A mortgage broker has warned landlords to be careful with how they manage their rental income and mortgage repayments, after seeing a number of applications hindered due to one easily avoidable error.
Many landlords sensibly keep a separate bank account for their rental income and expenses. However, a common mistake is having the mortgage payment due on the same day the tenant’s rent is paid in.
If the rent doesn’t arrive on time, even by a few hours, and there isn’t enough of a buffer in the account to cover the mortgage, that payment will bounce and can be marked as late.
Louis Levine, head of mortgages at UK Expat Mortgage, said: “One missed payment, even by less than a week, can have a serious knock-on effect.
“It doesn’t matter if you had the funds elsewhere ready to go: lenders see it as a late payment and it will trigger automatic rejections on future applications – even for your personal residential mortgage, not just buy to let.”
For expat and overseas landlords, this issue is especially common, as many rely on rental accounts in the UK and don’t actively monitor them.
Levine added: “You also can’t over rely on mobile banking notifications – they will only tell you when it’s too late and your mortgage payment has already bounced.
“The bank’s system might take a few days to mark it as missed, so you may get away with it still if you quickly make it up, but it varies from bank to bank.
“We’ve seen clients with perfectly healthy finances fall foul of this purely because of timing: the rent lands late, the mortgage bounces, and suddenly they’re locked out of a portion of the mortgage market in the future.”
To avoid the problem, landlords were urged to keep a cash buffer in their rental account, ideally enough to cover at least one month’s mortgage payment.
Secondly the mortgage payment data can be misaligned with the rent payment, just in case the money arrives late.