Mortgage Advice

thewookie

Hi all,

I have a A&L mortgage fixed rate since July 07 which ends in July 10, when it will revert back to the SVR.

House was £105000 put down 10k deposit.
Currently it is £600 a month.

Since I have taken out the mortgage I have returned to education to study for a degree. I have a part time job which gives about £600 a month and my partner earns about £700 a month.

I have £3900 on a C/C. ( currently on 0% with Virgin )

Now I have asked previously and the consensus seems to be that I will not be able to remortgage as I won't meet earnings ratios but would I be able to change to an interest only mortgage for a while which will hopefully reduce my payments and allow me to clear the C/C faster? If so what is the process does it sound feasible.

Thanks in Advance

opinions4u

Ok - first of all I'm going to make an assumption that there is little or no equity in the property. On those grounds alone I would have to agree that those who told you "no remortgage" were right. You would probably be short on salary too and even if you could remortgage I would guess that the rates you would get would be little better than the 4.99% A&L SVR.

If I have understood correctly, what you are saying you want to do is underpay your mortgage so that you can pay your credit card because you decided to quit a full time job in order to study.

It's not exactly a great proposition to your lender.

In the 1990s, when I was responsible for agreeing reduced payments for mortgage customers in financial difficulties, I would take in to account the following:

- what is the loan to value ratio? High loan to value = high risk to the lender = little leeway for generosity.
- why is the borrower in this situation? Being made redundant, long term illness, husband and his income has run off with his secretary etc = grounds for compassion. Wilfully giving up work doesn't.
- what will the borrower do if I reduce their payment? If it was a case of prioritising an unsecured debt (e.g. credit card) over and above a mortgage payment then I gave no leeway. If it was because essential expenditure (by which I mean gas, electricity, water, council tax, food and other secured credit) couldn't be met then I would reduce payments.

There were occasions where it was appropriate to reduce mortgage payments to NIL for a period of time. There were many, many occasions where I would agree to interest only payments that lasted for 6 months and were often renewed several times after that. There were even rare occasions where, despite awful credit history, it was in the interests of borrower and lender for my then employer to advance a secured loan in order to clear unsecured credit elsewhere (although only where affordability criteria were easily met by extending the term of that unsecured credit). But I am pretty sure that with your circumstances I would have refused to reduce the mortgage payment by a penny.

The only people who can answer your question about going on to interest only are A&L. They will have different criteria to those I applied over a decade ago. But before you ask the question you need to consider what your pitch is, because it doesn't look good from here.

They may also charge a fee. While this may be relatively modest, remember that you will basically be paying them a fee to borrow a relatively small amount of money (the difference between capital repayment and interest only). They may also record these underpayments as arrears on your mortgage which could blast your credit file apart.

Personally I'd suggest paying the full monthly payments and spend some time over on the Debt-free Wannabe forum looking at other ways to increase income and reduce debts and outgoings.

thewookie

opinions4u wrote: »

Ok - first of all I'm going to make an assumption that there is little or no equity in the property. On those grounds alone I would have to agree that those who told you "no remortgage" were right. You would probably be short on salary too and even if you could remortgage I would guess that the rates you would get would be little better than the 4.99% A&L SVR.

If I have understood correctly, what you are saying you want to do is underpay your mortgage so that you can pay your credit card because you decided to quit a full time job in order to study.

It's not exactly a great proposition to your lender.

In the 1990s, when I was responsible for agreeing reduced payments for mortgage customers in financial difficulties, I would take in to account the following:

- what is the loan to value ratio? High loan to value = high risk to the lender = little leeway for generosity.
- why is the borrower in this situation? Being made redundant, long term illness, husband and his income has run off with his secretary etc = grounds for compassion. Wilfully giving up work doesn't.
- what will the borrower do if I reduce their payment? If it was a case of prioritising an unsecured debt (e.g. credit card) over and above a mortgage payment then I gave no leeway. If it was because essential expenditure (by which I mean gas, electricity, water, council tax, food and other secured credit) couldn't be met then I would reduce payments.

There were occasions where it was appropriate to reduce mortgage payments to NIL for a period of time. There were many, many occasions where I would agree to interest only payments that lasted for 6 months and were often renewed several times after that. There were even rare occasions where, despite awful credit history, it was in the interests of borrower and lender for my then employer to advance a secured loan in order to clear unsecured credit elsewhere (although only where affordability criteria were easily met by extending the term of that unsecured credit). But I am pretty sure that with your circumstances I would have refused to reduce the mortgage payment by a penny.

The only people who can answer your question about going on to interest only are A&L. They will have different criteria to those I applied over a decade ago. But before you ask the question you need to consider what your pitch is, because it doesn't look good from here.

They may also charge a fee. While this may be relatively modest, remember that you will basically be paying them a fee to borrow a relatively small amount of money (the difference between capital repayment and interest only). They may also record these underpayments as arrears on your mortgage which could blast your credit file apart.

Personally I'd suggest paying the full monthly payments and spend some time over on the Debt-free Wannabe forum looking at other ways to increase income and reduce debts and outgoings.

Had a bit of a read around the forum last night too and kinda came to the conclusion that it isnt the best solution anyway. I can meet the repayments going forward and pay down the CC. My only concern is going to be if interest rates start creeping up it could get a bit sticky.

Thanks for the advice.