DH's income dropping from Jan - can we renegotiate mortgage to reduce monthly repayments?

[inadreamworld]

DH will only be earning £20000pa from Jan 2013. I am a sahm and am expecting baby no 2 in about a month so cannot return to work in the near future! We have a very small mortgage (borrowed £50000) as we made a big downpayment on our flat - we only have about 6 years left on the mortgage which is currently around £530 per month. We are not in arrears - in fact we are 2 months ahead of payment. We really need to renegotiate (if this is the right word) our mortgage to make the monthly repayment lower. I think this is possible but I am not very knowledgeable about finances - can anyone offer any advice? Obviously we will make an appointment with the bank but wondered if anyone had any experience of doing this?

It's definitely worth a talk and they'll have a few options for you like payment holidays or extending the term of the mortgage. Before you do that, however, an income of £20k takes you well below the Tax Credit thresholds. Let HMRC know of your change in circumstances a.s.a.p as you may find you're entitled to more help from there. Has his income come down by much?

Good luck

Thanks Cogito! I phoned tax credits people today and when we have 2nd child I will be entitled to nearly £100 per week. Income come down by about 10K unfortunately as DH has 2 part time teaching jobs and one of them has come to an end. He will be looking for a new job but this may take a while.

You are in a really really good position to renegotiate. Lots of equity. No defaults. Overpayment. A mortgage lenders dream. So go and talk to both your mortgage holders and have a hunt online for other mortgages to see what gives you the best rate.

To give you an idea of sums the mortgage company like you to pay off by retirement (so 60 or 65 I guess) so depending on your age you can probably get 25 years.

50k over 25 years is about 2k a year to pay off. Or £170 per month. Plus interest. If you owe £50k now that will average over the term at about £30k I think (as you pay off less at the start than the end.) if you are willing to go variable then hopefully you should be able to get 3% or less on a mortgage (we pay 2.29% but were ridiculously lucky as my little brother is obsessed with mortgage rates and found this one for us a couple of years ago - ironically he couldn't use it!). 3% * £30k is £900 per year or £75 a month.

So with luck you should be able to get down to about £250 a month or so.

Although should probably add that this is very much back of an envelope stuff.

Thanks MummytoKatie, you sound very knowledgeable! £250 per month would be more manageable.

Wow £75 a month your little brother is a genius.

As well as extra Child Tax Credits you should get Working Tax Credits now which you probably wouldn't have been entitled to before on a salary of £30k. Have you run your new circumstances through something like the Turn2Us Benefit Checker <a class="break-all" href="http://www.turn2us.entitledto.co.uk/entitlementcalculator.aspx?ref=www.turn2us.org.uk/" rel="nofollow" target="_blank">link here?

When my dh was made redundant we switched our mortgage to interest only for a while. Like you we have a reasonable chunk of equity in the house so it felt like an OK thing to do. And if you feel reasonably optimistic that your dh will find a replacement 2nd job within say 6 months then it might be more flexible than extending the term?

I just called the mortgage lender and chatted through the options. They were really helpful.

Cogito - thank you - I didn't know I could get working tax credits - will look into it.

That's an idea DewDrOp will speak to them.

Have realised I know very little about finance/mortgages...thanks to all you more knowledgeable ones :)