Do I have to tell them?

charmedy2k

Hello,

I have a question for anyone out there, if a credit commitment does not appear on any of my credit reports do I have to disclose it to a mortgage lender when remortgaging?

My mum took out a personal loan for me about 2.5 years ago which I've been making payments on from my account since.

Our fixed interest rate deal of 4.49% is about to expire in March and we're expecting a baby in April so we really can't afford to stay with the people we are with and no one seems to want to buy our flat so we're stuck.
what we're hoping to do is go on to a low fixed rate deal of 1.80% which will greatly reduce the amount of repayment we're making for 2 years which then switches to the SVR + 1% in 2009 and is tied in for a further 4 years ( I realise that that could be a very high rate by then, but i'm trying to free up as much money now so that I can stay on maternity leave for longer and complete my accountancy exams, I'm also in the process of starting up my own business so any extra money made can then go into a High interest account with the possibility of paying off the 4% redemption penalties should we decide to change mortgage at the end of the fixed rate period, which we probably will).

So what do you guys think, obviously we would be able to afford the repayments as they are more than half what we are paying now, but do I tell them about the loan or not? I have other loans which also don't show up on my credit record, not sure why and I will be disclosing those.

Any helpful advice appreciated.

herbiesjp

The loan is in your mum's name so it would not show up on your credit file - it his her loan.

Please please please think twice before going for such a low rate. The tie-ins and penalties attached to such a loan will almost certainly make the deal very very expensive for you in the long run.

Have you found the deal yourself? Have you gone via a broker?

There are other ways of reducing your monthly payments without going and tying your self into a product like this.

UK007BullDog

Those are the worst deals ever. What if the interest goes up to 10% and you have to pay 11% interest and to exit a deal like that can cost you up to 10% of the loan you have borrowed initially. It might cripple you and you may not be able to afford the mortgage payments.

Have you thought of a good discounted rate for a longer term and interest only. That would be a lot better.

Definitely see a fees free, independent, whole of market broker, or see 2. It might be a hassle but for the long run better to have investigated all avenues.

dunstonh

Can only echo what has been said already. You are putting yourself in a position where in two years time you will have a big increase in your mortgage payments to a level that you know you cannot afford if it was today.

Leon_W

I'm not going to add anything here, but DO NOT take the deal you are considering without taking advice from several sources, it's just that if I also post against it you might reconsider your options.

These deals are invariably VERY BAD NEWS and as a broker I would NEVER recommend one even if it were the last deal on earth. The lenders reasons are generally along the lines of "someone on a career path who will get paid more in the future" . That's a chuffing great "IF".

As Bulldog says, and without knowing your age or type of deal you are on it's hard to say, but I would seriously consider an interest only option with an overpayment facility than what you've been offered anyday.

charmedy2k

Hi Guys,

Thanks for the non judgemental advice, I really thought that I had taken all the catches into consideration when looking at this deal and others similar.
I did not use a broker because last time we paid the broker almost £1500 pounds even though I spent most of my time chasing the mortgage provider myself, I even ended up having to go from london to birmingham just to get the broker to send the papers out to the lender and I did feel that I could have saved myself a hell of a lot of money and time if i'd just done it myself!

The situation at the moment is that I earn £2000 net and my partner earns £16-1700 net a month, the mortgage is £220000 and the interest only payments are £850 a month and then I pay out £500 personal loan repayments myself.
In May my wages will drop to just over £400 per month due to maternity pay only being paid at 90% for the first 6 weeks and an extra £200 outside income, which obviously means that I will only be able to make repayments to either my mortgage or my personal loans for however long I decide to stay on Maternity leave (ideally at least a year).
Again as I have said I'm currently studying ACCA accounting and i'm the finance co-ordinator for the company I work for, when I pass in June I have the opportunity to become the finance director or find work elsewhere which will put me into a much higher earning position, I also have five years of working in finance which obviously puts me in a good position.

I do understand the catches of such a low rate mortgage, but surely it would put my partner and I in a better position financially now rather then struggling to make repayments for the next year on my artificially low wage thus increasing the possibility that we would lose our flat.
The early repayment penalties are 4% after year 2 which would be roughly £9000 plus exit fees and would be basically be the equivalent of what we would have paid out over 2 years, please tell me if I have missed anything as I know nothing apart from common sense when it comes to these things.

let me know what you think please as I do have to get the process started in the next week or so. Thanks

UK007BullDog

Well, as mentioned before find a FEES FREE Broker. Open the Yellow pages and look for the small local broker not the big national ones (there you are just a number). Look for the guy/gal working locally who will do the whole thing for you and you then are protected (FSA/FOS). If you go alone and it goes up the wall you have no comeback.