Property News > Landlords should only apply for repayment holidays if they really need them, broker warns

Landlords should only apply for repayment holidays if they really need them, broker warns

Landlords who have applied for mortgage repayment holidays that they don’t really need
have been criticised by broker Mortgages for Business.

It suggests that the majority of landlords contacting its switchboard are not carrying serious concerns about how they will be able to keep up with their repayments in the face of the COVID-19 pandemic.

Steve Olejnik, managing director of Mortgages for Business said: “We’re having a lot of
discussions with landlords around payment holiday requests. Only a handful of them are
raising legitimate concerns.

“Quite apart from the moral implications of abusing an emergency mortgage repayment
scheme brought in at a time of national crisis, it could play out badly for the landlord.”

The firm also warns landlords to be mindful that any current and future applications may be affected by a payment holiday request, and so they should think long and hard beforehand.

Applications are being reconsidered by lenders in cases where a landlord has asked for a
payment holiday on their existing loans.

Olejnik added: “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.”

Before a holiday request is granted, landlords will be asked by most buy-to-let lenders to
prove they are in financial hardship. Tenants need to be in distress and unable to pay their
rent, while landlords also need to be provably incapable of meeting their mortgage
repayments.

Olejnik said: “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.”

Landlords should speak to their lender if they are facing genuine financial hardship.

However, they have been warned to ensure that their lender is warned before any direct
debit payments are cancelled, as failure to do so may damage their credit profile.

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