Over the last few weeks the UK government has addressed liquidity issues for companies, landlords, tenants, employees and now the self-employed. While the devil is in the detail there is no doubt that confirmed funding in excess of £330 billion and an open-ended commitment to employers and employees will help with short-term liquidity challenges. However, the immediate issue for many is mortgage payments and how to fund these.
Thankfully there are a number of options to consider even in these extremely challenging times.
MORTGAGE PAYMENT HOLIDAYS
The UK government has come to an agreement with mortgage lenders so that individuals affected (or expected to be affected) by Covid-19 are able to apply for a three month payment holiday. While not all mortgage lenders have currently signed up to the scheme there is more than enough liquidity within scheme participants to make this a viable option. The initial criteria seemed to suggest that those in arrears may not be able to claim a payment holiday but more recent indications suggest this is not the case. It is worth noting that interest will still accrue on mortgage capital during the initial three month payment holiday.
It is highly advisable to approach your lender at the first sign of financial difficulties to discuss the options. In some circumstances there may be other more appropriate options available other than a basic mortgage payment holiday. If you have any questions or queries, please contact us and we can approach your current lender or alternative lenders together.
FURTHER CAPITAL ADVANCES
These are obviously unprecedented times and lenders are proving to be extremely flexible when it comes to short-term liquidity issues. As a consequence, where there is sufficient financial headroom, many lenders are now looking to arrange increased borrowing lines for clients. Many of these capital injections can be arranged within a matter of days using the Internet, email and electronic signatures. The fact lenders are willing to act relatively quickly means that those struggling do have real and viable options.
REMORTGAGES
At the moment it is still business as usual for mortgage lenders and this is likely to continue for the foreseeable future – many employees are now working remotely. However, if you require a remortgage within the next six months it is advisable to approach your lender, or seek alternative lenders, immediately. Whether the Covid-19 issue turns out to be relatively short lived or extended beyond current guidelines, there will be excessive pressure on the mortgage industry as applications mount up.
There are numerous potential advantages for those looking to remortgage or restructure their borrowings which include:-
• Taking advantage of historic low interest rates
• Switching from capital to interest only mortgages to improve short-term cash flow
• Consider flexible/offset mortgage arrangements which will assist with short-term cash flow
• Increase your mortgage to free-up liquidity for personal/business commitments
The vast majority of mortgage companies will look favourably on those looking to remortgage/restructure their borrowings in the short term. They would prefer their clients to emerge from the Covid-19 lockdown in relatively good financial health.
SECOND CHARGE MORTGAGES
We are starting to see more clients looking towards second charge mortgages as a means of mitigating short-term cash flow issues. These are relatively straightforward transactions and may involve your original mortgage provider or alternative parties. The second charge sits “behind” your main mortgage and allows you to use additional collateral and equity in your property to release capital in the short term.
We have numerous contacts we can approach for second charge mortgages which are often a lot more straightforward than you might assume. We know the information they require, the financial calculations and the collateral they will seek.
BRIDGING AND SHORT-TERM FINANCE
The use of bridging and short-term finance has increased in recent weeks and this trend is likely to continue for some time to come. As the government response to Covid-19 is extremely liquid and fast flowing, circumstances for individuals and businesses can also change very quickly. Bridging finance is a short-term process where capital can be released almost immediately using property or additional assets as security.
The flexibility of this particular type of finance will prove extremely useful in the current environment with an array of different options available. We are experts in moulding financial solutions around an individual’s unique scenario to avoid a short-term liquidity crisis. Part of this process also involves looking slightly further ahead and pre-arranging repayment of what can be relatively expensive short-term capital and replacing this with a more traditional long-term arrangement.
BUSINESS LOANS AND OVERDRAFTS
The UK government and the banking industry are working hand-in-hand to create an array of short-term funding solutions for those struggling as a consequence of Covid-19. We work with in excess of 300 lenders across the money markets many of whom offer an array of different business finance options. Whether looking at term loans, private equity, overdrafts or bridging finance, there are numerous solutions to many of the challenges faced by individuals and businesses today.
