Earnings reduced - my mortgage is 6 x earnings

j0nesey

Hello everyone, this is my first post and I've had a quick look to check this subject hasn't been discussed before. Any advice would be greatly appreciated.

I am currently maintaining my mortgage payments BUT as it says in the thread title my mortgage is 6 times my current earnings having taken a significant pay cut 12 months ago.

I want to reduce my costs a little so would like to move property (buying) but something a little cheaper with lower maintenance costs.

I am wondering if I was to approach my current lender and explain the scenario then suggest I'd like to reduce my mortgage (but not significantly - to say 5x my earnings) to move

a) could they actually withdraw my current mortgage or force me to relinquish/ it in some way and
b) how otherwise might they view such an application.

As I see it on the one hand I am trying to be responsible and reduce my costs and actually lower my mortgage accordingly but on the other they are likely to see it negatively from a risk point of view - I wonder is there any typical conditions or responses to such a situation.

I might add my mortgage is/would be 70%

Any advice is appreciated.

Thanks in advance.

Thrugelmir

Much depends on your personal circumstances. As times salary is relative to your income. 6 times £20k salary being a different proposition to 6 times a £100k salary.

Wouldn't bother speaking to your current lender. Suggest you carefully budget what is affordable. Then work from there. Look at property when you've done the finances. Even 5 times is potentially a big risk. With higher interest rates on the horizon.

Moving house is expensive, so you need to make the right one. You can always climb back up the property ladder in the future. Better than falling off totally.

bossymoo

I'm not sure many lenders would go with 5x in the current climate. But they couldn't force you to sell unless it came to serious arrears and repossession proceedings, which is a long way off.

They would probably recommend you find somewhere nearer 4x income. Is that feasible?

5x is a huge commitment still, what if interest rates increase? (Yes I know this would impact you now too, but they / you didn't account for that originally).

Is there no way your income will increase in the near future? Is getting a lodger a viable option?

You have to consider also the up front cost of moving - conveyancing, estate agents, removals etc.

Either way, I would speak to them before you get into any arrears, most lenders can offer help with budgeting advice etc, and they will appreciate you keeping them in the picture. They may also have other options for you eg length of term, interest only for a short period etc.

And regarding your other finance, there is a wealth of information on here about getting the most from your money and making it stretch.

I hope you get something sorted, it must be a worry.

kingstreet

You might get 5x your gross annual income, but if any overtime or other variable amount is included, you may be limited to including only 50% of that.

Some lenders take working & child tax credits into account, plus child benefit.

However, childcare costs and other commitments, such as loans and credit card payments need to be deducted.

I suggest you use a lender's online affordability calculator to establish what is realistic.

j0nesey

Firstly a very big thank you especially for such quick responses.

I think my main worry was if the lender could retract my mortgage and from what you suggest Bossy this isn't the case which makes me feel more confident about approaching them to explore the options.

Also I am looking at options which bring my mortgage back to a normal 3x earnings amount which makes sense with respect to what you all say

I'm reasonably financially savvy - I think - and feel like I am managing ok but as you say mortgage rate increases would be a stretch too far for me so I want to be proactive.

thanks again

ACG

4-5x income isnt uncommon - depending on your circumstances.

You may be able to port your current mortgage to a new property - reducing the mortgage by however much. Play around with the current lenders affordability calculator. If it doesnt fit, then might be worth a chat with a broker but i suspect its probably going to be possible to do what your after.

Thrugelmir

j0nesey wrote: »

I think my main worry was if the lender could retract my mortgage and from what you suggest Bossy this isn't the case which makes me feel more confident about approaching them to explore the options.

Providing you meet you current contractual payments in accordance with your mortgage contract. Then a lender has no reason or grounds to "retract" your current mortgage. Irrespective of any change in your circumstances. Whether it be your salary, value of the property etc. As all the lender is looking for is repayment of the debt owed.

j0nesey

thanks for confirming this... I felt it was best to be sure of this before approaching the lender and I feel much clearer on my options now. Thanks to everyone for your advice