Income has changed. Need new mortgage. What now?

[Ellsiedodah]

Hi all, I've become a SAHM for prob a 5 yr stint if we're blessed with another kid. We have a 5 yr mortgage fixed rate deal with Nationwide which ends July 2020 - which was granted on my having a £40k salary which is now history. We're going to leave London next year to seek out a more affordable life but I'm wondering what happens with the mortgage - do we literally have to deal with what's offered on the basis of my OH's income (which is also depleted) or if we were to port with the same company when we're due to renew would there be any benefits? Experiences renewing with nationwide also appreciated! Thanks

From what I understand (and we are looking at porting) you would need to pass a brand new affordability check.

When the fixed period ends, you’ll go onto the variable rate till you sell the house and move out.

If you want to keep the house and rent it out, I’m not sure that you’d fix it anyway as you’d need lender’s permission to rent it out. You’d probably change to a BTL mortgage based on your circumstances at the time.

If you stay with Nationwide you won't need to pass a new affordability check. If you move elsewhere you will. Assuming you're not on an interest only product, Nationwide should be competitive.

Not true @nobaggypants
www.nationwide.co.uk/support/support-articles/manage-your-account/porting-your-mortgage/porting-your-mortgage-overview

They say they’ll treat it as a new application if you port the mortgage and WILL re-assess affordability.

From past experience, when your fix end your interest rate will revert to your providers variable rate (sometime with a minor change, read your documents).

Unless you are happy to accept this you will need to apply for a new mortgage product.

Whether staying with your current provider or choosing a new one you will still need to supply evidence of income etc

We are with Nationwide. If you wanted to stay in your house then you could easily choose a new product online when your current one runs out.

As you want to move, you will have to make a new application and pass affordability checks again, so they may not be willing to lend as much.

We have two mortgage deals with Nationwide as we ported mid term i.e. £80k on 5 year fixed until 2020 and £20k on 3 year fixed until 2021 but the total amount is considered affordable for us.

Nationwide didn't reassess our affordability when our previous fixed term deal ended last year - we were staying in the same property and didn't want to borrow any more money, so it was just a case of us picking a new product from their range

With NBS if you are staying in your current house, you can move onto a new deal without a new affordability check. I would avoid a fixed rate if you intend to move as if you don’t pass affordability on the new house, you will be charged a penalty to exit deal. Go for a variable or stay on the SMR.

To port to a new house, it will require a full new assessment a bit like doing a remortgage to another lender as they are assessing the new security and your ability under the new agreement. You can move your current deal over though.

Genuine question - do you not have a legal responsibility to notify them of your situation change at the end of the term? I would think you would be responsible for that as they are lending you money based on evidence of earnings that are no longer true. I would want to investigate if there was a legal issue here too. But don't know, so just asking.

Just to correct some misinformation above. We have just gone through this process with the Santander and as long as you are not trying to borrow more money or change the length of the mortgage or increase the LTV ratio then they won't do affordability checks

Hi all, thank you so much for all your input and advice. I guess technically we won't be porting as our contract ends next July, when we aim to move, so there will be nothing to port. The fees to do earlier seem totally untenable, though the thought of being on a variable rate terrifies me and I guess we have to prepare for that given houses are selling so slowly atm. @Bigpizzalover, I don't really understand what you suggest re going onto a variable rate as preferable? Does affordability matter less in that situation? I just wondered if there would be any benefits to using the same provider, but I guess not. This thread though has definitely made me feel we need a good mortgage advisor! @Bendingspoons, would you mind explaining why you have 2 mortgage deals? Assume it's because you remortgaged?

I realised that bit wasn't particularly useful information if you are potentially looking at getting a smaller mortgage. We had a flat with a mortgage on, say £80k. We moved to a house and wanted to borrow more. As we were only part way through our 5 year fixed rate period, we weren't allowed to change that deal without paying early repayment charges. We therefore had to pick a new deal for the additional bit of mortgage, say another £20k. I was a bit confused by it!

If you aren't in a position to buy by July, you could probably choose find a tracker mortgage that doesn't have early repayment charges. That way if you want to borrow less when you move you won't be charged early repayment.

Having just switched our product, there were no charges for overpayments in the last 3 months of the mortgage, which may be relevant if you want to move earlier than July.

@Ellsiedodah If it is just your deal term (eg the end of your fixed rate) that ends next year and not the actual end of the mortgage term (25yrs or however long you took it for) then you would still have a balance to port.

With regards to the variable rate comment, if you are on the variable rate or the standard mortgage rate with NBS there is not penalty to exit that deal, so if you was looking to move next September for example, I would go on the variable rate or the SMR when your current deal ends if you was looking at starting a new mortgage with another company when you move. If you are wishing to port with NBS then yes a fixed deal would most likely be better as you could just take that with you, subject to your affordability passing.

NBS have an affordability calculator on their website (full calc is much better than the quick one) so you will be able to get an estimation of what will be affordable to you based on your OH income. Also each dependent that you have knocks a chunk off your affordability so you are likely to be able to borrow more with just the 1 DC.

Some of the above may have changed slightly as they have recently had a few changes, but all the above was correct circa 14 months ago.

@bendingspoons thanks so much for the clarification and useful insight

@bigpizzalover thanks so much - v helpful. Also gah! Re kids knocking down affordability! But makes sense!

I think you will be subject to all the financial checks when you move house. The early repayment charges tend to go down over time. Depending on yoir fixed rate it may be a bit of a jump until you tie yourself in age. I'm sure a mortgage advisor could tell you what your options are and what is most cost effective.