Many people are trapped in their mortgage deal and find that they are unable to remortgage in order to release equity from their own home and move onto a better rate.
In 2014 and 2016 new mortgage lending rules were put into place to ensure that lenders assess a borrower’s affordability before they were offered a mortgage. Beforehand, your borrowing was based on your earnings but it’s now based on what you’ve got coming in verses your monthly expenditure. Lenders will also be looking at what costs you will have in the future, and if you could cope if interest rates went up or your income went down.
For those who took out mortgages some time ago and want to move onto a new deal could find themselves unable to meet the lending criteria today. This means that they could be forced onto the lender’s Standard Variable Rate (SVR), which is invariably higher than a fixed or tracker rate deal. As a result, those who are on the lender’s SVR deal are unable to move to a new one, which means they are paying more than they need to.
In addition, some people have found that their personal circumstances have changed, for example they may have a larger family and increased childcare and living costs.
Alternatively, you could be self-employed which can make it more difficult to obtain a mortgage as will be asked for firm evidence of past, present and future earnings.
Finally, it could be something as simple as your age! Traditionally mortgage lending went up to around age 65, but nowadays many people need to borrow much later – even into retirement, which carries more risk for lenders in terms of income, and a 25-year mortgage may be harder to come by.
How can you change the situation?
There are several ways you could get out of being a mortgage prisoner. First, if you have a good credit score and payment history with no late or missed payments your lender will see that you are a reliable borrower. This can really work in your favour when it comes to remortgaging, so it’s essential to keep your credit score healthy.
Second, try and look at how you can reduce your outgoings. For example, do you need to pay a gym membership? How much do you spend on luxuries that you can cut back on? By cutting back and building up savings for a few months you can protect yourself against any monthly increases and appear to be less risk.
Talk to an independent mortgage broker who can look at your circumstances and look at the whole of the market to find the right deal for you, and assess whether or not you are likely to be offered a mortgage. They can also advise on what to do going forward in preparation for applying for a mortgage further down the line.
Speak to one of our independent mortgage advisors for impartial help and advice, as well as access to the widest selection of competitive mortgage deals in the UK.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.