Interest Only Question

[Labbetts]

I'm on a Barclays +0.18% Lifetime tracker (interest only) and looking for a top up.
Since taking out the mortgage my circumstances have changed, i've gone from being well salaried to running my own business.

Apparently i'm still within my limits for borrowing more, equity is great (30-40% LTV) but paranoia is setting in around the affordability questions, and whether they'll use this application as an excuse to flip my current agreement over to repayment, or even worse, a deal that isn't anywhere near as good.

Reason being, i've got the sense they've begrudged my current deal for many years. When the markets collapsed they became insanely cheap. Good for me, but letter after letter kept arriving trying to entice me off that deal with alternative rates, all of which were worse in the long run.

I make small over payments every month, but as i'm working my way up the property ladder i'm not in any hurry to clear this debt (it's cheap) i'd would rather save the cash and pay off in bulk if i had to.

Alternatively, anyone know a good mortgage broker?

[Labbetts]

Sarnie said:

They can't make you redeem your current rate or make you change to repayment.

However if you want something from them (a further advance) they could request something of you (redeem the current rate) which could force your hand to move away from them if you really need the money.

How long have you been self-employed?

Business has been going for 3 and a half years chap. Although it's a relatively new company it's in good health.
My concern came about when the first person at Barclays (phone op) said that you needed to earn over £75k to qualify for interest only. Which I do so no worry there.

Made me wonder whether there were other criteria that might force my hand, especially as my circumstances shifted from standard salary to business ownership.

I don't really care if they decline a further payment, providing it doesn't screw my existing agreement in the meantime.

Thanks for the advice BTW. Appreciated.

[Labbetts]

fantastic. Thank you sir.
All makes sense.
Does affordability or business ownership (self employment ) have a big bearing on this? Since the change a few years ago.

[Labbetts]

Sarnie said:

Yep, affordability is always now going to be a big issue for lenders...

Sarnie, one last question fella

During these affordability questions they look at the tolerance right? (6.99% with Woolwich) Do they look at where you could make cutbacks to pay that? Or do they require current expenditure to have that kind of buffer.

ie: At the moment i have around £1k spare a month, that could be £2.3k if i was to make several dramatic cutbacks.

[Labbetts]

Sarnie said:

They will look at your current situation primarily and then where any changes could plausibly be made. Eg if you were paying £500pm on childcare currently, how likely is it that you could actually drop this amount?

If you are currently spending £500pm on a hobby for example, that is something that you could obviously cut back on immediately without it affecting your life.

Good luck!

cool. thanks so much. I could claw back £1k easily enough.
Is affordability calculated on current salary?

[Labbetts]

Nigel_O said:

I agree on the first point, but I'm not so sure about the second

Lenders are duty-bound to ensure that interest-only borrowers have a robust repayment plan - where such a plan cannot be demonstrated, they have the right to put the account onto a repayment basis

I know this from first-hand experience - I had repayment plans for my offset mortgage with One Account, but they weren't "robust" enough for the lender, so they put me onto a repayment basis. I paid the mortgage off a month later.....

Yep agreed.
I have my house. Mortgage is currently 25% of the value - and equity well exceeds the minimum £300k