outsider perspective, ideas and feedback

haybel19

My partner and I own are our own home with a mortgage it is currently worth around 120k and the outstanding mortgage is 86k. We have had this mortgage for 4 years.


As we now have a little one (and a dog!) we have very much outgrown our small newbuild.


But here is the problem... borrowing enough to move as our current lender nationwide would offer to lend less than we currently owe. We would only be looking to borrow 110k (at most and will not borrow anything we do not feel we can comfortably repay).


We have flawless credit scores and history everything is and always has been, paid on time.


Our income has dropped quite drastically, partly due to overtime really boosting OH earnings and partly due to me not being able to conventionally work due to several health conditions. I am however self employed with low earnings, and whilst these may increase- employment is not an option.


OH earns £21, 500 per year. I earn self employed around 1000 a year plus we get child benefit at £88 ever 4 weeks and child tax credit at £8.48 per week so our totally yearly income is £23,892.


We have no overdraft or credit or debt of any kind. We over pay our mortgage by very small amounts £10-£15 a month just to show willing. We have no savings to speak of, but this is something we are working on.


Just looking for ideas and inspiration on what we can do to improve our position in the eyes of lenders and for ourselves. Please do bear in mind that I cannot work and therefore self employed income is all I can add to the pot, and due to my conditions I am limited in the number of hours I can put in. My earnings have double from last year and I am really trying within the limitations that I have. My partner has been looking for other work but he is on good pay for his type of work, and works five mins from our house so can walk and we do not want to get a second car which would increase our outgoings. However this would be considered if the benefit was greater than the expense. Hope that all makes sense and look forward to any feedback.

haybel19

Anyone?


I guess one of my questions is am in term of how the mortgage lenders view us- better to overpay by small amounts or have a small amount of savings? or should I be aiming to do both.

Thrugelmir

Overpaying is the way to build equity quicker. Can you afford to overpay by more than £10 or £15 a month? A larger mortgage is going to require you to find more every month. Also lenders will assess affordability on your ability to repay if interest rates were 3% higher.

There's no easy answers I'm afraid. Personal choice as the way to make savings in ones personal budget.

haybel19

Thank you. Yes we could over pay by more. I did consider looking at what the mortgage we wanted would cost roughly then paying that every month as then in my mind its harder for them to say we cannot afford if we are actively demonstrating our ability to pay at that level does that make sense?


We are not rich far from it, and have made an awful lot of cuts and become much more money savvy, and are continuing to learn all of the time thanks to this wonderful site.


So would you focus on overpayments rather than having savings?

Thrugelmir

haybel19 wrote: »

So would you focus on overpayments rather than having savings?

What rate of interest are you currently paying on your mortgage. As a rule if this is higher than you earning on your savings. Then overpaying is the way to go.

Simply paying a higher amount is not necessarily a sign of affordability. Some many other external factors that could impact. As I mentioned before higher interest rates are on the way. So you need to keep this in your mind when planning ahead.

haybel19

Thank you. Really appreciate the time you have taken this evening to reply and I appreciate the food for thought.


At the moment we are on a fixed rate deal- fixed last year and running for 3 years. Rate is 3.79%. So safe from rate changes for 2 years but your quite right to point out that changes could have a very big impact. I will definitely continue overpaying and increase this- and with this in mind we really to do need a rainy day fund especially as unexpected bills can really knock us for six and I want to be in the strongest possible position if/when rate changes affect us.


Think I am also going to do another full review of all of our direct debits and see what can be further trimmed (I do this couple times a year and always shop around). The more that can be freed up to improve our position the better.


Are there any lenders with higher lenders with higher lending multiples? I understand nationwide are one of the stricter ones.