Assistance With Mortgage And Rent Payments During The Coronavirus Pandemic

For the many households who do not own their own property outright, the largest single item of expenditure each month is their mortgage or rent payment.

Given the pressure on household budgets due to the impact of coronavirus, the government has announced a range of measures designed to support both home-buyers and tenants who are in financial difficulty.

Some local councils are also offering council tax payment holidays or reduced payments.

Assistance for mortgage-holders

The package of coronavirus support measures announced by the government in March included provision for a three-month mortgage payment holiday for those who are struggling to pay as a result of the impact of the pandemic.

Banks and building societies are not obliged to participate in the arrangement but they have signaled that they will do so.

It is being stressed that people should not simply stop paying their mortgage without reaching an agreement with their lender first.

Anyone not paying without notifying their lender would see this logged as a ‘missed’ or ‘late’ payment on their credit file, which would then adversely affect their credit score. This in turn would make it harder for them to obtain credit in future.

An agreed payments holiday will not have a negative impact on credit files.

Once a mortgage holiday is in place, the mortgage holder will be able to miss up to three consecutive monthly payments. Then, depending on the lender, those ‘missing’ months would either be added to the term of the mortgage, or the money not paid during the three months would be added to the total outstanding debt.

This would mean higher monthly payments once the holiday ended until the end of the term.

Interest would still be charged during the holiday period and added to the outstanding debt.

For those who do not need to stop paying their mortgage completely, lenders may be willing to accept reduced payments. As with the payments holiday, money not paid would be added to the total debt, along with interest.

It may also be possible to switch to from a capital & interest (repayment) mortgage to an interest-only mortgage for an agreed period, again depending on the lender.

To qualify for a payment holiday or payment reductions, borrowers will need to be up-to-date with their mortgage payments. Anyone already in arrears will need to discuss their situation with their lender.

Rent support for tenants

The government is keen to see tenants affected by the coronavirus crisis given similar support to those with mortgages. However, it has no legal power to enforce a rent payment holiday, so any arrangements between private landlords and their tenants will be voluntary.

That said, legislation is being prepared to prevent tenants in England and Wales from being evicted for a period of three months. Landlords will have to give three months’ notice before they start eviction proceedings. In Scotland the notice period will be six months.

Tenants are being urged to contact their landlords as soon as possible if they’re concerned about not paying their rent in full or on time because of the impact of the crisis. They should not simply miss a rent payment.

The hope is that tenants and landlords will be able to work out a plan to suspend or reduce rent payments and then arrange for repayment once normality returns.

This should be aided by the fact that landlords with buy-to-let mortgages may be able to secure payment holidays for themselves from their lenders.

Tenants in social housing will also be protected from eviction if financial distress caused by the pandemic results in their missing rent payments.

Council tax

Some local authorities are offering to defer council tax payments by two or three months if people are struggling financially as a result of the crisis.

As ever, people are being advised to contact their council for details and to discuss their particular circumstances.

It is likely that any missed payments will be added to the total bill for the remainder of the year, which will increase each monthly payment once the deferment comes to an end.

This article was written by Kevin Pratt from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.