Remortgage September 2023 - what should I focus on?

Saria

So our 5 year mortgage deal will finish in September next year. We are currently on 2.19%, but obviously that will go up a lot once we have to remortgage. 
Our payments are already quite high and we will be paying until we retire, so I am dreading the interest hike next year. I am also worried about what deals we might receive. I am trying to figure out what we should be working on right now to try and get the best deals possible next year. Any advice is very much appreciated!

At the moment, we have a fair amount of credit card debt that we are slowly paying off (on 0% balance transfer cards so no interest for now). We will have hopefully paid off the majority of this by next year, but there will still be some left. 

When remortgaging, would it be best to have as little credit card debt as possible? Or should we currently be focusing on (slightly) overpaying our mortgage each month as our rate is still low? We haven't really overpaid before as we were paying off debt/trying to save. 

I sadly also lost my job last year and went into self-employment, which I worry will affect our chances of getting decent deals. I did not earn much last year, but am doing better this year (similar to when I was employed, possibly even slightly more in earnings). What do I need to do in regards to this and applying for a mortgage next year? Will it complicate things?


I am trying to figure out what is best at the moment, saving, overpaying, or paying off the credit cards. I want our credit score to look as good as possible of course. 
Thanks for any tips and advice!

CookieRose

Hi - I'm afraid I can't give much advice, but what I can suggest - is contact your current lender now and find out about what the redemption fee would be.  This is normally a percentage of the outstanding loan amount.  It's different depending on lender, but mine, for example, is 1% to release in the final year of my fixed term - I'm also currently in a fix until September 2023.

I spoke to my lender yesterday and I've now got an illustration based on TODAY'S product rates (which for me is 5.39%), which is valid for 120 days (so until mid February 2023).  I will have to pay a product fee (£499) and the redemption fee if I take up the new offer.  The advice is to continue with my current fix (1.6%) until just before the offer expires, to make the most of my current much lower rate.  I would recommend you have a similar conversation with the current lender, they may not need to do affordability checks.  

I'll be watching what the rates do for the next few months.  If they start to drop, then I can call and get a new illustration done which again will restart the 120 day timeframe.  If things don't improve, then at least I have the option to take the best rate available at today's rates.

Wishing you all the best, I know how stressful it is 

K_S

@saria If you are already with a mainstream lender, then you should always have the fallback option of a product-switch/product-transfer/rate-switch - staying with them and simply selecting a new fix. This usually involves no income/credit/affordability checks and no underwriting. As you'll be limited to one lender, you may not get the "best" rate in the whole of market but if it's a mainstream lender it's not going to be too far off.

If you are looking to access the whole market (by remortgaging to a new lender), that's when you self-employment, background debt, etc. comes into the picture.

Saria said:

So our 5 year mortgage deal will finish in September next year. We are currently on 2.19%, but obviously that will go up a lot once we have to remortgage. 
Our payments are already quite high and we will be paying until we retire, so I am dreading the interest hike next year. I am also worried about what deals we might receive. I am trying to figure out what we should be working on right now to try and get the best deals possible next year. Any advice is very much appreciated!

At the moment, we have a fair amount of credit card debt that we are slowly paying off (on 0% balance transfer cards so no interest for now). We will have hopefully paid off the majority of this by next year, but there will still be some left. 

When remortgaging, would it be best to have as little credit card debt as possible? Or should we currently be focusing on (slightly) overpaying our mortgage each month as our rate is still low? We haven't really overpaid before as we were paying off debt/trying to save. 

I sadly also lost my job last year and went into self-employment, which I worry will affect our chances of getting decent deals. I did not earn much last year, but am doing better this year (similar to when I was employed, possibly even slightly more in earnings). What do I need to do in regards to this and applying for a mortgage next year? Will it complicate things?


I am trying to figure out what is best at the moment, saving, overpaying, or paying off the credit cards. I want our credit score to look as good as possible of course. 
Thanks for any tips and advice!

 

Saria

CookieRose said:

Hi - I'm afraid I can't give much advice, but what I can suggest - is contact your current lender now and find out about what the redemption fee would be.  This is normally a percentage of the outstanding loan amount.  It's different depending on lender, but mine, for example, is 1% to release in the final year of my fixed term - I'm also currently in a fix until September 2023.

I spoke to my lender yesterday and I've now got an illustration based on TODAY'S product rates (which for me is 5.39%), which is valid for 120 days (so until mid February 2023).  I will have to pay a product fee (£499) and the redemption fee if I take up the new offer.  The advice is to continue with my current fix (1.6%) until just before the offer expires, to make the most of my current much lower rate.  I would recommend you have a similar conversation with the current lender, they may not need to do affordability checks.  

I'll be watching what the rates do for the next few months.  If they start to drop, then I can call and get a new illustration done which again will restart the 120 day timeframe.  If things don't improve, then at least I have the option to take the best rate available at today's rates.

Wishing you all the best, I know how stressful it is 

Thank you. I think stopping our current deal early isn't an option because of the cost involved, I think it would be a few thousand pounds for the Early Repayment Fee, which I simply don't have.  

Good luck with whatever you decide to do with your mortgage! It feels like a bit of a minefield right now, doesn't it?

K_S said:

@saria If you are already with a mainstream lender, then you should always have the fallback option of a product-switch/product-transfer/rate-switch - staying with them and simply selecting a new fix. This usually involves no income/credit/affordability checks and no underwriting. As you'll be limited to one lender, you may not get the "best" rate in the whole of market but if it's a mainstream lender it's not going to be too far off.

If you are looking to access the whole market (by remortgaging to a new lender), that's when you self-employment, background debt, etc. comes into the picture.
 

Thank you for the advice. We are currently with First Direct, I'm not sure if they are considered mainstream haha. 
So if I stick with them, will they not require anything from us at all, like a new valuation of the house, income/expenses etc.?

If we do want to switch to a different lender, is it going to be more difficult because of my self-employment? Or does that not matter as long as I can show a (fairly) steady income over the past year?

CookieRose

The early repayment/redemption fee can be added onto the existing loan, so you don't need to find it in order to enact/pay it, if that makes sense?  Call the lender anyway, they're your best option right now, as K_S says, unlikely to need to go through affordability checks, and you'll get access to the current rates, and no immediate obligation to make a decision. 

Damage limitation, safety blanket, etc, for what they're worth right now eh?! Yikes.

simon_or

Saria said:

CookieRose said:

Hi - I'm afraid I can't give much advice, but what I can suggest - is contact your current lender now and find out about what the redemption fee would be.  This is normally a percentage of the outstanding loan amount.  It's different depending on lender, but mine, for example, is 1% to release in the final year of my fixed term - I'm also currently in a fix until September 2023.

I spoke to my lender yesterday and I've now got an illustration based on TODAY'S product rates (which for me is 5.39%), which is valid for 120 days (so until mid February 2023).  I will have to pay a product fee (£499) and the redemption fee if I take up the new offer.  The advice is to continue with my current fix (1.6%) until just before the offer expires, to make the most of my current much lower rate.  I would recommend you have a similar conversation with the current lender, they may not need to do affordability checks.  

I'll be watching what the rates do for the next few months.  If they start to drop, then I can call and get a new illustration done which again will restart the 120 day timeframe.  If things don't improve, then at least I have the option to take the best rate available at today's rates.

Wishing you all the best, I know how stressful it is 

Thank you. I think stopping our current deal early isn't an option because of the cost involved, I think it would be a few thousand pounds for the Early Repayment Fee, which I simply don't have.  

Good luck with whatever you decide to do with your mortgage! It feels like a bit of a minefield right now, doesn't it?

K_S said:

@saria If you are already with a mainstream lender, then you should always have the fallback option of a product-switch/product-transfer/rate-switch - staying with them and simply selecting a new fix. This usually involves no income/credit/affordability checks and no underwriting. As you'll be limited to one lender, you may not get the "best" rate in the whole of market but if it's a mainstream lender it's not going to be too far off.

If you are looking to access the whole market (by remortgaging to a new lender), that's when you self-employment, background debt, etc. comes into the picture.
 

Thank you for the advice. We are currently with First Direct, I'm not sure if they are considered mainstream haha. 
So if I stick with them, will they not require anything from us at all, like a new valuation of the house, income/expenses etc.?

If we do want to switch to a different lender, is it going to be more difficult because of my self-employment? Or does that not matter as long as I can show a (fairly) steady income over the past year?

First direct is owned by HSBC, so definitely mainstream. If you're staying with them they won't need any documents or checks.

Every bank has different rules for self employed applicants (I know from experience as someone who has employed, self employed and had adverse) so there's no one rule. If you have 2 full years of accounts, you can expect most banks to consider the average of your last 2 years net profit. If you only have one year of accounts, it gets much more difficult.

Unless you want to get the absolutely lowest rate out there and have a good broker, if you're newly self employed I'd probably just stick with First Direct this time.