Mortgage novice requires advice please

JWM

Hi, we are currently 3 years into a 5 year fixed rate with Abbey. I know its 2 years to the end of the deal but I would like to know what to expect, and have a few other queries.

Some background – when we took out the mortgage we had a combined income of just over £50k, and took a mortgage of £203k (max amount available then) on a property valued at £270. Since then I was made redundant and my job is less well paid so our joint income is now £46k. When it comes to remortgaging the O/S mortgage will be approx £165k, gawd knows what the house will be worth but I hope it doesn’t sink too low.

So on remortgage – will we automatically be put on the SVR or will Abbey check our salaries and the LTV? Sorry is this is a silly question but I’ve never done this before……if their lending multiples or the value of the property have fallen dramatically can they cancel our mortgage or is it just a question of putting us on a high rate?

Also we have (and will have) other debts, so if we wanted to remortgage and pay off our debts I am assuming I will have to find a company with bigger income multiples. I’m assuming the best thing to do is wait until the end of our fixed rate (Oct 2010) and look around then?

As our debts are growing, I was thinking of taking positive action now and writing to the CC companies asking if they will freeze/reduce interest rates for a period to allow us to get things under control – if I do this will it affect our chances of being able to remortgage, or the rate that we get? We can continue paying the minimum payments until 10/2010 but I’m trying to look at it from all angles.

Finally, I know people can sometimes be judgemental on these boards, but we have cut down our expenditure to the bare minimum (no car, no holidays, no going out, cheap food etc) and will be paying all our debts in full. Unfortunately its been a bad year with hubby's O/T scrapped and a couple of big house bills (roof repairs and tree removal) knocking our plans.

Any advice or helpful suggestions would be most appreciated, nothing harsh though please as I’ve had so many sleepless nights worrying about this that anyone being nasty might cause a flood of tears!

Thanks

sleepless_saver

Hi, just popping in to say that you will get a better response to the debt bit of your post on Debt Free Wannabee where there are lots of people with experience who can help you out.

When your fixed rate comes to an end, you would automatically go on to Abbey's SVR unless you remortgage. So if you did not remortgage no one would be working out how big a mortgage your earnings could support. But it's a long way off anyway and a lot of things could change by then.

You have paid a lot off your mortgage in 3 years if you reckon it has gone down by £37k? is that right?

herbiesjp

So on remortgage – will we automatically be put on the SVR or will Abbey check our salaries and the LTV? Sorry is this is a silly question but I’ve never done this before……if their lending multiples or the value of the property have fallen dramatically can they cancel our mortgage or is it just a question of putting us on a high rate?

You will automatically revert to the SVR normally (some lenders put you on a tracker). Unless you have chosen to stay with them and switched onto a new deal. They will not cancel your mortgage. Also they will not ask for income verifcation unless you are looking to borrow more

Also we have (and will have) other debts, so if we wanted to remortgage and pay off our debts I am assuming I will have to find a company with bigger income multiples. I’m assuming the best thing to do is wait until the end of our fixed rate (Oct 2010) and look around then?

As long as you are aware of the implication of doing this i.e. turning unsecured debt into secured debt and having to pay it off over a longer period of time making it more expensive, then this can be done. Income mutiples will depend on the percentage of borrowing you are looking at, along with your credit score amongst other things. DO not wait until your deal expires, but instead a few months beforehand.

As our debts are growing, I was thinking of taking positive action now and writing to the CC companies asking if they will freeze/reduce interest rates for a period to allow us to get things under control – if I do this will it affect our chances of being able to remortgage, or the rate that we get? We can continue paying the minimum payments until 10/2010 but I’m trying to look at it from all angles.

You could try transferring onto lower rate cards. If you do what you say, they could put a marker on your credit file like "arrangements to pay" - which in effect means that you cannot meet the payments. This would have a negative effect on your credit file and re-mortgage options

JWM

Its actually £37k in the 5 years of the fixed rate period, its an 18 year loan.

I'll check the paperwork to make sure I'm not dreaming that figure!

Thanks I will also check out the debt free board, just wanted some mortgage advice too as its not an area I know very much about.

Thanks again

JWM

Thanks herbiesjp, so even if I make arrangements to pay now, Abbey will automatically put us on an SVR anyway so that might be the best thing to do. If we don't want to borrow anymore, I was worried that they might want what we've got back......ie by making us sell the house.

Thanks again.

herbiesjp

Before going onto SVR, you can ask them what other deals they have available for existing clients.

They will not credit score you as you are not asking for any more money, only a product switch.

Think long and hard before making these arrangments - as they could affect your credit score for a while.

Have a look at the other board as mentioned, or if you are really struggling get in contact with your local CAB and they will be able to help

JWM

Thanks that’s helpful. I think we’ve got all the cards we can get (been knocked back for the last 2 I applied for), so switching to 0% is probably out.

The options appear to be:
1 Do nothing now, continue paying the minimum on the cards. Try to remortgage at a higher amount to clear the debts (knowing that this is a risk as debt becomes secured). If not possible stay with Abbey on their best deal and try to sort out the cards separately, knowing that the future credit rating will be affected
2 Make arrangements with creditors if possible, understanding that this will probably make borrowing anymore in 2 years time at remortgage impossible.

I needs to sit down with the spreadsheet to really think about this. Although its hard when the gas bill goes from £35 (01/08) to £57 (07/08) to £80 (10/08), but my wage increase was 1%! Still I know its not just me.

Over to the Debt free board now I think, many thanks for putting my mind at rest re the mortgage, at least that’s one less thing to worry about.

JWM

Sorry, just thought of something else.

When we applied the Abbey said that we could take the term over any length – I was 39, DH 46, so we took an 18 year team so that it would finish before DH’s 65th birthday. I think they said you could take it up to the 80th birthday – surely not? It’s a repayment mortgage.

I wonder if it would be possible to increase the term and/or make it interest only for a short time, so we can hit the other debts? Then when things are better switch back. Of course the danger with this is that if things get worse for us that leaves less time to actually pay it back. It’s a gamble.

I know the obvious thing to do is phone the Abbey and ask but I suppose I don’t want to flag to them that we are having difficulties or indeed, admit to myself that its happening. All payments are up to date for al our credit.

Can someone advise me – if I call Abbey is that it in terms of future good deals or credit (not that I think borrowing more is a good idea but I want to keep our options open)? Should I tell them that we are facing difficulties or just keep my head down?
I thought about posting this on the debt free board but this is really about how mortgage companies treat people who have admitted that there may be difficulties without having missed a payment?

Thanks again

hethmar

I dont know what the right thing is to do but Id get the mortgage term running first before querying about changing it - just in case you do flag up any difficult questions.

In the meantime, check with the CAB about help in sorting out the other debts you have.

Good luck

benbenandme

Might be worth checking the old style board too, I know you aid you've cut down but its amazing how much more they can help you cut back even when you think you're back to the minimum

JWM

I wonder if someone could advise me re the questions in point 8 above? Thanks, just to help me with my calculations!

benbenandme - yes already been on the old style, unless we give up eating there really is no where else to trim the budget! Thanks for your help though