Landlords are being blacklisted by lenders because they fail to schedule their mortgage payments to ensure rent has arrived before the direct debit leaves their account, a respected mortgage broker has warned.
Louis Levine (pictured), Head of Mortgages at UK Expat Mortgage, says the issue typically occurs when landlords sensibly maintain separate bank accounts for rental income but schedule mortgage payments to leave on the same day rent is due to arrive.
If the rent is delayed by even a few hours and there is insufficient buffer in the account, the mortgage payment bounces – creating a black mark on the landlord’s credit file that can trigger automatic rejections on future mortgage applications.
Serious effect
“One missed payment, even by less than a week, can have a serious knock-on effect,” Levine says. “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.”
The problem is particularly acute for portfolio landlords, where a single late payment on one property can affect their ability to refinance or expand their operations. Many specialist lenders now use automated credit scoring that instantly rejects applications from landlords with any missed mortgage payments in the previous 12 months.
And it is especially common for expat and overseas landlords to miss payments, as they rely on UK rental accounts but don’t tend to actively monitor them, making them far more vulnerable to mistiming issues.
It’s a small detail that can have huge consequences.”
Levine says the solution is straightforward – landlords should maintain a cash buffer of at least one month’s mortgage payment in their rental account and schedule mortgage payments several days after rent is due, providing a safety margin if tenant payments arrive late.
“For a tenant, missing a rent payment is inconvenient. But for a landlord, missing a mortgage payment can damage your credit and make future borrowing much harder. It’s a small detail that can have huge consequences.”
He advises that estate agents should make sure they flag the issue to their landlords whenever they are setting up new tenancies.
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