will be in contact to assess circumstances and agree a manageable way to repay the interest charges incurred and make up the deferred payments. Each lender will have a range of options to do this.

 

Who will be eligible for a payment holiday?

To be eligible for a payment holiday borrowers will need to be up to date on mortgage payments.
For buy-to-let landlords it will be available if tenants have lost income because of the impact of Covid-19.
There are a number of options available and payment holidays are not always the most suitable solution for everyone. By speaking to the mortgage provider, they can tailor the best option.

 

How to apply?

If borrowers are concerned about making mortgage payments they should contact the mortgage provider as soon as possible. Documentation is not required; borrowers will just need to self-certify that their income has been either directly or indirectly impacted by Covid-19.
Buy-to-let landlords will need to self-certify that their tenant’s income has been impacted by Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.
At the end of the payment holiday the lender will make contact to assess circumstances and agree a manageable way to repay the interest charges incurred and make up the deferred payments. Each lender will have a range of options available to help you do this.

 

How long will it take to process an application?

Firms are doing their best to support their customers during these unprecedented times. However, the spread of Covid-19 is also having an impact on their own staff and applications will be dealt with as quickly as possible.

 

What will happen to credit scores?

Mortgage providers will make every effort to ensure that borrowers taking a payment holiday will not be negatively impacted on their credit score.

 

What happens for those already in arrears?

Lenders will make every effort to support people already in financial difficulty and will make this process as simple as possible. Mortgage providers have agreed to a three-month moratorium on residential and buy-to-let possession action, meaning that no homes will be repossessed at this difficult time.

 

What should tenants do?

Tenants should contact their landlord or managing agent if they have problems paying rent. For landlords whose tenants are unable to pay their rent, they should contact the lender as soon as possible to discuss the options that may be open.

 

 

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