In these unsettling times concerns regarding how to cover your overheads will be of course be at the front of your mind. The mortgage is very likely to be your major outgoing. We thought we’d share the following very useful advice from Hans Geberbauer, CEO of the lender Paratus AMC.
The industry expert provides the latest help for mortgage borrowers affected by Covid-19.
The basic principle:
No doubt many of you may be worried about your ability to pay your mortgage. Late Friday afternoon, the regulator has put out extremely borrower-friendly guidance (please check for updates occasionally as the situation is changing at lightning speed).
If your ability to pay is affected by Covid-19 (directly or indirectly) or you are worried that it may affect your ability to pay, you can ask your mortgage provider for a three months payment holiday at any time during the next three months. A payment holiday means making no payments at all during the payment holiday period (but you can make some, either voluntarily or by agreement with the lender).
Will it ruin your credit record? Are there fees or costs?
No, absolutely not – it will not have a negative impact on your credit file. There will be no fees. However, you will have to pay interest on the amount you defer.
Do you have to pay the money eventually?
Yes. With interest. This is not a waiver. Exactly when and how quickly you have to catch up on your payments at the end of the period is
What proof do you have to provide?
None. Your mortgage lender may want to understand your circumstances a bit better but they are not allowed to insist on proof. To get the payment holiday, it must be Covid-19 related, directly or indirectly. Don’t lie.
When should you call your lender?
Call your lender before there is a risk of missing a payment. But understand that their call volumes are high right now. For instance, my employer has over 20,000 borrowers and I am hoping they are not calling us at all at once. You can ask for a payment holiday in the next three months, so if you are in good shape, let those in immediate need get through to the lenders first.
Can I just stop paying if I have Covid-19 related problems?
No. Please do not do that. You will incur fees and it will ruin your credit file. In fact, always call before you can’t make a payment, Covid-19 or not.
What if you are already in arrears?
The payment holiday scheme technically does not apply to you but the FCA has asked lenders to be very forgiving to everyone during Covid-19 crisis. They may waive fees. Call them.
What if you have a Buy to Let mortgage?
The same rules apply – but best not to hound your tenants for money while not paying your BTL mortgage.
The FCA (the regulator) really wants your mortgage lender to help you, so do not hesitate to ask them for help. (This is not mortgage or financial advice. If in doubt, contact your lender, a financial adviser or an advice charity like the Citizens Advice Bureau.)
What about if you are a tenant?
Landlords cannot currently evict anybody. But if you pay less than you owe, you will have to make up the shortfall eventually. If you get pressure from your landlord, you can challenge the landlord about whether they have claimed the mortgage payment holiday, and ask for more time.
I sincerely hope that you don’t have any use for these pointers whatsoever but if you do that they prove useful.