Over a year since they launched, what are the buy to let lenders attitudes towards mortgage payment holidays and bounce back loans? Can you get a buy to let mortgage if you’ve used either of these emergency financial measures?
Mortgage Payments Holidays
At its peak in June 2020, an estimated 1.8 million people were on a mortgage payment holiday (MPH), which indeed concerned the lenders, and it’s fair to say the buy to let lender attitudes towards MPHs were pretty mixed. At the time, the majority would accept your application if you had taken an MPH but were now making repayments. Some would review it on a case by case basis, others would accept your application regardless of whether you were still on an MPH, and a small minority wouldn’t consider you at all.
The lender concern was justified; the vast volume of borrowers applying for the payment deferrals suggested that people’s financial situations were not as robust as they needed to be despite affordability calculations. Unfortunately, there were cases of individuals taking advantage of the emergency measures, which didn’t help the situation. None the less, by November 2020, 89% of those who had taken an MPH had returned to making monthly repayments. As the application deadline passed on 31st March 2021, we are now in the final six months of mortgage payment holidays.
The lenders are now less divided about mortgage payments holidays. On the whole, if you did take one but are now making monthly repayments again, they will consider your application as usual. There’s still a tiny minority that won’t consider your application. Still, on the whole, as long as you’re now making repayments again, MPHs shouldn’t impede your ability to secure a buy to let mortgage. If you’re still deferring your mortgage payments for a buy to let property, then your options may be limited, but give us a call, and we’ll see what your options are.
Bounce Back Loans
The Bounce Back Loan (BBL) scheme launched to help inject cash into businesses impacted by the pandemic and help them survive. Throughout 2020, 1.5 million businesses took out one of these loans, worth up to £50,000. Again, while most of these applications were made due to genuine need, there was a significant number made by individuals looking to benefit from a cash injection on relatively cheap borrowing terms.
Buy to let lenders quickly cottoned onto these opportunists, as some were trying to use the cash as deposits for investment property. Consequently, lenders significantly increased due diligence, rejecting applications that found a BBL to be the deposit source and generally lengthening the underwriting process for all mortgage applications.
As applications for Bounce Back Loans closed on 31st March 2021, like MPHs, they will become less of a concern. However, if you’re applying through a limited or trading company for a buy to let mortgage, lenders will ask whether you’ve taken a BBL. Furthermore, they are still performing more financial checks than you would have experienced pre-COVID, so be prepared.
If you did take a BBL (for a genuine reason), you might still be able to get mortgage finance. Lenders will want to see how the pandemic has impacted your business and how it is now recovering to a profitable level. Expect lots of questions and have your accounts ready, but rest assured, a BBL doesn’t completely exclude you from mortgage finance.
If you’re looking to purchase a buy to let property and are concerned about whether lenders will accept your application in light of the pandemic, do not hesitate to call our expert team on 0345 345 6788 or email firstname.lastname@example.org. By working closely with the lenders, we’re up to speed on their criteria and attitudes towards these issues and will be able to advise you on the best course of action for your investment requirements.