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  • Mortgages & Finance

    Remortgaging In The Current Climate...

    Many people will find that they need to seek professional mortgage advice in order to obtain a remortgage. This may not have been the case five or so years ago when mortgages were easier to obtain as more money was available from the banks and building societies. These days, due to what is known as the ‘credit crunch’, there are less mortgages around resulting in mortgage advice becoming more valuable than ever before.
    The on-line encyclopedia Wikipedia explains a credit crunch as follows. … “There are a number of reasons why banks may suddenly increase the costs of borrowing or make borrowing more difficult. This may be due to an anticipated decline in value of the collateral used by the banks when issuing loans, or even an increased perception of risk regarding the solvency of other banks within the banking system. It may be due to a change in monetary conditions (for example, where the central bank suddenly and unexpectedly raises interest rates or reserve requirements) …..
    Currently the UK is experiencing all of the above. It may well be that the on-going credit crunch may force the UK into a recession. Many economic pundits are attempting to predict when and if this will happen, but all concur that unless the oil price moderates, the Bank of England cuts rates, or the interest rate banks charge each other to borrow large amounts of money from each other comes down.
    There are many people who are keen to remortgage now who are finding that they cannot, due to the above problems. For them it’s a difficult situation in that they are now susceptible to their existing lenders’ uncompetitive rates.
    Those facing the biggest difficulties will be those coming off a two-year fixed rate (which were priced competitively at the time), or those who took out a mortgage with a high loan to value ratio. These groups may find it tricky to remortgage, along with those who need to borrow at high income multiples as lending criteria have tightened so much.
    The most important thing is to remember that you are not alone. There are plenty of people who took out mortgages with a high loan to value ratio who will be less than pleased as house prices fall.
    Our Top 10 tips when remortgaging….
    1. Until early 2008, anyone could arrange a mortgage, but today it’s the job of a professional who specialises in mortgages. Nationwide announced recently that they are now moving to quality rather than quantity in deciding which mortgage advisers they work with.
    2. A specialist mortgage adviser will know exactly how to position your case with a lender and will invariably have extra clout because of their collective buying power.
    3. Ensure that you look at any mortgage offered in its entirety. The interest rate is just one part of the deal as other add-on fees could prove expensive. They are often added onto the loan which is expensive when the interest is spread over the whole mortgage term.
    4. Watch out for being tied into your mortgage beyond the normal term at a higher rate. It’s a common lender ploy that catches many people out.
    5. Ask your mortgage adviser to negotiate with your existing lender. If a lender knows you might take your mortgage elsewhere they may agree better terms with you.
    6. If you can’t afford your mortgage payments, act straight away and talk to a mortgage adviser or your mortgage lender. You may feel better for seeking advice.
    7. Your lender or a mortgage adviser will be happy to help and will discuss all the options available. They have a requirement to treat you fairly, so give them a chance to do that.
    8. If you have a repayment mortgage, look to switching onto a cheaper interest only mortgage to give you some space, then switch back. Seek advice before doing this as sometimes lenders will charge a fee to change the basis of the mortgage.
    9. Do a budget planner. Stop unnecessary payments. Pay the important bills first, not those who shout loudest. The priority bills are those who can take legal action such as any loan secured against your house, rent, council tax, water, gas, electricity, unpaid fines, hire purchase, and of course your phone if you are reliant upon it.
    10. If you find a good deal, act quickly, as rates are disappearing almost as fast as they appear.
    Wasim
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    WOW! Great post Wasim. That's helped me a lot, as I have three pops sitting on SVR's at present. Want to move them onto long term fixed rates (if I can). Do you know if Northern Rock and Mortgage Express might offer any product transfers any time soon?
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    Hi Vanessa
    MEx are not releasing any info to IFA's or brokers at the moment. There website recommends you contact them direct on 08457 248 248. But what they also say is that "From this point on, we may not necessarily be able to offer our customers a competitive new deal when they come to the end of their existing product term."...posted a few months back.
    Northern Rock the max they are offering on a BTL at the mo is 70% (6.39% and 6.89%) with no direct mention of product transfers but they do offer remortgages at a rental stress of 120%.
    Hope this helps Vanessa
    Regards
    Wasim
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    Excellent post Wasim
    I would add another category to the list of people who will struggle to remortgage when their current deal ends..............anyone who arranged a self certified deal as almost every lender has pulled out of this market. Which covers almost everyone running their own business
    happy days!!
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    Kevin Wright
    07889 526979
    kevinwright@thinkpositively.co.uk
    Guys,
    Will lenders not take a more favourable view on a self-cert mortgage that has been maintained over the three years with a previous lender?
    V.
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    Vanessa said:
    Guys,
    Will lenders not take a more favourable view on a self-cert mortgage that has been maintained over the three years with a previous lender?
    V.
    Hi Vanessa
    I had this conversation with a Client today...there are no "True Self Cert" mortgages anymore...even with the odd one or two that are available you need to provide accts and bank statements, if not then an accountants contact details and your SA300 (self assessment paperwork).
    Talk to the respective lenders and see what they can do for you.
    Best regards
    Wasim
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    Good article relevant to this thread:
    How to beat the mortgage valuation shock
    Brokers advice on how to protect yourself from falling property values as lenders struggle to keep back overpayment money
    Elizabeth Colman @ Times On-line
    Brokers generally recommend you overpay your mortgage to clear as much debt as possible and make sure you qualify for the best deals.
    For example, a borrower with a £200,000 loan on a £300,000 property who overpaid by 4.5% (the size of Bank rate cuts since October) or £750 a month would reduce their mortgage to £182,000 over two years, cutting their loan as a proportion of their property value from 67% to about 60%. This would give them access to cheaper deals, according to L&C Mortgages.
    However, Northern Rock customers who overpaid on the basis that they would be able to withdraw the money again if they needed to — as is common with “flexible” mortgages — have been warned this may no longer be an option.
    One Sunday Times reader who had overpaid £1m on his £3m loan faced a barrage of questions about his income and outgoings when he applied to withdraw £25,000. His request was turned down by the call centre staff and his case referred to the underwriter.
    Ian Gray, of independent mortgage broker Largemortgageloans.co.uk, said: “This is yet another example of lenders tightening criteria for borrowers unexpectedly. Many people took out those flexible deals with the promise that it was a place to park cash and they could get it next day with a phone call. There are now serious questions about whether they can get their money.”
    Borrowers on flexible, standard or offset mortgages should be able to overpay without penalty. Other deals may limit payments to 10% of the loan.
    Brokers also advise those looking to protect themselves from falling property values to consider booking a deal in advance. Nationwide allows this three months in advance without another valuation.
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    Hi Guys
    A question i would like answered by someone from the legal fraternity...
    ...if the lender refuses to let you drawdown on your overpayments, as in the example above, does this make the contract null and void as the lender has breached the terms? Especially if when you take out your mortgage they make no reference to affordability and claim you can just ring the help desk or write out a cheque.
    I have been asked this by a few people and have no real answer for them.
    Regards
    Wasim
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    Hi all
    I wrote about the self cert trap this week in my Blog. https://www.residentbroker.com/blog ill post it here next week if that's ok with Vanessa
    As far as lenders not allowing clients access over payments that's exactly what abbey did a couple of months ago anyone who had made overpayments but abbey deemed them still above 90% ltv they wouldn't let them withdraw the overpayments again
    This is only applicable to actual overpayments though not payments into an offset savings account
    John
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    One would have to read the contact. Some contracts (all?) have provisions that if the value of the property protecting the loan has fallen the lender can change the amount they will allow in terms of a release.
    I advise people to read what they have signed to see what they agreed. That is the first step. If one is to argue the contract has been violated the remedy could be the lender is forced to go back to the original terms. In other words, knowing what the contract says is the starting point for any legal action.
    Wasim said:
    Hi Guys
    A question i would like answered by someone from the legal fraternity...
    ...if the lender refuses to let you drawdown on your overpayments, as in the example above, does this make the contract null and void as the lender has breached the terms? Especially if when you take out your mortgage they make no reference to affordability and claim you can just ring the help desk or write out a cheque.
    I have been asked this by a few people and have no real answer for them.
    Regards
    Wasim
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.