what are our options...

melt71

My fixed rate isn't due to end for a few months yet but when it does I'm now worried that I will not be able to get a remortgage

The background is that I bought the house off my ex husband many years ago as I had continued to live here with our child after the divorce and he had moved on but obviously wanted us to stay in the area so he could see his child. We had an amicable split and he is still very involved in her life so I wanted to stay in the area (he's bought another house with his new partner & child). I paid twice what he had outstanding on the mortgage for this house, so he made a killing and was happy and I was happy because I considered it mine and my daughter's home and I still got it for under the market value at the time.

I now have a new partner and new baby and we either want to extend this house or move to a bigger house either way, it will mean remortgaging. Even after the dodgy market, the house is still worth about £190k if not more as we have totally renovated it since the last remortgage.

I work about 30 hours a week and although I earn quite a lot for the area, it's nowhere near enough to get me the £110k mortgage I need. So I originally found a very helpful FA that helped me to get a self cert fixed rate mortgage. The house at the time of the original mortgage was worth about £185k and then when I remortgaged it was worth about £200-230k so before people judge me for being rash, it was actually cheaper and made more financial sense for me to buy than it did to rent - I have a lot of equity in the property and a mortgage is still cheaper than local rents!

My partner is on a DMP and doesn't contribute to the mortgage, I pay all of the bills and mortgage and he pays for food and luxuries such as Sky etc. I can easily afford the mortgage payments and we'll be able to afford even higher payments when my partner's DMP is finished in about 2 years and both of our incomes can go into the central pot.

We're happy to pay a slightly higher rate to make sure it is fixed, but with Self Certs likely to disappear I'm not sure what will happen now!! We still have quite a bit of equity in the house, so would this be taken into account?

Sorry this post is turning into an essay - I felt I should give some background of our situation.

If anyone could give any advice, I would be very grateful. I'm worried I'm going to have to sell the house and we'll end up in rented paying extortionate rents or worse, having to move out of the area completely which I really don’t want to do.

Thanks

Mortgagehelper

melt71 wrote: »

My fixed rate isn't due to end for a few months yet but when it does I'm now worried that I will not be able to get a remortgage

The background is that I bought the house off my ex husband many years ago as I had continued to live here with our child after the divorce and he had moved on but obviously wanted us to stay in the area so he could see his child. We had an amicable split and he is still very involved in her life so I wanted to stay in the area (he's bought another house with his new partner & child). I paid twice what he had outstanding on the mortgage for this house, so he made a killing and was happy and I was happy because I considered it mine and my daughter's home and I still got it for under the market value at the time.

I now have a new partner and new baby and we either want to extend this house or move to a bigger house either way, it will mean remortgaging. Even after the dodgy market, the house is still worth about £190k if not more as we have totally renovated it since the last remortgage.

I work about 30 hours a week and although I earn quite a lot for the area, it's nowhere near enough to get me the £110k mortgage I need. So I originally found a very helpful FA that helped me to get a self cert fixed rate mortgage. The house at the time of the original mortgage was worth about £185k and then when I remortgaged it was worth about £200-230k so before people judge me for being rash, it was actually cheaper and made more financial sense for me to buy than it did to rent - I have a lot of equity in the property and a mortgage is still cheaper than local rents!

My partner is on a DMP and doesn't contribute to the mortgage, I pay all of the bills and mortgage and he pays for food and luxuries such as Sky etc. I can easily afford the mortgage payments and we'll be able to afford even higher payments when my partner's DMP is finished in about 2 years and both of our incomes can go into the central pot.

We're happy to pay a slightly higher rate to make sure it is fixed, but with Self Certs likely to disappear I'm not sure what will happen now!! We still have quite a bit of equity in the house, so would this be taken into account?

Sorry this post is turning into an essay - I felt I should give some background of our situation.

If anyone could give any advice, I would be very grateful. I'm worried I'm going to have to sell the house and we'll end up in rented paying extortionate rents or worse, having to move out of the area completely which I really don’t want to do.

Thanks

The first thing I would suggest is to approach your current lender tomorrow. Ask them what deals they would offer you when your current one ends.

That should be your starting point for now.

Taking your property value at £190k, then the loan to value of your current mortgage balance is less than 60% - which is the ideal area for most lenders right now.

However after that things get tricky. Lenders such as The Mortgage Works have already pulled out of the self cert market - so the indications are there already.

If your true income isn't enough to support a mortgage of £110k when assessed under normal terms, why do you want to borrow more now?

To give you a guide, based on the basics of your income, property value etc, subject to credit scoring you would need to have an income in the region of £30k per annum to bring in a mortgage of £120k.

There may be differences between lenders, but tread carefully - you could be jumping out of the frying pan...and you know the rest.

The reason 'Self Cert' mortgages are likely to be banned is because they were offered to individuals who really shouldn't have them - they were originally designed for the self-employed - but then hijacked by 'some' brokers who saw cash signs..only to leave some of their clients high and dry 2-3 years later.

Sorry I can't be more positive, but the 'new' mortgage market is very very different to that of 2-3 years ago.

melt71

Thank you very much for your reply.

The only reason that we would want to borrow more money that we have on the mortgage now is to enable us to do the extension - other than that I really don't want to increase the amount of mortgage we have already (£110k). We need a 3rd bedroom as my eldest is now 12 and it is making life very akward sharing with our 18 month old!! However, if we were to buy a bigger house rather than extend, we would be prepared to move to a surrounding area to get more property for the same money (our area is a sought after area and there are a couple of areas nearby that we would be happy to move to).

The mortgage is currently with Abbey. I would be happy to have another fixed rate with them again but didn't think they'd offer me anything once the rate ended. Would they take into consideration that I've paid the mortgage no problems even at the much higher fixed rates?

If I need to earn in excess of £30k to get a mortgage of £110k then I've got no option but to sell my house and rent. Even if I increased my hours, I would not be earning that amount!

Is there anyway that I could get a longer term mortgage perhaps? and then change back to a normal one once our financial circumstances improve (child going to school, working more hours etc)?

Mortgagehelper

melt71 wrote: »

Thank you very much for your reply.

The only reason that we would want to borrow more money that we have on the mortgage now is to enable us to do the extension - other than that I really don't want to increase the amount of mortgage we have already (£110k). We need a 3rd bedroom as my eldest is now 12 and it is making life very akward sharing with our 18 month old!! However, if we were to buy a bigger house rather than extend, we would be prepared to move to a surrounding area to get more property for the same money (our area is a sought after area and there are a couple of areas nearby that we would be happy to move to).

The mortgage is currently with Abbey. I would be happy to have another fixed rate with them again but didn't think they'd offer me anything once the rate ended. Would they take into consideration that I've paid the mortgage no problems even at the much higher fixed rates?

If I need to earn in excess of £30k to get a mortgage of £110k then I've got no option but to sell my house and rent. Even if I increased my hours, I would not be earning that amount!

Is there anyway that I could get a longer term mortgage perhaps? and then change back to a normal one once our financial circumstances improve (child going to school, working more hours etc)?

At the moment, I would suggest that you speak to your local Abbey office and have a chat face to face.

As an existing borrower, you will at least be able to have your payment history considered as part of the process.

Abbey do offer enhanced income multiples in cases such as yours but they have recently reviewed the different types of income that can be used.

With this in mind, you need to speak to them first.

Even if you took the mortgage over a longer term, it would of course make it cheaper (on a capital repayment basis), but you would still be assessed on the capital debt.

If you take out a new deal with Abbey (and don't move) then you would not have your income assessed - it is viewed as an admin change and nothing else.

If you wanted to move (even with the same amount of mortgage) you would be assessed fully...including your income.

Hope this helps.