Remortgaging after a reduced salary

Hannimal

I have been offered a job (yay) that I would love to take (yay!). However, it would come with quite a large reduction in salary. Whilst I'd be able to live off the lower salary and undoubtedly enjoy my life just as much as I do now, I am worried about it in terms of my house. I have bought last year and I am on a 5-year-fix. I am worried that at the end of the 5 years, I won't have enough equity to qualify for a mortgage with my new salary. Does this affect remortgaging? 

My plan is that the new job would be a bit of a springboard and after a few years I would be eligible for more senior roles, so in long term this would likely make financially sense as well. However it is risky to assume that, especially in this economy! For now, it would significantly improve my QoL.

AdrianC

Hannimal said:

I have been offered a job (yay) that I would love to take (yay!). However, it would come with quite a large reduction in salary. Whilst I'd be able to live off the lower salary and undoubtedly enjoy my life just as much as I do now, I am worried about it in terms of my house. I have bought last year and I am on a 5-year-fix. I am worried that at the end of the 5 years, I won't have enough equity to qualify for a mortgage with my new salary. Does this affect remortgaging?

Equity won't be your issue - affordability will.

Quite simply, though, nobody knows what the mortgage market will be like in four years time...

SameOldRoundabout

Remortgaging may be an issue. However 4 years is a long way away, and when we had our mortgage renewed (not a remortgage) they simply offered us another deal and did no checks. As long as you’re paying the mortgage it should be okay to just suck up the new deal even if it’s a little higher than a full remortgage but anything could happen with you, jobs or mortgages between now and then. 

Hannimal

Thank you both. This is really helpful. 

I think equity and affordability go hand-in-hand. If I've built up more equity in my property the mortgage I need will be smaller. The other option I am toying with is getting a lodger in and popping all they pay as overpayments toward the mortgage to reduce the amount I need in 4 years' time. 

moneysavinghero

Hannimal said:

Thank you both. This is really helpful. 

I think equity and affordability go hand-in-hand. If I've built up more equity in my property the mortgage I need will be smaller. The other option I am toying with is getting a lodger in and popping all they pay as overpayments toward the mortgage to reduce the amount I need in 4 years' time. 

If you're making the changes to improve your QOL, would taking in a lodger help with this?

Thrugelmir

At the end of the fixed term you simply switch to a new product with your existing lender. There's no need to remortgage. 

Hannimal

Thrugelmir said:

At the end of the fixed term you simply switch to a new product with your existing lender. There's no need to remortgage. 

I am new to this so forgive me for being naive but I thought this was something best avoided that would end up costing much more than a remortgage

theartfullodger

That's what brokers tell you so you can keep paying them lots of fees.

Find out what the rates are.  With lowest ever interest rates likely to be ok.  Find out!  Save loads of work and worry!

Hannimal

The broker I use gets all his income from the lender, I don't pay him and he does a fantastic job  

theartfullodger

Find out the rates!

Your broker is still making money out of your remortgaging.

Good luck

gingercordial

When your fix ends you will have two choices essentially - leaving aside the third choice which is to do nothing and go onto an expensive variable rate, not very MSE.  That is probably what you're thinking of when you say you thought it would cost much more to stay.  

The first is that you ask your current lender what deals they have for you, maybe another fix.  As you will have paid some of the mortgage off perhaps this will be at a lower LTV.  Hopefully they offer you something decent (or no worse than the rest of the market, whatever that's like in 5 years) and you just get moved over to that deal seamlessly.  They don't do new affordability checks as they know you, so to speak.

The second is that you remortgage to a new lender, which comes with all the same checks as getting your initial mortgage did.  It might be worth it if your existing lender isn't offering a competitive deal.  On the other hand if you take into account product fees with a new lender and hassle of the application (and in your case possible lower affordability) then staying with your existing lender might still be the better choice if it's only slightly more expensive.