Mortgage and Protection developments and guidance for clients
I’m mindful that it has possibly never been more important, in light of the Coronavirus, to keep an ongoing dialogue with all of my clients.
I’m also keen to ensure you’re being provided with the latest information so that you can take any action appropriate to your potentially changing circumstances.
Please click on the following link for Government advice on home moving during the Coronavirus.
You may be aware that the Chancellor announced that anyone struggling financially as a result of the Coronavirus outbreak will be able to take a three-month mortgage repayment holiday. This includes home owners, landlords and Help to Buy purchasers. This means that ALL lenders will now have to honour the three-month time frame.
A mortgage repayment holiday is an agreement with your lender allowing you to temporarily stop or reduce your monthly mortgage repayments. The repayment holiday will be available to borrowers who are up- to-date on their mortgage payments and not already in arrears.
If you believe you will struggle to make repayments in the coming months, I would recommend you engage directly with your lender as soon as practical to agree the best way forward - which may, or may not, include a payment holiday.
Please note my comments below regarding remortgaging.
Interest will accrue for the period of the holiday and payments missed will be added to the loan and repaid in the future - potentially over the remaining term of the loan.
The credit reference agencies are engaged with the lenders and it is anticipated that borrowers’ credit files will not be negatively affected as a result of the three-month payment suspension.
Lenders have been under extreme pressures over the last few days to answer the enormous uplift in queries, at a time when they have significant operational challenged, so please do not be surprised if there is a delay in responding to your call/correspondence.
If you are concerned I would urge you to keep trying. There also may be an online form, or link to request a payment holiday on the lenders website.
Mortgage Product Availability
Whilst there is no doubt that many lenders are struggling to manage the operational implications caused by the Coronavirus, the availability of mortgages has to date not been impacted significantly. As such, if you are looking for a new mortgage or will require a re-mortgage in the next 6 months then please do get in touch.
In particular, if you are looking to re-mortgage in the next 6 months, but will require a payment holiday, please do speak to me before engaging your lender, as it may influence the mortgage products available to you.
Whilst none of us know what the coming months will bring, there is a possibility that mortgage funding may become restricted. This is particularly true if you have specialist borrowing requirements such as being self-employed, have multiple income sources or have missed any payments. Exploring options sooner rather than later may prove sensible, so do make contact.
Existing Policy Holders
For those clients with life, critical illness or income protection policies already in place, you can be assured that the insurers are all responding positively and will pay all valid claims. Please check your existing policies, particularly Income Protection or Accident & Sickness policies for details of your deferred or waiting periods.
The insurers I recommend are the very best in the market and I know they will do their utmost to support clients.
Insurers are continually reviewing their policy terms and conditions in this market, and your policy may contain valuable benefits as they were taken out before the coronavirus pandemic. If you have any concerns or queries about your current policy, please do not hesitate to call me. Whatever you do, keep your cover in place!
If you have missed any payments, give me a call, and we’ll do what we can to get you protected again.
You may have concerns or symptoms unrelated to Coronavirus and may also be struggling to see your GP. Or, perhaps you’d just prefer not to visit them at this time. Please don’t forget that most protection policies offer some great support services which could be valuable in the coming days and weeks. In particular, many offer remote or online GP services, including access via apps on your mobile phone as a safe and convenient alternative.
Many also provide advice lines on broader health, and wellbeing issues. If you think these services may be valuable, I’d recommend checking your policies for more details of the services offered.
Please do get in touch or contact the provider direct (go to their website) if you have any queries. But remember, if you have any concerns or are experiencing any symptoms related to Coronavirus, refer to the latest NHS guidance. This is important, as the situation is changing daily and the NHS or Government advice should be the first port of call.
Looking to Purchase a New Protection Policy
Protection policies are designed to provide a critical safety net for you and your family if you were unable to work due to illness or accidents or if the very worst happened and you were to die.
Whilst there have been some changes to insurer policy conditions and a tightening of medical underwriting in recent days, products remain available and are often far more affordable than people think.
As your adviser I am here to help, so if you have any questions around either engaging your lender or more broadly around your mortgage, protection policies or the wider impacts of the Coronavirus on your financial position please do get in touch.
I hope that you'll find this information useful in light of current developments. I’ll continue to keep you informed and supported but please do not hesitate to contact me with any questions that I might be able to help you with in the meantime.
Buying a home
Your home may be repossessed if you do not keep up repayments on your mortgage.
Before you choose a specific deal, you may want to understand more about what types of mortgage are available.
This brief summary may help.
Common types of Mortgage
- Variable rate - Your monthly payment fluctuates in line with a Standard Variable Rate (SVR) of interest, set by the lender. You probably won’t get penalised if you decide to change lenders and you may be able to repay additional amounts without penalty too. Many lenders won’t offer their standard variable rate to new borrowers.
- Tracker rate - Your monthly payment fluctuates in line with a rate that’s equal to, higher, or lower than a chosen Base Rate (usually the Bank of England Base Rate). The rate charged on the mortgage ‘tracks’ that rate, usually for a set period of two to three years. You may have to pay a penalty to leave your lender, especially during the tracker period. A tracker may suit you if you can afford to pay more when interest rates go up – and you’ll benefit when they go down. It’s not a good choice if your budget won’t stretch to higher monthly payments.
- Fixed rate - The rate stays the same, so your payments are set at acertain level for an agreed period. At the end of that period, the lender will usually switch you onto its SVR (see Variable rate). You may have to pay a penalty to leaveyour lender, especially during the fixed rate period. A fixed rate mortgage makes budgeting much easier because your payments will stay the same - even if interest rates go up. However, it also means you won’t benefit if rates go down.
- Discounted rate - Like a variable rate mortgage, your monthly payments can go up or down. However, you’ll get a discount on the lender’s SVR for a set period of time, after which you’ll usually switch to the full SVR. Discounted rate mortgages can give you a gentler start to your mortgage, at a time when money may be tight. However, you must be confident you can afford the payments when the discount ends and the rate increases.