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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Worried about paying my mortgage
I work in the airline industry and have just found out I am going to be made redundant at the end of October. I am currently searching for work – although it’s very early days – so I am currently in limbo.
I have been on furlough and was taking a mortgage holiday. This is also due to end at the same time as I am being made redundant. I don’t have any insurance to cover my repayments and savings are very limited. I have two children and my wife doesn’t work as the children are very young.
What options are open to me?
Answer
I am so sorry to hear about your job – you must be incredibly worried at the moment. The best thing you can do is speak to your mortgage lender now, tell them the situation and ask them what they can do to help.
Lenders are required to be sympathetic, so I am sure they will be willing to work with you to put something in place which will take the pressure off you. I would also suggest that you contact Citizens Advice which will be able to talk to you about other support which may be available. I wish you and your family all the very best.
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Question
Mortgage stress test – what is it?
I have been looking at taking out my first mortgage and have noticed something about mortgage stress tests. Can you explain what this is and how I can make sure I pass this test?
Answer
A stress test is where the lender essentially applies a calculation to your mortgage payments to ensure they would be affordable if interest rates were to increase.
So if, for example, the interest rate you would be paying on your mortgage was 2%, the lender would still want to ensure that the payments would be affordable if you were paying 5% (the stress rate). The reason that lenders do this is to make sure that in the situation interest rates increased and thus, so did your monthly payments, the mortgage would remain affordable to you.
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Question
Using savings to overpay on our mortgage
We have a friend who is a financial adviser and he said savings rates are low at the moment so we would be better off using our savings to pay off the mortgage instead.
It would be good to get a second opinion on this from a mortgage expert’s perspective. However, if we were to overpay on our mortgage, how would be go about this? There are early repayment charges on our mortgage but I don’t expect we will pay it off – merely bring down the loan amount.
We have managed to save £6,000 during the lockdown. Would we be able to use the entire amount to pay down the mortgage or would most lenders prefer we increased our monthly repayments?
Answer
So, from a purely mathematical perspective, if £6,000 in savings earns you £60 per year, but £6,000 paid off your mortgage would save you £150 per year then it would make more sense to pay down the mortgage.
However, I would also suggest that you do not clear your savings out entirely – it’s wise to have some easily accessible money available to you in case of emergencies.
Your mortgage probably allows you to make some form of overpayment each year without incurring a charge, so the best thing to do would be to speak to your lender and ask them what is permissible within the terms of your mortgage contract.
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Question
Change of house – how will this impact my mortgage?
I have got into a bit of a mess with my house purchase. I am buying a home on a new build estate and I am currently going through the conveyancing with a solicitor. I have seen the plans and I am not happy with the position of the house.
The back of the house is north facing and I had wanted a garden which was either west or south facing. I am a first-time buyer and I am going it alone so didn’t realise this when I was viewing as I had so many other things to think about.
I want to go back to the developer to see if I can purchase another plot and the homes in the better plots are more expensive so I would need a bigger loan. Will my lender be able to change my mortgage?
Answer
Buying off-plan certainly does require an amount of imagination when it comes to picturing what you are buying – you aren’t the first person who has done something like this, don’t worry!
There is no immediate reason why you cannot change things with your mortgage lender, although they will need to check that the higher mortgage is still affordable and they also will want to revalue the property – so this won’t be an instant thing.
But it certainly can be done, so I would get on the phone to them and ask them what you need to do to get this sorted.
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