During these unprecedented times, many homeowners and buy to let landlords will have a fear of what will happen with their home or investment property if they cannot continue to make mortgage payments.
Unlike the provisions to protect residential and commercial tenants from eviction, mortgage holidays from UK lenders are (as things stand) not enforced by law. The policy adopted by most lenders is the consequence of an agreement between the government and principle lenders, but, this scheme is voluntary and does not have to be supported by a lender if they do not wish to.
UK Finance (representing that industry sector) has issued guidance with the following 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. It should be noted that the borrower needs to certify that their tenant has been affected to qualify for the scheme, and it is not available if the tenant’s income has not been reduced.
- A borrower will continue to owe the money where a payment holiday has been granted and interest will still accrue, so if you are able to make part of your normal mortgage payment to reduce the money you owe or your interest charges then you should consider doing so.
- Lenders will make every effort to ensure that the payment holiday does not negatively impact on your credit file.
- If you are already in arrears, you should contact your lender as soon as possible. Lenders will review any change to your circumstances to ensure that payments remain sustainable and they may be able to offer you a payment holiday.
- If you are already experiencing financial difficulty, lenders have also agreed a three-month moratorium on residential and buy-to-let possession action (from 19 March 2020), meaning that no homes will be repossessed at this difficult time.
The guidance does not exclude borrowers with more than one property. Any mortgage holiday will, in essence, be seen in law as a contractual agreement to “alter” existing contractual obligations between the borrower and the lender.
Website content note: This is not legal advice; it is intended to provide information of general interest about current legal issues.