Finance: Supporting landlords' incomes through the pandemic
If you’re struggling financially as a result of the pandemic, the good news is that there’s some help available for landlords.
1. Rent Protection Insurance
New rent guarantee policies were withdrawn from the market at the end of March last year, as soon as the Government introduced emergency legislation for evictions. But now that insurers have had time to assess the impact of the pandemic, most have returned with a temporary Covid-19 product.
These products will generally cover you for up to 6 months of rent payments (or more if managed by Your Move) and it’s great news that landlords once again have this support available.
If you took out rent protection insurance before 25th March 2020, check with your provider where you stand if you need to claim and what the policy terms are likely to be when it’s time to renew.
2. Mortgage holidays
The current rules allow you to ask your lender to defer up to six monthly mortgage payments. That can be a month at a time or all in one go, depending on when you feel you need help, but it’s for a maximum of six months in total.
This facility has been extended several times already, but is due to come to an end on 31st March. So, if you’re having difficulty affording your Buy to Let mortgage payments because your tenant has defaulted on their rent - or even if your own income has been badly affected by the pandemic – it may be possible to still apply for a payment holiday before 31st March and after this time, you may be able to extend existing deferrals until 31st July 2021. Lenders will make these decisions on an individual basis, so speak to your own lender directly to check whether this option is available to you.
Important notes: This is deferring payments, not ‘skipping’ them, so interest will continue to accrue on the whole outstanding borrowed amount, increasing the overall cost of your mortgage. And make sure you’re clear on how your lender will allocate the deferred payments and additional interest. Some will extend your mortgage term by the number of holiday months; others will spread the deferred payments and extra interest over your existing term, meaning your regular monthly payments will increase.
And, although taking a payment holiday during the pandemic shouldn’t affect your credit score, with the UK’s three main credit reference agencies (Experian, Equifax and TransUnion) having pledged last April to protect credit scores during the pandemic, your lender might ‘flag’ any special arrangements made for your mortgage payments. While this isn’t usually a factor in credit scoring, other future lenders would be able to see that you’d taken a holiday or had a period of reduced payments. Be aware that if you miss or are late with any payments, this will definitely be registered and could affect your ability to borrow in the future.
3. Owe up to £30,000 in tax? You may be able to pay HMRC in instalments
To help ease the financial burden on Self Assessment customers, HMRC has increased the threshold for its ‘Time to Pay’ facility from £10,000 to £30,000. That means if you owe up to £30,000 in tax, you can set up a plan online for paying in monthly instalments, over a period of up to 12 months.
Conditions: You must have no outstanding tax returns or tax debts, no other HMRC payment plans already set up and the new plan must be set up no later than 60 days after the tax due date. Interest will be applied to the outstanding balance from 1st February 2021. See full information on the GOV.UK website.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.