TSB remortgage advice

jp1964

Hi all,

We have our current repayment mortgage with UCB Home Loans, at the time we took this out DH was self employed so we could not get a 'standard' mortgage from a prime lender and self certified our income (truthfully!).

For 8 years now we have had two Limited Companies with proper accounts, both doing well, but have not remortgaged due to having high credit card debt, we knew we would be refused for this reason. We have been paying a variable rate of 5.49% for some years now, and although we comfortably manage the repayments its obvious that we are paying over the odds by a considerable amount, wasting about £300 per month which could go towards overpayments for the mortgage.

Our aim when we remortgage is to overpay anyway to reduce the term of the mortgage and save on interest.

Now having paid down quite a bit of our credit card debt and with our mortgage being currently only 68% of the house value, I have been into our local TSB branch to enquire about remortgaging with them, as I have banked with them for 22 years, and the mortgage payment comes out of that account.

I had a brief chat with the manager, who seems to understand what we are trying to do, and our circumstances, she has made us an appointment with the branch mortgage adviser in a couple of weeks time, and seems to think that they can help us to both save money on mortgage repayments and at the same time overpay, given the rates that are offered, that looks reasonable and achievable if we are approved.

Just to also say that both my husband and myself have good credit scores and no defaults on any accounts.

What I wanted to ask, having read some of the threads on here, is am I being unwise to just go to my bank rather than use a broker, I thought that as the bank know me and have experience of my account management it might make things simpler, given that we both still have quite high credit card balances which we are overpaying each month to reduce the balances quickly, all on 0% deals, and are between us only using circa 40% of our available credit, that may put off some lenders, even though we have enough in earnings to cover all our bills, especially as our outgoings have reduced considerably as all the children's school fees are now finished (yay!) so we have spare income to reduce our debt each month.

I had thought of waiting a year or so until more debt had been paid down before applying for a remortgage, but it seems crazy to be paying £300 a month over the odds, a year would see £3600 wasted which we could be using to pay down the mortgage, and as I say we can comfortably afford to still pay that amount but in a far more efficient way.

Should I wait or go for it, and is going to my bank a good idea or should I go to a broker, if so, where do I start looking for a good broker?

Thanks for your thoughts in advance.

amnblog

Many applicants believe that a long unblemished history with their bankers will make their mortgage or re-mortgage application easier.


A quick look through this forum will identify that that is not the case. A mortgage is considered a new transaction and whilst a current account with the lender may assist credit score a little, it does not 'put a tick in the box'.


So, given your current relationship with TSB is no advantage what is the benefit of using a broker?


1. Choice - TSB offer one range of products, are they offering the best available product for you? (There are around 3,000 products available on the market for the type of scenario you outline)


2. Underwriting - Do you know you will meet the TSB's (or any lender's) criteria? A broker needs to establish you meet criteria before they put you to any lender for consideration.


3. Time - You could spend 3 hours with the Lender's in branch adviser to then simply be told 'no'. (It happens all the time - see this forum)


4. Cost - It is easy to pay a valuation or booking fee to a Lender to progress an application that it later refused for a reason you could not have foreseen at outset. (Less likely on a re-mortgage, but the principle is there)


5. Service - You can select a broker to deal with you in the way you want to transact - be that face to face or telephone or internet.


6. Hassle - The broker handles everything for you right through to completion so you do not have to chase anyone.


7. Complication - going direct to the Lender you can end up with credit scores on your file that achieve nothing - this is to be avoided.


I don't know your situation but mention of two limited companies sets the alarms bells ringing. The better your Accountant the more likely your trading figures won't pass muster with a number of Lenders.


TSB do not offer products through brokers so we are not familiar with their underwriting criteria but we understand it to be conservative from industry rumour.


Of course, even if you decide to use a broker, finding the right one is difficult. Recommendation is your best course. Failing that a site like Unbiased will list firms you can speak to in order to get a view if they will offer the kind of service you want.

jp1964

Thanks for taking the time to respond, you have been so helpful and make a lot of sense, its very much appreciated, just a couple of queries?

How does a mortgage broker make sure that we meet the criteria for a lender before applying for a remortgage?

Would there not be the same risk that an application could be made only to be turned down for some reason, presumably also the same risk that credit checks that a company applied to through them make will go on our files as well?

I can see how comparing the whole of the market tailored to our circumstances could really be of help, but how can we know that we have chosen the right lender to apply to who will accept our company trading figures, we do have a very good accountant from a firm that has won industry awards 4 years running for the best services to SMEs, so does this disadvantage us at all?

How much does going to a mortgage broker cost, presumably there are charges for legal work done, TSB are offering free basic legal work and no valuation fee, plus a £500 cash back once all is completed, the difficult choice is whether the advantages we may or may not gain by going to a broker outweigh this assuming that we are accepted?

The bank manager did say to me that because the mortgage payments come out of my account every month and they can see all my income going in and expenses going out then income verification may not be necessary but to bring in the last three years' accounts just in case.

I am considering simply going to see the mortgage adviser at TSB and then finding out what they have to say regarding whether we meet their criteria or not, I can always go away and take some time to think about it, presumably they don't force you to apply there and then!

I am tempted to go anyway, the rates mean that £300 could be shaved off our bill and then used elsewhere to pay down the mortgage or our card debt, which should really be the priority whilst the 0% is in force.

Your comments are much appreciated.

amnblog

Criteria


It is the broker job to know lender's criteria.


Applications turned down


There is always a risk an application can be turned down at any stage but via a broker that risk is minimal


Choosing the right lender


A broker should know from your accounts and how you take your income which lenders will consider your case


Income verification


I am not sure the FCA consider income verification unnecessary


Going to see TSB anyway


Perhaps if it is rained and you could do with a cup of coffee!

Thrugelmir

jp1964 wrote: »

given that we both still have quite high credit card balances which we are overpaying each month to reduce the balances quickly, all on 0% deals, and are between us only using circa 40% of our available credit,

How much do you owe? The terms "quite high" and 40% of available credit could mean absolutely anything. Your debt levels may well have a bearing on the outcome.

What happens if there's no 0% deals available?

jp1964

Hi,

We have balances of around 18k each on various cards, they are all on 0% at the moment for anything up to a year (starting October this year) and among other things we have unused cards which keep offering us 0% balance transfer deals, so presumably when the current 0% deals finish in April and October next year we will be able to transfer any remaining balances over to them.

Before paying off a large amount of our credit, we were paying in the region of £1700 in minimum payments on our debt, and never missed a single one, now we are able to pay more off due to greatly reduced monthly outgoings, and are overpaying by £1200 per month plus the minimum payments required, we hope to be credit card debt free within the next two years.

I did hesitate to enquire about remortgaging, thought it might be better to wait, but it did seem a little bit silly to waste £300 per month and pay a much higher interest rate than we need to, which is why I made the enquiry with TSB. We don't have any problem paying our outgoings but it would be far more sensible to use the £300 we may save by remortgaging to overpay the mortgage or make additional payments to reduce the card debt much quicker.

It seems daft to me for a mortgage provider to flatly turn us down when we are already servicing our bills quite easily with no defaults and a good credit score (although with all the strict lending criteria these days, they may well do for some reason) hopefully the bank will see it our way, but who knows? It will be interesting if nothing else to see what their criteria is and if we fit the bill.

kingstreet

I've just run one well-known lender's affordability calculator.

I entered a £30k salary over 25 years and the maximum borrowing was £150,000.

I then entered £18,000 credit card debt and the maximum borrowing dropped to £43,935.

On a £50k salary, it was £250k down to £173k.

Don't underestimate how much your affordability is going to be impacted by that card debt.

jp1964

kingstreet wrote: »

I've just run one well-known lender's affordability calculator.

I entered a £30k salary over 25 years and the maximum borrowing was £150,000.

I then entered £18,000 credit card debt and the maximum borrowing dropped to £43,935.

On a £50k salary, it was £250k down to £173k.

Don't underestimate how much your affordability is going to be impacted by that card debt.

Thats interesting, thanks.

We each earn £50k so presumably the above figure would apply for each of us, we need to remortgage for £198000 over 18 years at a LTV of 66% (my original post of 68% shows how much I need my glasses!), with an overpayment facility we should be able to reduce that term by a good few years, especially if we can get a lower rate than 5.49%!

kingstreet

Yes and the other outgoings and expenses you have will also have to be taken into account, such as the mortgage term, dependents, childcare, other credit etc.

The earlier post was merely designed to show the reduction from the credit card debt you actually mentioned.

jp1964

Ok, thanks.

We don't have any other credit or childcare costs, only the normal utility bills, council tax, water rates, insurance, food, clothing, miscellaneous living costs etc, much of the travel costs for fuel and vehicle costs go through the Limited Companies, I work from home so no travel costs incurred there, we have three children still at home, two of whom are over 18, 1 in college and 1 working, so effectively 2 dependants at the moment.

If your calculation is typical of the mainstream lenders, we hopefully should not have too much difficulty with the amount that we can borrow for a remortgage, even with the debt we have at the moment (although effectively we already have borrowed it and have been paying it back with no issues?)