Job instability and mortgage offers

jozbo

Some advice please on what to do if, during a search to buy a property, you find that there are redundancies at your workplace and your job isn't as secure as could be...

we don't have a mortgage offer but were hoping to apply as soon as we found a place (have been looking for about 3 months). recently my hubby has been given disciplinary action as have several other members of his team at work and people are being sacked.
my earnings are calculated by tax returns as am self employed.

i know it seems crazy to get a mortgage at a time like this however in our case the mortgage payments will amount to about half what we pay for our current rent (as we have a large deposit), and will be a larger house as opposed to the small 1 bed flat we're stuck in now.

we cant find anything cheaper to rent, all is the same or more expensive.

if you lose your job whilst paying a mortgage you have options eg pay off a couple of months with savings or take in a lodger. in small rented accomodation we dont have this option.

would it be unwise to buy now...? and would the bank offering the mortgage not offer to us in these circumstances. what if you lost your job after the formal mortgage offer was made?

many thanks in advance

jozbo

Cmon, somebody must have an opinion!

shortchanged_2

Basically it depends on what you can afford. If you feel you can afford it now and feel you would be able to manage to pay the mortgage and bills if your OH lost his job then go for it.

The only other issue maybe getting the mortgage in the first place as I understand self employed people can have difficulty obtaining a mortgage.

olly300

Rented accommodation - if your husband loses his job and you are not working. You both sign on for JSA and if you don't have massive savings then Housing Benefit will pay your rent up to a reasonable amount. (Even if you are self-employed you can sign on if you can't get any work however you have to produce your current year's accounts.)

Mortgage - if your husband loses his job and you are not working. You both sign on and you have to wait 13 weeks before your mortgage interest is paid. However the government is cutting the mortgage interest rate from October to about 3% above the base rate meaning that the payments are unlikely to cover the interest payments on your mortgage. This can damage your credit record.

If you have a lodger while claiming JSA then you can't ask for your council tax to be paid. Also at the moment there are lots of people looking for lodgers and most tend to avoid couples.

Personally I wouldn't advise you to buy a house unless you have a massive deposit and other savings that you don't have to put into the house.

Plus I'm surprised that your husband hasn't joined a union.

Unions are good in regards to:
1. Stopping employers disciplining staff because they can.
2. Ensuring that you get a redundancy payout
3. A union rep is the only person apart from a work colleague who can legally accompany an employee to a disciplinary meeting. If an employee tells an employer that they want their union rep present (best done in writing), the employer has to postpone such meetings until the rep can attend.

However he should not join the union that has a rep in his workplace but another one that also covers his line of work.

Unfortunately as people are not joining unions late in the day i.e. when they are in the midsts of trouble, lots of them are refusing to help people unless they have been a member for a few months.

olly300

Oh and a thing I forgot to add to the post above if you buy a house you are basically stuck in the location you buy the house in as mortgages have redemption clauses. If your husband is made redundant and subsequently finds a job 100 miles away then you will find it very difficult to move. If you are renting then it's much easier.

mostlycheerful

“you have to wait 13 weeks before your mortgage interest is paid”

Er, I thought that it had been reduced to 6 weeks due to recession but maybe I’m wrong.

I knew someone a few years ago who lost his job just one week after completing on his house and as he had bought a 3 bed he rented the 3 beds to lodgers and lived in the living room himself and had all the mortgage covered and some profit on top so he was ok. So sometimes it can be done if you get a big enough place and if the figures stack up correctly.

Rentals for single rooms in London are currently £60-90/week but interestingly are also mostly about the same as this in most other parts of the country where the property is a lot cheaper to buy. So, for instance, if you’re in the north or in Essex and buy a cheap 5 or 6 bed house and then rent all the rooms to lodgers then this is probably very doable and you could cover all the mortgage and make quite a fat profit as well. However if you get an expensive 2 bed in London then the rentals from two lodgers may only cover part of the mortgage and, of course, if you’ve got income from lodgers then you probably won’t be eligible for benefits. So, probably doable in cheap parts of the country, less doable in expensive parts.

Yorkie1

mostlycheerful wrote: »

So, for instance, if you’re in the north or in Essex and buy a cheap 5 or 6 bed house and then rent all the rooms to lodgers then this is probably very doable and you could cover all the mortgage and make quite a fat profit as well.

Except then you're getting in to HMO territory, with the extra expenses involved there

jozbo

olly300 wrote: »

Rented accommodation - if your husband loses his job and you are not working. You both sign on for JSA and if you don't have massive savings then Housing Benefit will pay your rent up to a reasonable amount. (Even if you are self-employed you can sign on if you can't get any work however you have to produce your current year's accounts.)

Mortgage - if your husband loses his job and you are not working. You both sign on and you have to wait 13 weeks before your mortgage interest is paid. However the government is cutting the mortgage interest rate from October to about 3% above the base rate meaning that the payments are unlikely to cover the interest payments on your mortgage. This can damage your credit record.

Thanks for this, hadn't even thought about claiming anything. Don't think we'd get the housing benefit though as my husband is not a british citizen (but has indef leave to remain in the UK). Also we will reserve a 8k cushion from our deposit and have a 60% LTV - so doubt we'd be eligible for help.

We are planning to buy in a cheaper area of London and any new job is likely to be in the centre so location not a concern.

Another question - would it be possible to apply for the mortgage in full now, in advance of finding a place? I know the precise amount of mortgage we need, the max they'll offer based on our current salaries. That way if he lost his job in the meantime it wouldn't be such an issue. I understand we'd need to pay the application fee, and it would be valid for 6 months or so??

poppysarah

mostlycheerful wrote: »

“you have to wait 13 weeks before your mortgage interest is paid”

Er, I thought that it had been reduced to 6 weeks due to recession but maybe I’m wrong.

I thought it used to be 39 weeks.

wodgerdodger

Whilst lenders will hold an offer open for up to 6 months they would seek confirmation that any details have changed e.g employment.

It is unlikely hubby could apply for mortgage payment protection as notice of redundancy is a known factor and any susbsequent claim would be invalid if you went this route. MPC is almost impossible for self employed.

There is a misconception that self employed would have trouble getting a mortgage. Provided you have either 3 years accounts or 3 years verified Self Assesments form HMRC then that would be acceptable to most Lenders provided income declared has been progressive over the last 3 years. As it's a relatively low loan to value would your self employed income suppoort the loan itself?

jozbo

I only have 2 years accounts, and income is low. In those 2 years it has more than doubled though. I could just about cover the payments myself, provided my current job didnt change but as I'm freelance it's very unpredictable.
If we took out the mortgage now and then hubby got made redundant, would they look on us more favourably if we could provide proof of having the £8k savings as a fallback?
I'm most worried that we'll advance well into a purchase and then he'll lose his job, leaving us out of pocket and stuck in a flat we hate and cant afford! :mad: