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    • LAJ123
    • By LAJ123 12th Oct 16, 12:19 PM
    • 2Posts
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    LAJ123
    Mortgage renewal with a reduced income
    • #1
    • 12th Oct 16, 12:19 PM
    Mortgage renewal with a reduced income 12th Oct 16 at 12:19 PM
    I have recently purchased a property borrowing a mortgage of £160,000.00 from HSBC. It is a 2 year fixed mortgage at a rate of 1.79% for a term of 30 years. I currently have very low monthly repayments of around £500 p/m as I put down a very healthy 60% deposit when I bought the property.
    I am currently employed in a full time role earning £35,000 p/a but I am considering leaving my work and freelancing again (something I have done in the past and can earn between £27,000 and £30,000 p/a though this of course varies from year to year)
    My fear is that when I come to renew my mortgage in just under 2 years time will I encounter difficulties in agreeing a new mortgage with the significantly lower income? I did read somewhere that if I decide to remain with the same lender and have a history of paying my repayments on time they won't necessarily check my credit and income so this shouldn't be a problem.
    Any advice warmly welcomed!
Page 1
    • Thrugelmir
    • By Thrugelmir 12th Oct 16, 1:05 PM
    • 51,279 Posts
    • 43,084 Thanks
    Thrugelmir
    • #2
    • 12th Oct 16, 1:05 PM
    • #2
    • 12th Oct 16, 1:05 PM
    It's optional as to whether lenders perform any checks on existing borrowers switching mortgage products. Those that still do are either related to historical issues or is the nature of the market they currently target. There's no reason to think that HSBC will providing you take a non advised route, i.e. online.

    I currently have very low monthly repayments of around £500 p/m as I put down a very healthy 60% deposit when I bought the property.
    Maybe so. However a debt owed of £160k exposes you to a significant increase in outgoings should interest rates rise. At a normal level Bank of England base rate should be somewhere between 3.5% and 5%. Using your current rate as an example. You would be paying somewhere between 4.75% and 6.25% on your mortgage at some point in the future. Possibly even higher if lending margins start to spread. Once the effects of the BOE funding for lending scheme unwind for example. So don't get complacent.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • SavingSteve
    • By SavingSteve 12th Oct 16, 1:06 PM
    • 476 Posts
    • 205 Thanks
    SavingSteve
    • #3
    • 12th Oct 16, 1:06 PM
    • #3
    • 12th Oct 16, 1:06 PM
    If you stick with HSBC it will be a product switch. My understanding this is without any further checks.
    • neo2020
    • By neo2020 12th Oct 16, 1:12 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    • #4
    • 12th Oct 16, 1:12 PM
    • #4
    • 12th Oct 16, 1:12 PM
    My fear is that when I come to renew my mortgage in just under 2 years time will I encounter difficulties in agreeing a new mortgage with the significantly lower income?
    Originally posted by LAJ123
    You will encounter difficulties - I say this as a freelancer myself. My understanding is 4.5 x income is the most you'd be able to borrow all other things being well.

    You also need to understand that depending on when exactly you switch to freelancing, you will only have 1 or maximum 2 years' accounts. 2 already cuts the potential lender pool quite a bit, 1 cuts it right, right down.

    In other words, you will not only struggle to get a mortgage based on your income, you will also struggle based on other criteria.

    Have you considered holding on to your job until the fix deal expires, then remortgaging to a 5-10 fix and flex or some other kind of 5-10 year deal, and then switching to freelancing?
    • kingstreet
    • By kingstreet 12th Oct 16, 1:32 PM
    • 30,025 Posts
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    kingstreet
    • #5
    • 12th Oct 16, 1:32 PM
    • #5
    • 12th Oct 16, 1:32 PM
    You will encounter difficulties - I say this as a freelancer myself. My understanding is 4.5 x income is the most you'd be able to borrow all other things being well.

    You also need to understand that depending on when exactly you switch to freelancing, you will only have 1 or maximum 2 years' accounts. 2 already cuts the potential lender pool quite a bit, 1 cuts it right, right down.

    In other words, you will not only struggle to get a mortgage based on your income, you will also struggle based on other criteria.

    Have you considered holding on to your job until the fix deal expires, then remortgaging to a 5-10 fix and flex or some other kind of 5-10 year deal, and then switching to freelancing?
    Originally posted by neo2020
    This is a product transfer/customer retention product, not a remortgage...
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • neo2020
    • By neo2020 13th Oct 16, 8:28 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    • #6
    • 13th Oct 16, 8:28 PM
    • #6
    • 13th Oct 16, 8:28 PM
    This is a product transfer/customer retention product, not a remortgage...
    Originally posted by kingstreet
    I was answering the OP which talked about remortgaging, so, as you suggest, a product switch would be the right option I think.
    • kingstreet
    • By kingstreet 13th Oct 16, 9:51 PM
    • 30,025 Posts
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    kingstreet
    • #7
    • 13th Oct 16, 9:51 PM
    • #7
    • 13th Oct 16, 9:51 PM
    No mention of a remortgage in the opening post, neo...?

    There is specific mention of customer retention products being available from existing lender when not remortgaging as no status or affordability checks may be done for them.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • neo2020
    • By neo2020 13th Oct 16, 9:59 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    • #8
    • 13th Oct 16, 9:59 PM
    • #8
    • 13th Oct 16, 9:59 PM
    No mention of a remortgage in the opening post, neo...?

    There is specific mention of customer retention products being available from existing lender when not remortgaging as no status or affordability checks may be done for them.
    Originally posted by kingstreet
    Hrm, you're right. I stand corrected. Apologies to OP and well done you.
    • kingstreet
    • By kingstreet 13th Oct 16, 10:03 PM
    • 30,025 Posts
    • 15,963 Thanks
    kingstreet
    • #9
    • 13th Oct 16, 10:03 PM
    • #9
    • 13th Oct 16, 10:03 PM
    Nah, dunna worry. I'm really pedantic about use of "remortgage."

    It means use of a new mortgage from a new lender to repay the old one, possibly with increased borrowing.

    The actual mortgage, the security which ties the homeloan to the security property has to change from one lender to another.

    Too many people now understand a remortgage to be a rate change at the end of whatever they are currently on.

    It isn't.

    BTW you were completely correct in your assertions as they would apply if this was about remortgaging.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • neo2020
    • By neo2020 13th Oct 16, 10:07 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    Nah, dunna worry. I'm really pedantic about use of "remortgage."

    It means use of a new mortgage from a new lender to repay the old one, possibly with increased borrowing.

    The actual mortgage, the security which ties the homeloan to the security property has to change from one lender to another.

    Too many people now understand a remortgage to be a rate change at the end of whatever they are currently on.

    It isn't.
    Originally posted by kingstreet
    It's a very important distinction actually. Until recently, I didn't even know product switches were possible and assumed that I would have to treat my finances the same way you treat your house while trying to sell it: in permanent "for show" mode.
    • LAJ123
    • By LAJ123 18th Oct 16, 12:26 PM
    • 2 Posts
    • 1 Thanks
    LAJ123
    Thanks all I think that makes sense, so when I come to the end of my fixed term of 2 years in 2018 I should be able to get a new mortgage product ( known as a product switch) through my existing lender and the likelihood is that they will not need to conduct a new series of credit checks in order to do this as I will be an existing customer with a 2 year history of mortgage repayments paid reliably and on time?
    Thanks!
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