Understanding what the virus means for lenders, mortgage brokers as well as for individuals that owe money can be important to understanding what you should be doing for the future of your finances.
The government alongside its financial regulators and some of the largest banks in the UK have announced that they are lowering withdrawal penalties on lifetime I assays to 20% from the 25% that was in place before the virus. This means that people could save an unprecedented 5% if they are in need of accessing their savings during the crisis.
This relief comes on top of a series of new measures such as payment holidays for loans and credit cards, motor finance assistance, assistance for mortgage borrowers and renters being offered various protections against eviction.
Many banks across the UK are also allowing people to open up fixed term accounts without any type of penalty to offer new support for those that want to save and support our future economic upturn after distancing.
Mortgages remain one of the largest questions that many lenders have throughout this crisis. With many lenders offering payment holidays as well as the housing market addressing a number of future prospects, there are some frequently asked questions from many vendors regarding their mortgages.
As soon as the UK government announced measures to support homeowners who have been financially impacted due to Covid-19, a series of banks began offering the same type of support. There’s been ongoing reporting on various financial institutions that are offering breaks but it’s still been a time of uncertainty for people that may not know how they could be impacted personally. Understanding some of the most frequently asked questions for mortgage borrowers and what the plan may be for the future can give you an actual roadmap for your finances.
Some of the most common questions affecting mortgages under Covid-19:
How can I access a three-month payment holiday?
You could receive a payment holiday from your mortgage if you’re facing some type of financial difficulty as a result of the virus. Requesting a payment holiday form for your lender could mean that you receive a holiday as soon as the form has been approved. The form essentially allows you to take a break from making your monthly mortgage payment for up to three months at a time.
Lenders will report the payment holiday to credit agencies but reporting agencies have confirmed that it will not impact your credit score unless you are unable to pay your mortgage after the payment holiday.
What alternatives do I have 2B3 month payment holiday?
You can also temporarily switch from repaying any capital amount that is borrowed on your mortgage to just covering the interest on your mortgage. Choosing the three men payment holiday or an interest only repayment plan to make sure that all of the interest which is extrude on your monthly mortgage balance is handled and any missed payments of the outstanding amount will be divided over the remaining length of your mortgage term.
An interest only payment could mean paying a slightly higher mortgage payment in the future but it can give you the option to extend your financial relief longer than three months.
What if I am trying to qualify for a mortgage today?
If you’ve been offered a financial product such as a mortgage for purchase a lender will have to extend the term of your offer until you’re able to come in and complete that offer in the offices. If you suffered a reduction in your income or the complete loss of your job from coronavirus, the change of information must be reported to your lender. If there’s no change in your circumstance you will be able to access the same offer that was given to you before the office closed.
This means that the conditions of your mortgage will be extended if necessary beyond what the typical terms of a mortgage offer would be.
How do surveys and valuations work from lenders now?
Surveyors are not key workers and have not been classified as such due to their need to enter into different properties and the chance that they could transmit the virus by speaking with different property owners. Physical valuations on homes have been almost all suspended. Most lenders in the meantime are using drive by or automatic valuations to proceed.
A survey or will not leave their vehicle during the valuation and this means that the evaluation you’ll be receiving on your mortgage will often be far less thorough than what you would get under normal circumstances. Avoiding a physical valuation can place a risk on you as a lender as this could mean that the maximum loan to valuation ratio could be substantially lower than the value of your home due to items that could be missed.
Which mortgage transactions are still occurring?
Land Registry is still operational and this means that re-mortgages that have a low loan to valuation ratio can continue to transact. If you’re looking to access the new rate from your current lender you can also take a look at your rates within the same lender. Switching over to a new lender is on hold for the time being due to the lack of physical valuation.
Are banks still able to offer loans?
A number of banks have started to with draw financial products and they’ve also reduce the amount that they can lend to people due to staff shortages and difficulty with obtaining surveys for properties. Banks remain in decent financial health but there may be a series of cutbacks and financial products planned for the future.
What is the impact of the virus on the property market?
Over the short term the market will be stuck in a fairly static position due to all the restrictions associated with the sale of properties. When isolation is finished many estate agents are going to reopen their ability for valuations and physical surveys. The property market will likely boom during this time with many people forced to put their plans on hold.
There’s an optimistic feeling about the future of the housing market and banks are still wanting to lend financial products. People that have been stuck inside for months are interested in moving to new areas, their priorities have changed and they may be looking for items like a garden or yard. The virus is working to impact the property market by changing people’s priorities as well as forcing them to take a good hard look at the homes they live in currently.
Working with a mortgage advisor can be an excellent way that you can get the relevant information you need to proceed during these difficult times. A mortgage advisor can help you through the process of your current mortgage situation, how you can negotiate a payment holiday and the option that may best suit you for qualifying for a mortgage after lockdown has finished.
While we may not have a perfect picture of the future on the nature of the housing market and how mortgages will be affected by this crisis, we know that there are options available if you’re experiencing financial difficulty and the housing market is still continuing despite this troubling time.
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