Landlords who have requested payment holidays due to the COVID-19 pandemic are finding that they are being declined when applying for new buy to let financing facilities.
Landlords are therefore urged to think extremely carefully about taking payment holidays, as these will potentially jeopardise future financing, either for new acquisitions or alternatively for refinancing existing assets.
The FCA has recently extended the potential for payment holidays, and there is also some discussion around whether the payment holidays could last until October this year.
It is important to note that payment breaks do not negatively impact an individuals credit score, however, a lender can incorporate payment holidays as one of their criteria, as LendInvest have recently implemented.
Matt Lenzie from Commercial Mortgages Broker said: “unfortunately some landlords did not consider the potential implications that taking a payment holiday may have. Some of our clients are in a tight financial position, so had no choice, but it is fair to say that some other clients saw this as an opportunity to reduce their outgoings for a period of time. We have had several instances where clients have made applications and have either been declined, or alternatively have had to repay the payment holidays which they had taken, and furthermore cancel the payment holiday going forwards as a condition of a new financing application.”
“Landlords need to think carefully about using these types of schemes unless they are absolutely necessary. Also, borrowers need to think about the potential impact of taking a Bounceback loan, as this will be factored into the cashflow position, particularly for portfolio landlords, again landlords need to ensure that drawing down the money, albeit at a cheap rate of interest, with no capital repayments for 12 months, will bring sufficient benefits.”
To discuss your funding requirements, and for a no obligation review of the facilities in place, please get in touch with our team.