Landlords: can’t pay your BtL mortgage?
With cash flow a cause for concern among tenants and investors, here’s Viewber’s advice for landlords who may struggle to repay their buy-to-let mortgage.
While the immediate shock of the pandemic may have passed, it is only now – with a high degree of uncertainty still prevailing – that many of the effects are being felt.
For landlords, there is the threat of being unable to make buy-to-let mortgage repayments – almost exclusively because tenants are in financial difficulty or a vacant property remains un-let with no rental income.
The good news is there are a variety of strategies to help reduce buy-to-let mortgage repayments or defer them altogether. Viewber rounds up the sagest of advice this far.
1. Request a mortgage payment holiday
Landlords are eligible for a three month mortgage payment holiday – which means no repayments are due during a qualifying 12 week period. The deferred payments will either be added on to the end of the mortgage term or recouped in the form of higher monthly payments after the pandemic has passed. Contact your lender directly to request a mortgage payment holiday – many have specific online forms – although you may get assistance from a financial adviser if they organised your mortgage on a broker basis.
2. Remortgage to reduce repayments
Lenders and financial advisers continue to work during the pandemic and with interest rates at historically low levels; landlords may be able to reduce the amount they repay every month by remortgaging, especially if their fixed rate is coming to an end. What Mortgage? has reported buy-to-let mortgage rates as low as 1.19% on some two-year fixed rate products, so it’s worth investigating.
3. Ask to extend your mortgage term
If you have a buy-to-let mortgage that repays the capital as well as the interest, one of the quickest ways of lowering your monthly mortgage repayment is to lengthen the term of the mortgage – the number of years over which you agreed to pay back the loan – from 10 to 15 years, for instance. Be aware - despite lower monthly repayments, your overall borrowing costs will be higher using this method as you are repaying interest over a longer period of time. Don’t forget to reduce your term as soon as it’s financially possible.
4. Negotiate to pay back smaller amounts
Some lenders are open to the idea of landlords making reduced mortgage repayments during the Covid-19 crisis, allowing them to budget more effectively. In line with mortgage repayment holidays, a reduced payment system is only a temporary measure and it will result in higher mortgage repayments once things are back to normal or an extended mortgage term.
5. Offer tenants a temporary rent reduction
If your choice is some money from your tenant versus no money, it may be worth coming to a temporary agreement to reduce the rent. Try and agree an amount that covers the entirety of your monthly buy-to-let mortgage repayment but still offers your tenant a discount. Be sure to document any rate negations in writing, highlighting that it is a short-term measure only.
While Viewber is adhering to Government’s advice onsocial distancing, we are well prepared for the post CV19 environment. Take a look at our specialised viewing, property visit and video tour services available to landlords here.