Broker warns over mortgage payment holidays
Is a mortgage payment holiday the right choice to make?
As England moves into its latest full lockdown and banks once again offer mortgage payment holidays, expat mortgage brokers Offshoreonline are warning against clients taking advantage of this apparent “something for nothing” opportunity, without checking the consequences first. Guy Stephenson, a specialist expat buy to let mortgage broker comments, “For all the best reasons, we saw many banks and building societies rush in and urge their customers to take advantage of a UK government sanctioned mortgage holiday. What was not always made clear was might happen if that client subsequently applied for another mortgage later on.”
With many expats now rushing to try and take advantage of the stamp duty holiday on UK property which ends on March 31st next year (2021), the potential consequences of taking a mortgage holiday are now becoming more evident. When lenders credit check a new application, the payment holiday shows up as a payment missed, even though it is not a default. If a lender underwrites on an individual basis, they may dig deeper. Equally, many lenders are saying this will automatically result in a failed application, as the borrower should not have needed to take a payment holiday, if a tenant was still in place.
“Lenders always require expat buy to let borrowers to have an independent income, usually over £37,000, precisely because the lender expects the borrower to cover any mortgage payments during periods of rental voids that might arise between tenancies. When a lender sees both a mortgage payment missed and no issue with a tenancy, that prompts concerns” added Stephenson.
This pattern is not just being seen in the UK. In France too, lenders will automatically refuse to look at mortgage applications, if the buyer is furloughed or taking any kind of UK government income top up, such as Universal Credit, reports Offshoreonline.
The advice to buyers is simple – check with your broker before you leap in and sign up for an offer which on the face of it, looks too good to miss.