Mortgage renewal and a 9 month tenant

Spec26

Hi all,

Looking for some particular mortgage advice.

My brother and I (28 & 26) have had a shared mortgage for ~1.5 years. It's due for renewal in early December. In early September he is considering moving out for 9 months to do a course (for a career change) and get a tenant for these 9 months. I am happy with the idea of this.

My concern is over mortgage renewal. Our current provider allows you to arrange your renewal up to 4 months in advance, meaning in early August we could apply for the renewal based on my brother's current employment / salary situation before he quits his job just before the course starts. Are all the salary, employment and bank account checks done only at that point in August, or would they check again just before the commencement of the new mortgage proper in early December (or at any point between early September when he starts course / quits job and mortgage renewal date)? If they did check after that point then he would not be on a salary and we would have our renewal rejected and we would have to move out of the property. This, obviously, we don't want to happen!

We would be using the tenant's rent money to cover his share of mortgage repayments during that 9 month period (with my parents assisting with any deficit) until he moved back in (and resume payments himself).

So, how do renewal checks work and is the plan my brother considering realistic?

Thank you in advance for any advice,
Spec26

TrickyDicky101

Do you also live in the property? If so, you would not be getting a tenant but a lodger (the distinction is important).

Why do you need to renew? I take it you mean the fixed term is over and the mortgage reverts to some form of variable rate e.g. the SVR?

Spec26

Hello,
I would indeed still be living there, so it would be a lodger and not a tenant. The mortgage is in mine and my brother's name (50 / 50).

We need to renew because our fixed rate period is ending early December. Then I believe we revert to their standard rate - it's with Santander. I assumed the rate we revert to would be pretty terrible? Much like when a fixed price electricity contract reverts to an energy comapnies most expensive rate after it runs out? I will dig out the paperwork tonight.

However, ideally we'd like to secure another fixed rate mortgage whilst he is still in his current job as, due to his career change he is likely to drop from ~£45k salary to £25-30k (something he's willing to do as he hates his current career that much!), thus we'd get have issues with obtaining a decent new mortgage when he eventually got round to getting a new job after his 9 month study course.

Thanks!
Spec

Spec26

Looking into, we'll revert to Santander's SVR in Dec which is 4.74%. I informally asked what rate we'd get if we renewed and was offered 2.79%. To get this, will they need to run credit checks and review our salaries / bank accounts etc before proceeding or do they just give existing customers new mortgages without any checks?

TrickyDicky101

I believe that seeing as this is your current lender then they may well not run any new credit checks (assuming your mortgage has been paid on time since inception). I am not a mortgage broker, however, so hopefully one with more experience will come along to give you a much more definitive answer.

Morgage_Confused

Is the 2.79 a 5 year fix....its pretty good if it is.
What you are asking Santander for is a "retention product" and I dont think they look for any credit checks or salary but best to wait till a mortgage advisor comes along to confirm.

There are other 5 year fixes around at approx the same rate with other lenders but they will carry a product fee.
for example YBS 2.44% 5 year but with a £1475 fee but they will deffo credit and salary check.
thats a 65% LTV product btw

Spec26

Thanks for that you two. Do either of you know an advisor on here you can pm to get their input on the checks? This would be really appreciated as we're having a family meeting this weekend to discuss this.

2.79 was for a 2 year fix, we've been offered 3.49 for 5 year fix. This is for a long mortgage, we're thinking of changing it to a shorter one, e.g. 20 years, do you reckon the situation would be the same (i.e. no checks)?

I am going to call re changing to 20 year mortgage today and ask about checks at the same time.

Thank you,
Tom

Annisele

If you're just wanting to change the rate, there won't be any credit checks.

If you want to change the term of the mortgage, there probably will be checks.

Why do you want to shorten the term when your incomes are going down? If you do have spare cash, wouldn't it be easier to overpay? (But check early repayment penalties before overpaying).