Help - Remortgaging

Sazzlelou_2

Hi,

Me and my partner have had our mortgage for nearly 2 years with HSBC. We were first time buyers and are currently on a homestart mortgage which means we are paying interest only for 3 years and we're on a fixed rate for 2 years. Our fixed rate is up in December. I'm totally panicking about it for many reasons! First of all our circumstances are changing - I am leaving my job to do an NHS degree course - going from a very good wage to NHS bursary!! This was all decided before the credit crunch (knowing at the time we could afford it) and now I'm so so worried that we are going to struggle. We had a 100% mortgage when we first took the mortgage out and having paid interest only for 2 years haven't paid any of that off. Although currently houses the same as ours in our street are going for 5% more than we paid (meaning we would currently have 95% LTV) I'm really worried that this will change fairly soon and we will be in a negative equity situation. We have been to see HSBC and they said they couldn't do anything for us to pre-empt the situation. In fact they advised us to use our savings to pay our mortgage and then go and see them when we were at a point where we were going to default on our payments to see what they could do for us!!!!

Basically I just wondered if anyone could advise -we want a 3 or 5 year fixed rate mortgage but it looks like most deals with any provider at the moment want you to have at least 90% LTV is this really the case? Are we really going to be stuck going onto the SVR repayment (pushing our payments up by around £300 when we can least afford it)? We are happy to pay a fee (we have savings) or even pay the early repayment fee with HSBC if we can change to a fixed rate with another provider now but I don't know what our options are with our current LTV. I start my course in September and ideally don't want to go into this not knowing what our mortgage payments are going to be. Worried that if we leave it too late I'll be a student earning very little and we won't be able to move to another provider to get a mortgage for what we need on my partners wage alone and also that house prices will fall in the meantime. But as our rate isn't up until December I really think we are stuck.

I would really appreciate any advice anyone can give us. Thank you!!

MarkyMarkD

I am not sure I quite understand some of your logic.

When you say that you knew when you made the decision to leave your job that "you could afford it", how do you mean that you could afford it?

Do you mean that your joint income will still be enough to obtain another mortgage? In which case, what has changed?

Or do you mean that you expected to be able to meet the repayments demanded?

HSBC offer some very competitive deals at the moment. I doubt that they would refuse to allow you access to these, irrespective of your LTV, as you are existing borrowers, but I am willing to be proved wrong on that.

I think that switching lenders, either now (incurring the penalty) or later is unlikely to be cost-effective or even possible given your reduced income in a few months' time.

neas

its hard to get a 95% mortgage now (90% is easier).

Couple questions
1. What rate are you fixed at?
2. What did you buy the house for?... I'm guessing because you are interest only the mortgage is for exactly the amount you purchased for?
3. Did you originally get a 95%, 100%, 90%, 125% mortgage?
4. Do you have any savings.... additional income saved during the interest only time
5. Could you cancel the NHS thing?

Just quick questions to aid other posters.

Ms_Brush

I would personally make an appointment with an HSBC mortgage adviser. It is not a good time to remortgage, even less so if your income is about to drop and definately a bad move to change lenders whilst you have a redemption penalty in place.

I'm on an HSBC homestart mortgage as well (for different reasons) and i have a higher LTV - think its about 65%.

Nonetheless, when I took out my current mortgage I was temping on a much lower salary than my previous job (made redundant) and was 1/2 way through a messy divorce. This was before the credit crunch kicked in and my options were limited because of my situation. However, I needed to remortgage for more money and did not have a secure job and 3.5 x income was not even close to my old mortgage at that point. HSBC were fantastic and I achieved everything I needed to and am about to change part of my loan back to repayment (2 years early).

My point is - HSBC will look at AFFORDABILITY not Income multiples. On the assumption that you are paying your mortgage in full now and have no arrears, they are very likely to take a look at your future situation (on your bursary income), assess affordability, review your options and line you up with a new fixed rate when your current rate finishes.

Do this asap, and then get on with your new career with the NHS. Good on you for having the courage to follow your aspirations, and not staying put just because of money!

MarkyMarkD

neas The OP said:

We had a 100% mortgage when we first took the mortgage out and having paid interest only for 2 years haven't paid any of that off.

which answers 2 of your questions.

Sazzlelou_2

In answer to your questions below:

"When you say that you knew when you made the decision to leave your job that "you could afford it", how do you mean that you could afford it?"
I mean that we looked at our entire budget based on my partners wage and my bursary and cut everything down and worked out that we could afford our mortgage on our current rate and even a bit higher. What has changed is the credit crunch - fixed rates are much higher, no lenders are doing 100% morgages, we would not be able to stay on interest only due to our LTV.


Couple questions
1. What rate are you fixed at? Currently 5.4%
2. What did you buy the house for?... I'm guessing because you are interest only the mortgage is for exactly the amount you purchased for? £135000.
3. Did you originally get a 95%, 100%, 90%, 125% mortgage? 100%
4. Do you have any savings.... additional income saved during the interest only time? Yes we have savings and we have paid off all other debts. However, ideally we don't want to have to be paying the mortgage off with these savings, they are specifically there for emergencies such as our cars breaking (which is likely to happen during the 3 years of my course)
5. Could you cancel the NHS thing? Yes I could cancel it - but it would be so disappointing to have to do this when I have worked so hard for my place (around 800 applicants for 30 places at my chosen institution). I am currently working 2 jobs around 50 hours a week so we can save as much money as possible to make sure we have some savings behind us. It would be so upsetting to not be able to do this because no lender can make our mortgage affordable for 3 years - we are not being unreasonable we could afford repayments of up to £900 per month at a push but I can't even see us being able to get that at the moment.

Sazzlelou_2

Also - thank you Ms Brush

"Do this asap, and then get on with your new career with the NHS. Good on you for having the courage to follow your aspirations, and not staying put just because of money!"

Its nice to have a nice comment. I sometimes feel so anxious about this all that I'm worried its not going to be worth going through all this.

However, we have already been to see HSBC and they were no help at all, they didn't look at what we could afford and in fact the advice they gave us was that when we go onto repayment on the SVR use our savings to pay the mortgage until they run out and then come and see them when we are at a point when we are going to default on our payments and they will see about putting us on interest only. I think that is really irresponsible advice personally and its made me feel so much worse about the situation because now I'm really thinking that they won't let us have a new fixed rate because of our LTV situation. Does anyone know? You seem to have to have 90% equity to get a fixed rate, which seems ridiculous to me! As I have said before, we are happy to pay a product fee we just want to know what our payments will be for the next 3 years. I was very disappointed with how unhelpful they are. They will see us again in December when our current fixed rate is up but by that point I'll be on my course so unable to go to another lender if they can't do anything for us.

jigsawscott

Hi Sazzlelou

You situation is very similiar to my own current. 2 yrs ago my partner and I took out a 100% Homestart mortgage with HSBC @ a fixed rate of 4.79%. The property need a lot of work and we opted to spend the money on this instead of paying a deposit. Which meant that we were able to build up some equity through this work. We also overpaid by 20% every month.

My partner gives up work in September to go study and our fixed rate ended this month. After looking at all the rates and fees everyone is charging. We (rightly or wrongly) chose to go with the HSBC rate matcher. This incurred a rather hefty fee (more than double the usual fees) but meant we would have another 2 yrs with only a 4.79% rate. IE: No changes to our monthly payments. The reason for this choice was it allows us to succesfully budget while my partner goes back studying.

The fee for the rate matcher vaires depending on the amount of your mortgage/interest rate and term of mortgage. But if you work out the actual cost of the period of the fixed rate it may work out as it did for us.

GOOD LUCK - and as I told my partner, don't cancel the studying. If you want to change your career - go for it!

homer_j_3

The issues that you have are:

Your current income currently supports your debt. You worked on the basis that you would be able to remortgage and now you cannot.

The likelihood is that your home will be worth less also than when you bought it in the current market.

HSBC may not be giving you the answer that you want but what they are saying is that they are not prepared to help whilst you have savings. Why would they?

I think there are 3 options open to you.

Option 1: Do not do the course and keep your income as it is so you do not go into financial hardship.

Option 2: Do the course and try and find a part time job that pays you £300 a month to cover the increase.

Option 3: Sell the property, use the savings to cover the shortfall and go into rented. That presumes rent would be cheaper than your mortgage at the moment?

Clearly, you should check with the course providers whether you are entitled to any more financial assistance and maybe you could look at what you are spending to reduce your outgoings? Cancel sky, review your utilities, review your telephone/broadband. Look at your transport costs, can you get a cheaper way to work etc. Can you shop at a different supermarket?

Sazzlelou_2

Unfortunately we can't do the rate matcher - which would have been perfect for us because our fixed rate doesn't end until December and at the moment its only possible if your mortgage ends before the end of August (not sure how long they are going to keep extending this as it was originally June). We are happy to pay a high product fee for the peace of mind.

Is it really the case then that we won't be able to get another fixed rate? Even with our current lender because of the LTV? It doesn't make sense to me - if we are paying for the product and it means we can afford our repayments?

homer_j_3

You are looking at monthly cost, which is understandable but may put you back slightly in the medium- longer term.

Are you able to do any of the suggestions that I have made?