"Stress testing" ???

stingebag

Good morning, quick question put out to the forum if I may.


11 years left on a virgin mortgage currently at £84k, 3 years through a five year fix at 4.09% so 2 years remaining. Joint salary of just shy of 60k, no outstanding loans, credit cards, finance etc. Stable employment of over 20 plus years each, 2 children with no child care costs.


House value £195k so pretty low LTV paying currently £798 per month. Would like to knock 2 years off mortgage reducing it to 9 years remaining. Virgin tell me that would take the contractual payment to £940 per month which I am ok with. What they did say was I would be "stress tested" to their current rate of 4.79% plus a further 2% which again I understand that rates will eventually go up and banks need to be sure customers can pay. What I don't know is if I don't pass their "stress test" will this go against me for future mortgage deals, credit ratings etc. Your comments would be most appreciated. Thanks.

ACG

Can you not just increase your payments to £940 a month and over pay?

stingebag

Hi, yes technically I can just overpay, but the problem is I'm not too good at directing the money to the mortgage, it just gets side shifted elsewhere. This way I am sort of forcing myself to commit the money to the mortgage.

drdpj

You should just be able to ask them to change the direct debit amount, then it's done? That's how I've been overpaying for years.

d.

ValHaller

stingebag wrote: »

Hi, yes technically I can just overpay, but the problem is I'm not too good at directing the money to the mortgage, it just gets side shifted elsewhere. This way I am sort of forcing myself to commit the money to the mortgage.

The problem with reducing the term is that it is a contractual change and there is no guarantee that you could get the previous terms restored. If you have problems over financial discipline, reducing the term is the last thing you should be doing - hence the 'stress test'.

Don't do it. Overpay instead.

lee111s

As above, just increase the direct debit and over pay. It's exactly the same as contractually changing the term.

stingebag

Thanks for your replies, increasing the direct debit is the way to go then. Cheers!