Finance: Supporting landlords' incomes during lockdown
While many people’s incomes have been adversely affected over the last 11 months, the good news is that there is some help available for landlords:
If you are having difficulty affording your buy-to-let mortgage payments, either because your tenant has defaulted on their rent or because your own income has been badly affected by the pandemic, you have until 31st March to apply for a payment holiday of up to six months, although after this time, you may be able to extend existing deferrals until 31st July 2021, so it is worth speaking to your lender for help.
This facility, which has been extended several times already, enables you to ask your lender to defer up to six monthly payments. That can be a month at a time, as and when you need short-term help, or all in one go, but it is for a maximum of six months in total. 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.
There are two important things to understand about taking a payment holiday. Firstly, you need to know that the interest on the whole outstanding borrowed amount will continue to accrue, increasing the cost of your mortgage overall. Also, make sure you ask your lender how they 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 the existing term, meaning your regular monthly payments will increase.
Secondly, you need to be aware of the potential impact on your credit record. Taking the ‘holiday’ currently on offer because of the pandemic shouldn’t affect your overall score, given that the UK’s three main credit reference agencies (Experian, Equifax and TransUnion) pledged last April to protect credit scores during coronavirus. However, your lender may ‘flag’ any special arrangements made for your mortgage payments, meaning future lenders would be able to see that you’d taken a holiday or had a period of reduced payments. Even so, it shouldn’t affect your overall credit score. But do understand that if you miss or are late with any payments, this will certainly be registered and could affect your ability to borrow in the future.
Rent protection insurance
When the Government introduced emergency legislation for evictions in March last year, it had an impact on the rules around rent protection insurance, meaning new policies were not available. But since November, by which time insurers had been able to assess the impact of the pandemic, most have returned to the rent guarantee market with a temporary Covid-19 product.
These products generally cover you for up to 6 months of rent payments and it is 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 with your policy, whether you can still claim and what the policy terms are likely to be upon renewal.
HMRC ‘Time to Pay’ facility extended for Self Assessment
In order to ease the financial burden on Self Assessment customers, HMRC has increased the threshold for paying tax liabilities in instalments, 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 spreading payments across up to 12 months.
The conditions are that 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. Be aware that 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.