As a landlord, you may be facing the uncertainty of whether or not your tenant(s) will be able to meet rent payments due to unexpected redundancy or furlough as a result of COVID-19.
While mortgage lenders are offering three-month payment holidays, which extends to Buy-to-Let mortgages, it is still important that you put steps in place to plan for the unexpected.
Speak with your tenant
There is nothing worse than not knowing whether or not your rent fees will be hitting your bank account to meet your mortgage obligations, which is why the first thing you should do is contact your tenant to ask how they may have been impacted by COVID-19 and how that might impact their ability to pay their rent.
Compassion should be shown at this time, everyone is facing increased pressures as a result of the COVID-19 pandemic so consider the way you approach the question. Showing compassion is likely to result in a better outcome all round if an amicable agreement can be reached.
Contact your mortgage lender
If you believe you may struggle to meet your mortgage repayments, or if your tenant has indicated that will struggle to pay, then contact your mortgage lender at the earliest opportunity to secure a mortgage payment holiday.
Most mortgage lenders are tin the process of setting up the ability to make this request online in order to avoid lengthy call centre queues, so check online in the first instance.
Remember that interest will still accrue on the outstanding debt so you may end up paying more interest over the period of your loan, but with current interest rates, this should not have a significant impact.
Find a better mortgage deal
Following the announcement that the Bank of England has reduced its interest rates to a record low of just 0.1%, it may be the time to switch lender. However, if you need to take advantage of a mortgage holiday you will need to discuss this with them at the time of application to check it will be honoured.
Alternatively, if you're out of your fixed term or are nearing the end, speak with your existing mortgage lender to see what better rates they could offer.
New legislation prevents any new evictions from social or private rented accommodation during the COVID-19 emergency. While this will come as a relief to the 4.4 million privately rented households in England, it will likely to be of concern to landlords who are limited in their ability to deal with bad debts, especially if these may have been in place for the past couple of months.
Outlining the new legislation, Sheards Tax Manager, Jane Senior explains: “This means that no action can be taken by the landlord if the tenants can no longer keep up to monthly payments due to being made redundant or becoming furloughed. The legislation includes advice for landlords to show compassion during this time, and to support those who rely on rent as a stream of income, buy to let mortgages are now included through the mortgage payment freeze, to help reduce their costs and take the burden off them.
“The guidance recommends that all tenants that are concerned about payments and have found themselves in unfortunate circumstances should speak to their landlord to arrange a plan moving forward, either with a more manageable monthly payment or a rent holiday”.
Set up a savings pot
If you've not done so already we recommend setting up a standing order to a savings account to ensure you have a pot of funds to revert to in times where extra spend might be required on your rental property, whether it be to cover mortgage repayments or essential repairs.
If you do take advantage of the three-month mortgage payment holiday, we would recommend putting that money into this account if you don't need to use it for essential living costs, so that you have some longer-term financial protection should the tenant choose to move out during this period.
Self-employed landlord or property company?
If you are a self-employed landlord there is additional support available. Head over to our support available for the self-employed blog to discover what options are available to you.
While the outlook isn't as rosy for directors operating their businesses under a company formation, there is still some support available. Visit our blog on COVID-19 Support for Business Owners for more information.
As a final note, we recommend keeping records of all correspondence with both tenants and mortgage lenders during this period, should it need to be referred to at a later date.
If you're unsure as to what the current situation means for you, please contact us today to see how we can help.