Overdrafts and remortgage

Michelle2014

Will it stop you getting a remortgage if you use an overdraft?

Both me and my husband have an overdraft facility we use each month, the overdraft is repaid each month when our salaries go in nut by month end we are both in our overdraft.

Our mortgage is £95k and we have had it since 2006 so there in no issue with affordability.

kingstreet

Impossible to answer with the limited information provided.

If you are always overdrawn, some lenders may see affordability issues. It will depend on the chosen lender and overall case data.

Affordability is a snap-shot taken on the day you apply for a mortgage and what was considered affordable in 2006 may not be under the MMR regime.

Thrugelmir

Michelle2014 wrote: »

Both me and my husband have an overdraft facility we use each month, the overdraft is repaid each month when our salaries go in nut by month end we are both in our overdraft.

Our mortgage is £95k and we have had it since 2006 so there in no issue with affordability.

As interest rates rise you'll go further into your overdrafts every month. Incurring higher and higher costs. Therefore affordability may well an issue.

Historic payment of bills is meaningless. What matters is the ability to cope with financial distress however it is caused. Interest rates rises, unexpected bill, redundancy, sickness, divorce, death etc. Being a pay cheque away means there's no reserves to cope with the unexpected.

daisbuys

Sorry to jump in on your thread but I'm also in my overdraft but it's on an account I no longer use. It doesn't show up on credit reports so should I declare it?

Thrugelmir

daisbuys wrote: »

Sorry to jump in on your thread but I'm also in my overdraft but it's on an account I no longer use. It doesn't show up on credit reports so should I declare it?

Best to start your own thread.

Yes declare it. Your bank account might well not be reported. However if the omission is detected your application may well be declined.

Michelle2014

I haven't actually been asked by my broker if I have an overdraft so it has not been declared and we have a DiP. Affordability is not an issue - we have about £1000 a month after all bills and currently using that to pay off as much as I can off credit card. Obviously if I don't get the remortgage we could try switching to a new product with our current lender although rates are not as competitive.

Thrugelmir

Michelle2014 wrote: »

I haven't actually been asked by my broker if I have an overdraft so it has not been declared and we have a DiP. Affordability is not an issue - we have about £1000 a month after all bills and currently using that to pay off as much as I can off credit card. Obviously if I don't get the remortgage we could try switching to a new product with our current lender although rates are not as competitive.

Not a question of your broker asking. The full mortgage application will require you to declare your full financial position.

Affordability from a lenders view is different from that of a borrower. Besides the two overdrafts what other unsecured credit do you owe? Credit cards, car leasing , store cards etc.

Michelle2014

I went through affordability with the broker and declared credit card and loans. Also the usual outgoings such as groceries, council tax, phone bills, childcare etc. The lender said we could borrow up to about £115k

Unfortunately having had a very sick child normal plans went out of the window. Now trying to get back on track financially!

Obviously if there is a question on the mortgage form about overdrafts we will need to declare it.

Appreciate your input as know the market has changed since 2006, if we can't remortgage we will have to continue with the current mortgage at SVR of 5.79%.

Yorkie1

Who are you with at the moment?

Are you seeking to change the length of the term left, or the amount borrowed?

If you want to stay with the same lender and keep all existing details the same, then you're looking at a product transfer - and with some lenders if you do this online (i.e. without speaking to anyone at the lender) then they are unlikely to check your position.

Michelle2014

We are looking to change from interest only to repayment and extend the term to 28 years. Current lender is Leeds who say we have to book an appointment which they can't do for at least a month and will need to go through affordability again. We can get a better deal elsewhere hence why trying to remortgage. But it's sounding like this may not be possible due to overdraft and unsecured debt.

jimjames

Michelle2014 wrote: »

Will it stop you getting a remortgage if you use an overdraft?

Both me and my husband have an overdraft facility we use each month, the overdraft is repaid each month when our salaries go in nut by month end we are both in our overdraft.

Our mortgage is £95k and we have had it since 2006 so there in no issue with affordability.

You probably need to review your spending as this is exactly what the affordability tests should be highlighting. If you are going overdrawn every month then you are spending more than you earn so need to bring that into balance. Ideally you should be able to save and have an emergency fund - that won't happen if you are always spending more than you earn.