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Original poster

Re-mortgaging with only one salary?

60 replies

Kerelene · 13/05/2008 15:02

Hope this is the right place to post this

I am soon to be made redundant and am expecting my 2nd baby in November. Will probably claim benefits until then as have not found any jobs to apply for so far which pay more than benefit (after paying for childcare and travel).

I hope to claim maternity allowance for 9 months after baby's birth and then try and find a new job (which pays enough to cover childcare for 2 kids etc...)

It's just occurred to me that we will need to re-mortgage in May next year. Will we be able to get a mortgage on only my husband's (modest) salary? I am really worried that we might lose our flat which we only bought a year ago, with interest rates going up as well, but I don't want to start looking for work when I've a small baby just so we can get a mortgage...

Any advice/thoughts very welcome

Thanks

OP posts:
CountessDracula · 13/05/2008 15:03

Could you not keep the mortgage you have?
It would cost you a bit more but at least you would not have to worry about re-mortgaging

What are teh multipliers?
I mean is 3 or 4 times his salary enough?

noddyholder · 13/05/2008 15:10

countess is right you could keep the one you have and then remortgage when you go back to work.

happynappies · 13/05/2008 15:21

We were in a similar-ish situation. Although I still had a job, my employer was refusing my flexible working request and we thought I was going to have to resign. Our two-year introductory rate expired, so we contacted our lender to see if there was anything better to switch to, and also contacted a couple of others from the best buy tables in the press. It turned out that because myself and dd were classed as dependents of my dh (as I didn't have an income), the amount of money they would lend to him was less than if he'd just been a single person. I don't know if this applies across the board, but we didn't anticipate this at all. Although we could afford repayments, they just wouldn't lend us enough, so we ended up staying with our current mortgage provider. It turned out for the best because we have a tracker account, so rather than switching to their standard variable rate, we have a rate that tracks the BofEngland base rate, and as the rate has gone down a few times recently, we're actually better off.

I'd ask your current lender and some others how much they'd be willing to lend you on what rate - if you have a lot of equity in the property you'll be much better off. Also, if the dependent thing becomes an issue, it would be better if you have some sort of income however small so that you're not technically classed as a dependent - I don't know if that will be possible. Also, find out from your current lender what rate you will switch to when your deal comes to an end - with some deals the amount of fees etc. involved in switching means that it makes more sense to stay put. Good luck and hope that helps (sorry for rambling!)

Original poster
Kerelene · 13/05/2008 15:33

Thanks for the very helpful replies (never thought about getting classed as an extra dependant myself!!)

Our mortgage repayments are already very high and we will only just be able to manage, we couldn't afford to pay more on a standard variable rate (we're on a fixed rate now).

I have worked out that 4x DH's salary is £116k, our mortgage was £162k (minus whatever we'll have paid off in 2 years). We have equity (deposit paid) of about £28k. (this is for a tiny poky flat as well - perhaps we'll have to move out of London...)

Happynappies- ironically with our first mortgage the issue was not finding someone to lend us the money ( as they were prepared to lend more) but being able to afford the repayments!

We could possibly use some of our savings to overpay so that the size of the mortgage is reduced a bit?

I think we need to get some professional financial advice maybe?

OP posts:
happynappies · 13/05/2008 15:38

Also - could you temporarily switch to interest only mortgage until you find another job? That would reduce payments? or extend your mortgage term, again temporarily until you get yourself sorted? It might be possible to reduce your payments that way?

LadyMuck · 13/05/2008 15:42

How much lower than the SVR is your current fixed rate?

And also, which lender are you with? You may find that you can get another fixed rate with the same lender without any hassle. I suspect though that if you move you may have more difficulty.

Original poster
Kerelene · 13/05/2008 15:54

Thanks

Interest only - that might be an idea as a short term measure.

I think our rate is something like 4.86% and Nationwide who we are with, have a deal you can switch to for 5.74% although that could be much higher come next May. Their current SVR is 6.49%.

Our monthly payment is £936 so not sure how to calculate what we would pay at 4.74 or 6.49 but I imagine it would bump it up a lot...

We will probably be looking at higher rates therefore higher payments anyway, it's just that me not working will make things even more tricky.

OP posts:
ZoeC · 13/05/2008 15:56

You can work out repayments based on different interest rates here

Original poster
Kerelene · 13/05/2008 16:05

Thanks Zoe - the calculator is really useful

OP posts:
Original poster
Kerelene · 22/05/2008 14:43

Bumping this up in case anyone can offer other advice esp if you have been in similar situation?

Having done some sums we will be needing a mortage of about £150k when current one expires, hubby's salary x 4 = 116k so does that mean nobody will lend to us?

It looks as if our payments would go up about £140 per month if we had to pay the SVR when fixed rate finishes, we won't be able to afford this.

Am wondering if I should try harder to find a job now so I'm employed when baby comes - even though I wouldn't get SMP and might not be better off than on benefits, on paper it would make it easier for us to get a new mortgage?

Would it be wise for me to ask our existing lender if they would give us a new mortgage on only one salary? Or better to keep quiet? - do they ask about your income when you take out a new mortgage if you are already with them?

Any advice gratefully received!

OP posts:
CountessDracula · 22/05/2008 14:44

If you stay with your existing lender you won't have to say anything
It's not your mortgage that expires, just the fixed rate

CountessDracula · 22/05/2008 14:44

Which mortgage co are you with?

nervousal · 22/05/2008 14:49

but CD - they would revert to SVR and as she's said - they can't afford that.

CountessDracula · 22/05/2008 14:49

could you go partially interest only (assuming you are currently on a repayment mortgage) to make the payments the same?

CountessDracula · 22/05/2008 14:50

The reason I ask who the lender is is so I can go and see if they have any products available to existing borrowers that are fixed rate

Gobbledigook · 22/05/2008 14:53

I agree wtih CD and think your only option, in this climate, will be to stay with existing lender, take the hit on the new rate of interest BUT go interest only and/or extend the term of your mortgage in the short term.

Original poster
Kerelene · 22/05/2008 15:17

Thanks ladies

I hadn't thought about combined interest only and repayment - that would be better than just interest only -we only started 25 yr mortgage last year and DH is 46 which means it takes us into his retirement years, so don't really want to extend the term any further.

We;re with nationwide, i think their current fixed deal is 5.74% which seems to work out at an extra £60 per month which we may not be able to manage.

Another worry is that I may not be able to find a job come next year which earns any money after paying for 2 lots of childcare, but I guess I could take a job even if we weren't actually better off, just to get the mortgage, and then give notice!!

OP posts:
CountessDracula · 22/05/2008 15:18

I think you have to have been in a job for a certain length of time and certainly out of your probation period for them to count your income

CountessDracula · 22/05/2008 15:23

Also the 5.74 is a tracker which is no good for you if you are so close to the bone already. How would you cope if it went up?

They have an offer on a 5 year fixed rate for existing customers here but you must have 25% equity - do you?

They waive the £600 for existing customers.

I would take this and go partially interest only

Original poster
Kerelene · 22/05/2008 15:49

Ah no we don't want a tracker too risky.

Have worked out we have about 20% equity assuming value is same as when we bought a year ago which I guess it is.

It looks as if we may be able to get the loyalty one with a lower deposit through?

Also mentions payment holidays - perhaps we can also underpay for a few months - although if we've just started a new deal they may not allow it

Do you work in mortgages CD you seem very clued up!

OP posts:
CountessDracula · 22/05/2008 15:51

No, I am just interested in things financial!

you can get with a lower deposit but you will pay a higher rate 6,15%

CountessDracula · 22/05/2008 15:55

Actually as far as i can see it that is your only option if you don't get a job and need a fixed rate

You can't go on the SVR as that is variable too.

MegBusset · 22/05/2008 15:58

Presumably when you're made redundant you will get a redundancy payment? You could use this to overpay, Nationwide generally let you pay £500 a month extra. This will give you a buffer for the future.

You can only take payment holidays or 'draw down' money from the mortgage if you have overpaid previously.

We have just been in the same situation as our Nationwide 4.48% fixed rate expired in March, and I have effectively stopped working (well, am freelance but only part-time on low income). The Nationwide didn't bat an eyelid at letting us remortgage (although in the end we went with First Direct at a much better rate, which has now been withdrawn). If you haven't missed any payments then Nationwide will probably lend to you more favourably than another lender to whom you are an unknown quantity.

Are you planning on going back to work in the next couple of years? If so then you could ride out an interest-only mortgage til then, then switch back to repayment when your income goes back up.

If you want to stay out of work long-term, though, and with your finances already at stretching point, tbh I would be looking at moving to a cheaper area and reducing your mortgage.

MegBusset · 22/05/2008 16:02

I think that the harsh truth is that if an extra £60 a month would be out of your reach, you need seriously to look at all areas of your lifestyle. Do you have savings? What would you do if your DH lost his job? Could you or DH look at bringing in some extra income, could he look for a higher-paid job?

Original poster
Kerelene · 22/05/2008 16:04

We have some savings we could use some of to overpay - I think we can do this by £500 per month without incurring charges - but don't think we could get the equity up to 25% even if we did this.

Do you think it would make sense to overpay a bit to reduce our outstanding loan if interest rates are likely to be going up for a while?

It's such a minefield. I know a few people who are already on interest only mortgages even with 2 salaries. I think the strategy is to hope you inherit from parents' properties in time to repay the loan...

Do you think they will ask about our income if we are switching to a new deal, or not because we're existing customers and they know we have been regular payers so far?

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