How to split "The Iceberg"....?

Hi all. So, in brief we have a large mortgage. Like, big (£800k). We call it "The Iceberg".
We pay it each month standing on our heads, but that's not the point here.
The point is, it's big and crucially it's a giant chunk of debt with one lending house.
This makes me nervous for multiple reasons:
  • a) we can't go through the affordability checks that we went through initially to acquire said loan - we'd fail outright
  • b) ergo we are mortgage prisoners currently to the one lender
  • c) the mortgage broker told us recently that things have tightened up and what we did back in the day simply would not work today
  • d) if the current lender has an issue with us for whatever reason (stranger things have happened) and decides to recall the loan, we're f*cked
So - what I want to do is somehow break up this iceberg in to more manageable chunks, and spread our debt across different lenders.
Ideally I want to bash the central mortgage down to £500k within 3 years. We can pay off c. £80k per year without penalties. In addition to mortgage repayments which chip off £1k per month or so, I can also make payments from savings of about £10k per year. So across 3 years that's £90k accounted for out of £300k.
We have no other significant debt, and very high credit scores across both of us.
Ultimately I'd just rather pay a bit more interest to owe multiple parties rather than one.
Any thoughts or advice very very much appreciated!
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Comments

  • longway2go
    longway2go Posts: 1,006
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    I wish you luck. Personally I have never heard of a lender recalling a loan? 
    Mortgage Aug 2019 161,000 :eek::eek::eek:Nov 2019 156,500:T Jan 2020 153,122:T, Apr 2020 149,500, Apr2021 139, 675, Oct 2021 136,823, Dec 2021 136,120🙂EF 0/12,000 (0%)😕 (5062.44 was ERC), Jan 2023 128,650. Our Mortgage is never going to be as high as it is today. :jOnwards and downwards to a better life for our family. :jJust keep swimming
  • Good luck!

    Yes I would also be surprised if a lender recalled a loan that had been repaid on time each month.

    That being said, I can understand why you want to get the balance down. 

    I’d suggest overpaying/saving as much as possible and then consulting a mortgage broker to see what they suggest.

    Good luck! 😀
    MFW
    1 Nov 2020 @ 
    £42,204 to go in 34 months! (£1,241 a month)
    1 September 2021 £17,500 to go in 24 months (£729 a month)
    MFW 2021 #3 - £24,148/ £17,500 🙌


  • Thanks guys however I more had in mind a macro version of taking out a £25k personal loan, clearing that off the mortgage in bulk, then steadily paying it off as if it were the mortgage. I mean, the debt is the debt, right? The key to what I want to do is to split who I owe it to because I'm uncomfortable being so beholden to one lender.
    Maybe a simpler question is: how can I take out multiple personal loans simultaneously on at least vaguely reasonable interest terms? At what point do they all say: "no more, no more loans for you".
  • South_coast
    South_coast Posts: 4,795
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    Personal loans are likely to be at a higher interest rate than your mortgage, so this would cost you more overall. You could do a money transfer on a 0% credit card, but there will be fees associated with this. I'm not really sure why you want to split it out to different lenders, the amount owed will be the same regardless. Plus, if you want to remortgage in future, having multiple loans will look worse to a lender than just one sole product in your mortgage, however large that one product is
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • edinburgher
    edinburgher Posts: 13,423
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    Dear Moe, I am very surprised to see you looking alive and well after recent events!
    As others have said, great idea to pay down the mortgage in general, but no real logic to owing money to multiple lenders. The fact that you would fail affordability checks today suggests that, on balance, you maybe can't afford it. This might not be the case and Lord knows, there are a million and one cunning plans that have made their way through the pages of this forum by which people have managed quite successfully to pay off massive loans that they couldn't afford on paper.
    If I were you, I would focus on making sure that the basics were in place to continue to be able to afford the large monthly repayments required should the worst happen (job loss or worse). Probably a good time to stress test any emergency fund you have, look into unemployment insurance, life insurance etc. if these aren't covered already (after all, you're in a risky line of work).
    You are just as ****** owing £500k to one lender versus £800k if, for any reason, you can no longer afford it.
    Out of interest, do you know what you could afford according to tightened up affordability criteria? Getting to this level will be crucial in terms of getting out of this guddle. Also, roughly how old are you? Old enough to access pension lump sums etc. any time soon? Not saying that's a good idea, just noodling...
  • Dear Moe, I am very surprised to see you looking alive and well after recent events!
    As others have said, great idea to pay down the mortgage in general, but no real logic to owing money to multiple lenders. The fact that you would fail affordability checks today suggests that, on balance, you maybe can't afford it. This might not be the case and Lord knows, there are a million and one cunning plans that have made their way through the pages of this forum by which people have managed quite successfully to pay off massive loans that they couldn't afford on paper.
    If I were you, I would focus on making sure that the basics were in place to continue to be able to afford the large monthly repayments required should the worst happen (job loss or worse). Probably a good time to stress test any emergency fund you have, look into unemployment insurance, life insurance etc. if these aren't covered already (after all, you're in a risky line of work).
    You are just as ****** owing £500k to one lender versus £800k if, for any reason, you can no longer afford it.
    Out of interest, do you know what you could afford according to tightened up affordability criteria? Getting to this level will be crucial in terms of getting out of this guddle. Also, roughly how old are you? Old enough to access pension lump sums etc. any time soon? Not saying that's a good idea, just noodling...
    This!! I can’t see the logic for splitting the debt and think you’d be better off repaying as much as you can and ensuring your interest rates are as low as possible.

    Maybe I’d feel differently if it was my iceberg but I doubt it 🤔


    MFW
    1 Nov 2020 @ 
    £42,204 to go in 34 months! (£1,241 a month)
    1 September 2021 £17,500 to go in 24 months (£729 a month)
    MFW 2021 #3 - £24,148/ £17,500 🙌


  • Thanks and yes I know, the eye's a bit sore but the casino's doing ok, nobody's skimming off the top (although Fredo's still up to his old tricks), and my legs feel better for the deep tissue!
    I take your points but the hard truth of it is that while the debt is with one lender, we're wedded to them. We're mortgage prisoners. Rubber stamp it. That one lender determines everything, they hold all the cards. And that can't by definition be a positive thing.
    I'd disagree with the notion you're just as f**ked owing 500 to one lender, 100 to another, and 200 to another than 800 to one. Clearly, if you can't afford it all, then you're screwed across the board but that's stating the obvious and isn't what's up for debate here. Genuinely, whether I can afford the repayments is the least of my worries. The reason the spread debt is smarter in my view is because if the lender one day decides they're even going to require basic re-mortgagers to pass extremely strict affordability checks then...we're screwed. However if the debt is spread then we might live to fight another day, or switch to another lender etc
    And whilst it's true personal debt is taken in to account during affordability checks my understanding (and I might be wrong) is that factors like personal debt/dependents/life overheads etc are secondary factors compared to whether the bank thinks your actual cold, hard earning can support the repayments. Also, let's be honest, these checks are full-proof when it comes to income because the onus is on YOU to prove you can earn the required sums, whereas with debts/dependents etc the onus rests on THEM to discover if you "forgot" to include a certain loan or credit card or dependent on the form. Do you know what I mean? Maybe I have to just realise that a Tesco loan of £40k is the best I can do, but as I said I'd much rather knock this central iceberg down to 500, pay a bit more interest in the process, but not be so in the pocket of one lender....
    PS. one final point - the lower your LTV, the more products at better rates are usually available to you. This isn't such a factor now with rates so low buuuut...none of us have a crystal ball. It might be a factor in the future.
  • couth
    couth Posts: 60
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    edited 22 November 2020 at 8:33AM
    It seems to me like you are trying to make up a problem that you don't have, then you are trying to find a solution for it. It reminds me a bit of 'disease mongering'... that idea that pharma companies pay researchers to discover/define new diseases, then they find a cure for these and sell it to the masses for profit. Except you're experimenting on yourself and on your family. 

    All of us have mortgages, some larger, some smaller - and most of us are with a single lender. We can't live in perpetual fear that the lender will recall it... we have enough stress factors as it is, with c-19 (and Brexit, for some) being the biggest atm. 

    Good luck with paying down the mortgage, whichever way you decide to go about it.
  • Well, @couth to keep The Godfather analogy going it's a bit like that scene where they discuss whether to get in to narco, or not. And Tom says: "it's no big deal now and we're in the strongest position currently....but ten years from now...".

    Sure some of the scenarios I've listed above are seriously, seriously unlikely. But others aren't so far fetched (ie. lenders - trying to legally recall loans or get them off their books - decide to force even standard re-mortgagers to pass strict, current, present-day affordability checks knowing full well some borrowers will fail them). Is that particularly wild as a scenario? Not really. It could happen. And if you can't switch to another lender, then what next....??

    You madly scramble around barely sleeping and trying to scrape together enough cash to clear enough debt to pass the affordability check, or you're chock out of luck and have to sell. Neither scenario sounds like a hoot to me. I'd rather intercept it, if it's even possible. 
  • longway2go
    longway2go Posts: 1,006
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    But you have a contract with terms and conditions so I don't see how it can happen.... If you think it will happen in say 10 years and the mortgage is less expensive than a loan then it makes sense to stick to that and clear it down. 
    Mortgage Aug 2019 161,000 :eek::eek::eek:Nov 2019 156,500:T Jan 2020 153,122:T, Apr 2020 149,500, Apr2021 139, 675, Oct 2021 136,823, Dec 2021 136,120🙂EF 0/12,000 (0%)😕 (5062.44 was ERC), Jan 2023 128,650. Our Mortgage is never going to be as high as it is today. :jOnwards and downwards to a better life for our family. :jJust keep swimming
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