Remortgaging at end of term - newly Self Employed

thenewbee

Hello everyone! I last posted on here over a year ago as we were in the process of buying our house. We got a 2 year fixed rate on 26th Feb 2014, initially borrowing 90% LTV on our £183,000 home.

At the end of our first year we have £161,000 outstanding, as we managed to make some overpayments for the first 6 months. Unfortunately at that point I became very ill and had to leave my well paid job. I'm now self employed and business is going really well after beginning trading on 2nd August 2014. I turned over £9,000 total as at the end of March, however I recently took on my first employee and expect turnover to increase to approx £2,000 / month from May, and probably increasing more than that over time as my employee takes on more work and becomes more efficient.

I'm posting as a big concern of mine is our mortgage. We're on a 4.19% 2 year fix with First Direct. I would like some input from others on what our best options will be when it comes to the end of our fix, and if there's anything we can be doing in the meantime to help the situation when it arrives.

My partner is employed and earns £26,000 gross per annum. We both have good credit ratings with just a credit card of £1,600 which we're paying off and will have paid off by October this year. We've made every payment of our current mortgage, with overpayments in the first few months.

I'm aware we might not be able to remortgage based on our LTV at the end of our fix - from what I've seen most lenders require 60-75% LTV minimum, and we won't be there at that point. However, I have read that there may be more potential for a good deal if we stay with our current lender as less checks are carried out than if we went with a new lender - can anyone expand upon this or prove it to be wrong?

My current plan is to continue to pay off the credit card, make as many overpayments as we can on the mortgage (we haven't been able to recently but this will change in the coming months) in order to reduce our LTV as much as possible, and work my bum off generating income in the business.

I'd love to hear anyone's opinions, thoughts and experiences as currently this is something that's keeping me up at night. The idea of being on a crap variable rate with higher repayments rather than fixing with a decent rate is frustrating, and seems to penalise me for being self employed!

Thank you in advance! :beer:

ACG

£2k a month TURNOVER and you have an employee? Dont mistake turnover for profit - you may find your employee is earning more than you.

As for moving to a new lender, I dont think with 1 years accounts your likely to get anything better than what First Direct are likely to offer you on retention deals.

thenewbee

Yes turnover. I'm a dog walker & have very low expenses, I took on an employee when I reached capacity and couldn't take on any extra dogs - which means my profits & turnover will increase greatly in the next few months & hopefully be on an toward trajectory!

ETA - could you explain what the process would be if we stayed with first direct?

ACG

First Direct do not deal with brokers so not entirely sure but there may be a way of doing a product switch online some how?

thenewbee

ACG wrote: »

First Direct do not deal with brokers so not entirely sure but there may be a way of doing a product switch online some how?

Thanks - their customer service is quite good so I might give them a ring tomorrow to see what the situation would be. I've looked online and they have a good 5 yr fix at 3.8% available for existing customers for 85% LTV which could be achievable for us & would reduce our monthly repayments by £80!

Thanks!

Yorkie1

If you can do so, I'd avoid speaking to them on the phone - and do the switch to a new product online.

They probably won't need to reassess you for affordability if you self-select the new product.

If they speak to you, you risk them viewing the conversation as them providing you with advice about the best product for you - at which point they may well say they need to do a new affordability assessment on you.

thenewbee

Yorkie1 wrote: »

If you can do so, I'd avoid speaking to them on the phone - and do the switch to a new product online.

They probably won't need to reassess you for affordability if you self-select the new product.

If they speak to you, you risk them viewing the conversation as them providing you with advice about the best product for you - at which point they may well say they need to do a new affordability assessment on you.

We're not able to switch products until November, & I'd only be asking about the process involved. Surely that won't be problematic?

Jhoney_2

Do. Not .Call. Them.

They make notes of calls too, so if you do find your self being told they gave you advice and need to do an affordability assessment, they will know in November. Is it worth the risk?

Surely the process can be read online and in any event instructions will be available to proceed when you do it online (if FD do online retention options).

Spangled

First Direct's current SVR is 3.69%, so if rates remain the same until Feb 2016 (when your current deal ends) then you'll be paying less than you are now (4.19%) anyhow if you just go onto the SVR.

Of course, there's no telling what rates will do in that time - and being on a variable SVR is not for everyone. But I think First Direct's SVR is historically pretty good compared to many other lenders (I'm with NatWest and their SVR is 3.99% - so is Nationwide's).

First Direct also have a 3.59% 5-year fix for existing customers with max LTV of 85% - although it comes with a £950 fee, so you'd need to crunch numbers to see if that fee was worthwhile paying or not.

thenewbee

Thanks everyone! I will resist calling. Appreciate everyone's comments I'm a lot less stressed about it all now!