Remortgaging whilst using arranged overdraft

missambo

Hi,

I live alone and took my first mortgage out 4 years ago and at the time I was employed. Since then I have gone self employed and the first couple of years I wasn't making much so was relying on my overdraft, constantly. I've started to get more work and earn more, however, I'm still stuck in my overdraft, max is £900 when all bills come out! I've done a financial plan and hope to be out of it fully by this September. I also have credit card debt of £1600 which I'm trying my absolute best to clear.

I took a loan out last year (only personal loan I have) to clear my overdraft, but unfortunately didn't last long as work went quiet and I had large things to pay for, so eventually went back into the overdraft.

I'm due to remortgage September 2025 and I'm terrified I'm going to be refused because of my constant arranged overdraft usage. 

I truly believe I will end up earning enough to keep me out of it, but it just scares me that the bank won't see it that way.

I'm aware I've got until early next year to start the remortgaging process, but this is giving me so much anxiety I need to get an idea of whether or not banks will accept me.

I've read a few articles where they seem to contradict each other so thought I'd post in here in the hopes someone has had the same experience as myself and can tell me what their outcome was.

WellKnownSid

What do you mean "due to remortgage in September 2025"?  You don't have to remortgage you know...

If you are coming off a fixed rate, then you can just switch products with the same provider which does not normally require any further checks.

I've applied for two mortgages as self-employed, neither was straightforward.

missambo

Sorry, I'm completely new to this and don't fully understand the remortgaging process. If I were to stay with the same provider, would I then not be placed on their variable rate? Apologies if this is a daft question.

WellKnownSid

missambo said:

Sorry, I'm completely new to this and don't fully understand the remortgaging process. If I were to stay with the same provider, would I then not be placed on their variable rate? Apologies if this is a daft question.

If you do nothing at the end of the fixed rate, you will be on whatever rate you agreed to when you got your mortgage four years ago.  This might be base rate + a number.

Your provider will also have a number of fixed rates that you can switch to.  It'll likely be higher than four years ago - but still better than the above rate.  You'll normally be able to switch to these without any questions asked - just a box tick on their website, and the application fee if applicable.

missambo

When I looked at my mortgage letter it did have a variable rate on it, however it did state it would likely change.

However, this brings me hope! I've been stressing so hard over this, thank you for your responses!

WellKnownSid

Yep I would stop stressing - you should be able to lock in the new deals up to six months in advance and I believe the rules are changing allowing you to switch again if a significantly better deal comes along before you actually make the first switch.

Keep focused on your business though and maintain that discipline of paying back on loans or overdraft where you can this just gives you more options and breathing space.

Brie

Sounds like a bit of budgeting help might make life easier.  If you pop over to the debt free forum you'll find the statement of accounts (SOA) which you can fill out to see how much money you normally have every month.  As a self employed person you could use your monthly average income or your worst month - your choice really.  You could then post it on to the debt free forum to get some advice on how to tidy up your situation or you could simply keep it for your own use.

The thing to remember about remortgaging is that a new bank will look at your ongoing income as well as your standard expenses and how well you are servicing your debts.  So being in your overdraft is not really a positive thing but having loans, credit cards or even the overdraft don't have to be disasters as long as you can evidence that your income is sufficient to pay for all that available credit plus your mortgage. 

Your own bank will have very good insight into how you manage your money but a different bank will be dependent on what's showing on your credit reports.  Do ensure the easy positives are there - like being registered to vote.