Mortgage renewal problem

[Fergie87]

Hi everyone,
I am having a few problems with renewing my mortgage and it has me stumped. If there are any mortgage advisors or anyone with experience that can help me it would be appreciated. I will try and explain my situation as clearly as I can.

3 years ago I bought my 1st house at a value of £135k with £114k mortgage + fees which at the time was at a rate of 5.67% over 32 years making payments £640.7 a month. At this point I was earning £29k so the loan was under 4 times my earnings which was no problem.

Fast forward 3 years and my mortgage is now up for renewal. Over the past 3 years I have fully refurbished the house and had it valued at £170000. Today I rang my mortgage company to discuss the new rates and to look at borrowing a further £5k to put new windows in and finish the property. We went through a lot of different rates and I was told that I could borrow at 2.49%. With the extra £5k added on the mortgage the repayments would be £542 a month.

This is where the problems began. A year ago I decided to move careers and start at the bottom doing something I enjoy which consequently means I now earn £20k. The lender has told me not only would I not be viable for the extra loan but that I can not afford my current mortgage. I apparently have to now sit on the variable rate of 3.79% as they can not make me an offer on a new fixed rate mortgage. To say that I am miffed is an understatement, how can I not afford to pay less a month than I do already?

Is there anyone who can give me some sound advice on what I can do to secure a decent mortgage.

Thanks

Fergie87

[Maryben]

I don't think any lender will go more than 5 times income therefore £100,000 max. 3.79% base rate is better than the fixed rate you were on and better than several other lenders base rate.

[vescaegg]

Despite you having more equity and only earning £9k less, you have effectively lost £50k of borrowing ability which you need to get the new mortgage. 5x £20k means you are able to borrow only £100k max.

Your old wage allowed you to borrow up to £150k which was fine because you only needed £114k, but now you need say £120k (more probably around £114k still because you would have paid some off in the last 3 years) and can only 'afford' £100k unfortunately.

But seeing as you have made £35k on making the house worth more, that should get you under £100k borrowing still if you only need £5k more that your original loan. Right? You will be on probably only as good a deal as you were previously but it still should at least get you a mortgage.

Sarnie will be along shortly who should be able to help

Edited by vescaegg on Saturday 27th July 16:47

[Cemesis]

The 3.79% is not as bad as the 32 year term. Good luck with the new career and if things take off, I'd look at overpayments to bring that term down.

[Sarnie]

Fergie87 said:

Hi everyone,
I am having a few problems with renewing my mortgage and it has me stumped. If there are any mortgage advisors or anyone with experience that can help me it would be appreciated. I will try and explain my situation as clearly as I can.

3 years ago I bought my 1st house at a value of £135k with £114k mortgage + fees which at the time was at a rate of 5.67% over 32 years making payments £640.7 a month. At this point I was earning £29k so the loan was under 4 times my earnings which was no problem.

Fast forward 3 years and my mortgage is now up for renewal. Over the past 3 years I have fully refurbished the house and had it valued at £170000. Today I rang my mortgage company to discuss the new rates and to look at borrowing a further £5k to put new windows in and finish the property. We went through a lot of different rates and I was told that I could borrow at 2.49%. With the extra £5k added on the mortgage the repayments would be £542 a month.

This is where the problems began. A year ago I decided to move careers and start at the bottom doing something I enjoy which consequently means I now earn £20k. The lender has told me not only would I not be viable for the extra loan but that I can not afford my current mortgage. I apparently have to now sit on the variable rate of 3.79% as they can not make me an offer on a new fixed rate mortgage. To say that I am miffed is an understatement, how can I not afford to pay less a month than I do already?

Is there anyone who can give me some sound advice on what I can do to secure a decent mortgage.

Thanks

Fergie87

As others have said, 5x income is the absolute max at the moment. It's also worth noting that of the lenders who offer 5x income, most of them only offer it for salaries at circa £30k and above.

The reality is that the decision you've made has impacted your borrowing ability. There's not much point getting annoyed with the lender as they are actually right; if you were applying for your own mortgage today, you wouldn't get it.

Also, as others have also said, the 3.79% SVR is as low as you can get, and as your payments will have reduced; OVERPAY THE DIFFERENCE AND AS MUCH EXTRA AS YOU CAN AFFORD.

[Fergie87]

Sarnie said:

As others have said, 5x income is the absolute max at the moment. It's also worth noting that of the lenders who offer 5x income, most of them only offer it for salaries at circa £30k and above.

The reality is that the decision you've made has impacted your borrowing ability. There's not much point getting annoyed with the lender as they are actually right; if you were applying for your own mortgage today, you wouldn't get it.

Also, as others have also said, the 3.79% SVR is as low as you can get, and as your payments will have reduced; OVERPAY THE DIFFERENCE AND AS MUCH EXTRA AS YOU CAN AFFORD.

Thanks for the reply. I thought this might be the case was just hoping there would be something out there that I had missed. It's just strange that I have been paying £640 a month for 3 years and I am now being told I can't afford less.

I understand that lenders have to abide by guidelines and the limits within them. I just thought that a decent ltv and credit history could have helped me.

As has been said the 3.79% is still considerably les than I am paying now so I can't really complain.

[cossy400]

Would the less your paying now be enough to cover a loan as such to get the windows done?

Least then you d still get what you wanted, as in the windows done, house finished etc.