Navigating COVID-19: A Guide to Financial Help for Landlords

As a landlord navigating the COVID-19 pandemic, it is something of an understatement to say there is a great deal to take in. With many tenants struggling to pay their rent, and repossession rules temporarily restricted, for many landlords, and for the residential property management sector in general. these are challenging times.

There are however a number of schemes to explore to help landlords temporarily absorb rent arrears should tenants lose their jobs or face a reduced income due to the pandemic, as well as other strategies worth considering. Let’s take a look at what’s on offer.

Three-month mortgage holiday for buy to let borrowers

Where rental income has been affected by the coronavirus, landlords are able to apply for a three-month mortgage holiday. There is a fast track approval process in place with no affordability test involved. The deadline for applications is 31 October 2020.

For the duration of the holiday, no scheduled mortgage payments need to be made. There are however some important considerations to make.

Firstly, whilst there will be no additional fees or charges made, interest will still accrue during the payment holiday, which means that once it’s over, your monthly payments will increase to cover that interest and the deferred payments. The shorter the term left on your loan, the greater the increase in the monthly payments. You’ll therefore need to seriously think about whether this will be a viable expense for you going forward.

Secondly, if you apply for finance in the future, lenders may take in to account that you have made use of a payment holiday, which could go against you.

Who qualifies for a buy to let mortgage holiday?

If you are a buy to let landlord then your key criteria will be that your tenant has been directly or indirectly financially impacted by the pandemic. This does not mean that they will have to have tested positive for the virus.

Lenders are allowing landlords to self-certify that this is the case. The holiday will be agreed on the understanding that the relief will be passed on to the tenants in the form of a rental payment holiday.

Mortgage holidays are only available to borrowers who are up to date with their repayments. However, as of 19 March 2020, lenders have suspended all possession actions against borrowers. This suspension will be in force until 31 October 2020.

Will a mortgage holiday affect my credit rating?

UK Finance has confirmed that ‘firms will make every effort to ensure that the payment holiday does not negatively impact on your credit file.’

Credit reference agencies Experian, Equifax and TransUnion have confirmed that credit scores will be protected when a mortgage payment holiday is taken. The agencies have brought in a special measure called an ’emergency payment freeze’. This means credit scores will be kept at their existing level for the duration of the payment holiday.

What other financial options are available to me as a buy to let borrower?

A payment holiday is just one solution offered by mortgage lenders. Do try to speak to your lender to discuss what else they can do for you.

Whilst an affordability test isn’t necessary for a payment holiday, if you agree to undertake one, your lender may be able to come up with some form of support that’s more bespoke to you. Let’s take a look at some of the possibilities.

Increase your mortgage term

Your lender may agree to allow you to extend the length of the term over which you are repaying your loan. However you must consider that you will be paying it back over a longer period, which in the long term means you’ll hand over more interest.

Make capital or interest only payments

If your lender is in agreement, you may be able to temporarily switch to capital or interest only payments. This will bring down your monthly repayments, but again it’s only a temporary measure and you will still remain liable for any shortfall in your regular payments.

Is there any financial help for landlords other than coronavirus mortgage holidays?

Unlike in Scotland where the Government there has made the Private Rent Sector Landlord COVID-19 Loan Scheme available to landlords, there is nothing similar in force here in England. What’s more, unfortunately, rent guarantee insurance has been temporarily suspended, and the Self-Employment Income Support Scheme (SEISS) will generally not be of help to landlords, although the NRLA has been campaigning for additional financial support to help landlords through the pandemic.

There are however some practical steps landlords can take and schemes that you may wish to take advantage of.

Loans and credit card payment holidays

Many banks and building societies have agreed to offer loan and credit card payment holidays. Similar to the mortgage holiday, there is a payment freeze of up to three months available to qualifying applicants. Credit cards, store cards, personal loans, guarantor loans, logbook loans, home collected credit, Community Development Finance Institution loans and some Credit Union loans will be covered, as long as the provider is regulated by the Financial Conduct Authority (FCA). Buy now pay later arrangements and high-cost short term credit like payday loans are not included.

These payment holidays, potentially useful for both landlords and tenants who may be facing financial difficulties, will of course be subject to the individual qualifying criteria set down by the providers.

Energy company schemes

Most energy companies have set up schemes designed to provide assistance during the pandemic. These include free top-up cards, payment breaks, payment reductions, bill payment plan reviews, debt repayment plans and longer time to pay. The companies have agreed not to disconnect any credit meters during the outbreak.

Help for tenants

Various lines of assistance are open to tenants who are struggling to pay their rent such as the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme and Universal Credit to name a few. Residential property management companies and landlords will do well to encourage tenants to take advantage of these measures so that they are able to keep up with their rental payments. We will cover all these schemes, together with current repossession rules, in a separate dedicated post.

Do bear in mind that not all tenants are entitled to a rent payment holiday with their landlord. If they have not been affected by the pandemic then they should carry on paying their rent as usual. If you do make the decision to to defer rent, then it will still be due later, so it is wise for the tenant to continue to pay if they are able.

Secure your rental payments with a rent guarantee scheme

With rent guarantee insurance products suspended due to COVID-19, it is no wonder landlords, leading names in the residential property management sector and private rented sector associations are widely voicing their concerns.

For landlords looking to secure their income however, there is the option of the homes2let guaranteed rent scheme. This is a scheme that not only guarantees a monthly rental payment even during void periods, but also allows landlords to enjoy a full residential property management service so they can enjoy their investment from a hands-off perspective. With our plan that offers guaranteed rental income, properties are let to local authority tenants, as such securing the income for complete peace of mind, even in challenging times like these.

Interested to learn more? You are welcome to get in touch with our friendly team.

The information relayed in this article was up to date at the time of posting. It is intended to be of a general nature and has been taken from various official sources. None of it should be construed as financial advice. You should always seek tailored professional advice before making any financial decisions.