What is a Lifetime Mortgage in Durham?
A lifetime mortgage is a variation of a later life loan that you have secured on your home. It allows homeowners that meet the eligibility requirements to achieve equity release in Durham. Your loan will be repaid with the sale of your property, once you have either died or moved into long-term care.
When you take out a lifetime mortgage in Durham, you will be using equity that has been sitting within your home throughout your time as a homeowner in Durham.
Many will use this for things like home improvements, inheritance, to pay off their debts, to fund retirement & care costs, amongst other things.
How does a lifetime mortgage in Durham work?
You first need to be eligible for taking out a lifetime mortgage in Durham. This means that you need to be at least 55 years old and also own a property that is at least worth £70,000. There is no requirement for you to still have an active mortgage at this point, it just needs to be your main residence.
In order to make a start on the process of taking out a lifetime mortgage in Durham, you first need to get booked in and speak to a trusted and experienced later life mortgage advisor in Durham. It’s their job to look at your case and see if equity release in Durham or an alternative, is right for you.
Lifetime mortgages are typically found in two main forms. The first one that you will see is a lump sum lifetime mortgage, with the second of these being a drawdown lifetime mortgage.
A lump sum lifetime mortgage works pretty much as the name implies, as an all-in-one release of equity into a lump sum payment. This lets you access the amount you need, as soon as you need it, but will leave you with a much larger loan to pay back.
A drawdown allows you to access the equity in your home and withdraw amounts from it, as you need it. This means you won’t just be releasing all your equity in one go and are saving it for when you need it most. You also will owe less, as you only pay interest on what is released.
With all forms of lifetime mortgage, you are able to simply let your interest roll-up, though this will likely also impact how much inheritance that you can leave behind, once the sale of your home has been completed, with the money from the sale being used to repay your loan.
Thankfully, not only can an expert later life mortgage advisors help you to cordon off a specific amount of equity in advance, for covering any inheritance you wish to leave, but due to our membership in the Equity Release Council, you also get the benefit of having the “no negative equity guarantee”.
This guarantee is a lifeline for a lot of families, as it ensures that your estate never owes more than the value of the property. You can rest assured knowing that your family will never owe more than the property value and struggle financially after your death or you have moved into long-term care.
Pros and Cons of a Lifetime Mortgage in Durham
As is most often the case with any mortgage type, there are both ups and downs to having a lifetime mortgage. The importance of these are dependant on the person taking out the lifetime mortgage in Durham, as well as what their future plans are.
Of course a bigger positive is how flexible releasing equity from your home can be, in using either option, be it the drawdown and lump sum varieties of lifetime mortgage. You also benefit from having flexibility in your monthly mortgage payments.
You can simply let your interest roll-up, which will mean you have more cash to play with as you won’t be making any payments payments per month. The downside is that these will leave you with much less for leaving an inheritance or care when you die or move into long-term care.
The topic of inheritance can be a difficult one for many too, as a vast amount of homeowners look to take out equity release in Durham to make sure this is done. Thankfully, you have the choice to ring-fence some of this equity as well, as your later life mortgage advisor in Durham will help you plan this.
The upside is that, so long as you are able to maintain these payments, you will have a bigger amount to leave behind for your family when you are no longer here. Also, as mentioned, your family will benefit from the no negative equity guarantee, meaning no debt will exceed the home value.
Furthermore, there are now new safeguards in place for homeowners, thanks to the standards set by the Equity Release Council.
Is a lifetime mortgage in Durham right for me?
What this all comes down to, is what it is you are hoping to achieve, combined with your own personal situation. There are many different mortgage types available to homeowners in later life, with lifetime mortgages and equity release in Durham only being a small part of wider options.
As a team of dedicated and trusted later life mortgage advisors in Durham, it is our job to take a look at your case and decide whether equity release in Durham, or an alternative, would be a better option for you to take out.
In many different cases, an alternative is most likely going to be better suited for you. Your later life mortgage advisor in Durham will be able to go over these options with you, before they make a start on the process of equity release in Durham and subsequently, a lifetime mortgage in Durham.
Oftentimes, the more appropriate options can include taking out a personal loan, a conventional mortgages or a remortgage in Durham, retirement interest only, term interest only, to name a few. If a lifetime mortgage is right, your later life mortgage advisor will make sure that all of your needs are met.
This includes laying out a plan for what you wish to achieve in the future, how you predict your circumstances could possibly change, and any inheritance you wish to leave behind.
To gain a better understanding of how we can help with a lifetime mortgage, get in touch with our later life mortgage advice team in Durham today.
To understand the features and risks of equity release in Durham, ask for a personalised illustration.
A lifetime mortgage in Durham may impact the value of your estate and it could affect your entitlement to current and future means-tested benefits. The loan plus accrued interest will be repayable upon death or moving into long-term care.
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Help to Buy Mortgage Advice in Durham
After the unfortunate event that was the 2008 credit crunch, our government opted to create a backup plan, in a bid to try and restart the pulse of the mortgage market. Their focuses were on first time buyers, introducing ways to help them get onto the property ladder, referring to these as government ‘Help to Buy Schemes’.
There are various different Help to Buy Schemes available, some that you might find you are better suited for and others you won’t qualify for. Here is a list of the Help to Buy Schemes available to home buyers and a bonus scheme that might be useful.
Help to Buy Shared Ownership Scheme
The Help to Buy Shared Ownership scheme was introduced as a means of allowing applicants to purchase a percentage of a property and then pay back the remaining amount as rent.
You will usually have to own between 25-75% of the property in question. The remaining percentage will be owned by an outside party, namely the local housing association or council. This share can possibly be increased further down the line, if you happen to find yourself in possession of some more money.
The way that your payments work is that you will be paying back your monthly mortgage payments, but also a monthly rental cost. This basically means you are paying 100% of the ground rent and service charge on your new home. This will still apply, even if your share is the minimum amount.
Help to Buy Armed Forces Scheme
The Armed Forces Help to Buy scheme was introduced in 2014 after the roaring the success of the Help to Buy Equity Loan scheme. This scheme aimed to utilise the same basic concept as the one that came before it, however, this one was focused in on members of the armed forces.
If you do fit into the criteria of the scheme, this is something that could provide a real advantage to you when trying to get onto the property ladder. The government has made this an enduring policy and we have high hopes that it stays around, as the scheme is incredibly helpful to existing armed forces members who are in need of the extra help.
Bonus: Lifetime ISA
The Lifetime ISA is often a scheme that people forget. It’s not everyone’s immediate go-to scheme, however, it’s still useful to have some knowledge of it, as it could be the scheme that helps you secure a property as a first time buyer in Durham.
A Lifetime ISA is more or less a savings account where your money grows, completely free of tax. The government will also provide you with a top-up to your savings with an extra 25%. This means that if you meet the £4,000 maximum amount, you will receive a rather welcomed £1,000 bonus to your savings.
You have to pass specific mortgage criteria in order to gain access to this mortgage scheme. All of these details are readily available on the Lifetime ISA website.
The Credit Crunch Explained
Mortgage Advice in Durham
In order to understand what happened with the 2007/08 “Credit Crunch”, we need to take a look back on the years that lead up to it. If a First-Time Buyer in Durham took out a mortgage to buy a home back in the 1970s and ’80s, it’s very likely that this process was undertaken through a building society. It may be hard to believe, but your high street bank did not always offer their customers mortgages!
To find out whether you qualified for a mortgage or not, you’d have made an appointment with the building society manager and spoke with them. Customers would be encouraged to take out savings accounts with the building society and then the building society would use those people’s savings to lend to their other customers. Interest-rates would also be higher to borrowers than the rate they were paying to savers, in order for them to turn a profit.
Once the banks started to get involved with mortgage lending, they moved away from that older model. Instead, they opted to “buy” the money from markets, in order to accelerate the rate in which they could lend money to their customers.
Mortgages in The Noughties
If we move ahead of time and into the mid-2000s, there were plenty of new specialist lenders working within the mortgage market. Most of these originated from North America. Their way of handling business was to sell their book of mortgage customers, allowing them to raise new funds and continue the cycle of lending.
This method of practice was labelled Securitisation. The investors that bought these books were larger financial institutions such as pension funds and other High Street Banks.
The market was booming and these mortgage lenders were making a great deal of money. The newer lenders seized an opportunity by introducing more relaxed lending criteria. Poor credit history? Don’t worry about it. Wanting to self-certify? Go for it! These sorts of things were no issue for their businesses, or so they thought at the time…
Apparent Problems in the Market
As anyone with an inkling of common sense might have anticipated, these mortgages began to default. Major banks lost their confidence in each other, due to the uncertainty of how exposed they were in the very quickly falling apart subprime mortgage market.
In very quick fashion, the once sustainable banks’ share prices had completely dropped. A select few were bailed out by the UK Government (or more accurately, the taxpayer) in order to stop them going under altogether, whilst many failed to stay afloat.
Over the course of “The Great Recession”, a total of almost 80 different banks, building societies and lenders around the world, across 20 different countries, filed for bankruptcy or were acquired.
Because of this utter economic disaster, lending quickly dried up. Property prices dropped by a large amount and everyone lost confidence in the UK economy. It took almost a decade for the market to safely get back to a point where it could function sustainably once again.
Economic Recovery
Nobody wanted this to happen again, especially the UK Government, so investigations took place that aimed to look into what exactly happened and where it all went wrong. These studies led to the carefully thought out “Mortgage Market Review of 2014” that led the charge forward.
Self-cert mortgages had already been completely banned by then, but the biggest change to come out of this was that lenders themselves were now solely responsible for ensuring that the customer could in fact afford their mortgage payments.
The lenders were now responsible for digging deeper into customers incomes and outgoings with more precise lending criteria. They were paying more attention to credit commitments, childcare and other outgoings, so they could ensure customers were definitely able to afford their mortgage repayments on a consistent basis.
We have no doubts that it has now become a lot harder to get a mortgage than it was back in the day, though this is absolutely for the betterment of the industry, the economy and homeowners nationwide. Customers need to be a lot more organised with paperwork in order to prove their finances and be taken seriously by lenders and home sellers alike.
So many mistakes were made in the period running up to the Credit Crunch, but we hope that the industry learned a lesson this time and has lowered its chances of ever falling into a rut like this again.
Fast & Friendly Mortgage Broker in Durham
What is a 95% Mortgage?
A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender.
95% Mortgage Advice in Durham
Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.
This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in Durham will be able to look at, to see if you qualify.
All our customers who opt to Get in Touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.
Can I get a 95% mortgage?
95% mortgages are usually accessible by both First-Time Buyers in Durham & those who are Moving Home in Durham. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.
Improving your credit score
A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.
Affordability
Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.
Can my family help me get a 95% mortgage?
Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage.
How do I choose the right 95% mortgage?
When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation.
Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.
Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.
How can a bigger deposit help with my mortgage?
Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not.
There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as.
A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property.
So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future.
Durhammoneyman Spring Budget Update 2021
Rishi Sunak’s second Budget as Chancellor brought two pieces of welcome news for the property sector as the Government attempts to transform “Generation Rent” into “Generation Buy” to help stimulate the UK economy, namely the new 95% Mortgage Guarantee and an extension of the Stamp Duty Holiday.
95% Mortgage Guarantee
The name of this scheme is misleading as not everyone that applies is guaranteed to be offered a mortgage, it is still subject to affordability and credit score. The “guarantee” itself is that the Government will ensure Lenders don’t stand a loss if they grant a 95% mortgage to a customer who then subsequently falls into arrears and is repossessed leaving behind negative equity.
This scheme should in theory give Lenders more confidence to lend even though the applicant only has a smaller deposit to put down. Of course, Lenders never want to repossess someone’s home unless it is the last resort, but if that happens then the new scheme would cover any shortfall.
Lenders have been worried about the prospect of home values decreasing so this measure should alleviate that concern although of course, the chances of negative equity occurring will naturally reduce should property prices increase as a result of these announcements!
The scheme is available to both 1st Time Buyers and Home Movers, it’s available on any property (not just new build) and will run until December 2022. Some major High Street Banks have already signed up to the scheme and it’s likely more will follow later on. It’s still a big challenge for Lenders to cope with the demand they are getting for mortgages due to the difficulties training and supervising staff working from home but they will want to offer as many of these mortgages as they can.
Stamp Duty Holiday Extension
When the Stamp Duty Holiday was launched last year we all hoped life would be very much back to normal by the cut-off date of 31st March 2021 but things didn’t pan out that way as we know. Solicitors are struggling to keep up with the workload and if lots of chains had collapsed then it would have partly defeated the object of the exercise.
Therefore it was good to hear the scheme has been extended to 30th June for purchases up to £500,000 and 30th September for purchases up to £250,000.
The Government certainly sees the property sector as an area that can play a big part in our economic recovery and if you are looking to buy a home or remortgage this year please reach out and we will be happy to advise you.
Mortgage Payment Holidays | Mortgage Advice in Durham
Mortgage Payment Holiday
At the start of the Covid pandemic, the Government promised that all borrowers would be allowed a three-month mortgage payment holiday if they needed it. Most lenders followed the Government’s guidelines and did their best to help their borrowers during these hard few months.
We feel that it is best to create a summary of what mortgage payment holidays are, what lenders are doing and who can provide you with help and guidance through the coming months.
On that note, we feel like this is a good time to talk about what mortgage holiday payments are and how they can help you with your mortgage payments.
What is a Mortgage Payment Holiday?
They are quite simple. A mortgage payment holiday is a set-period, agreed upon between you and your lender, bank or building society, where your mortgage payments are deferred. In this situation, the set period should be around three months.
You will still have to pay back these payments. Over the period, you will receive interest which will be added onto your loan at the end of the payment holiday whilst your capital balance will not decrease. So, your overall mortgage loan will slightly increase. So you save money in the short term but in the long term, it may prove expensive.
Once you feel like you are ready to start paying back your monthly mortgage payments, either your monthly mortgage payments will be recalculated at a higher level or your mortgage term could be increased. Lenders prefer to not increase your mortgage term as it could put you past their standard retirement ages.
You may even be allowed to pay off a lump sum later on in the year to get your monthly mortgage payments back on track to how they were prior to your payment holiday.
Mortgage payment holidays are available for borrowers with both residential or Buy to Let Mortgages in Durham. This really helps out landlords as they now have help if rental payments are affected.
The Government’s Proposal
Here is the Government’s proposal following the COVID-19 outbreak:
- Mortgage lenders will offer an automatic
three-month mortgage payments holiday for borrowers who have been impacted
directly or indirectly by COVID-19 - The mortgage payment holiday will apply to
customers who are up to date on their payments, not in arrears, and wanting to
self-certify that they are impacted by COVID-19 - This means that lenders will not complete an
income and expenditure assessment, or an assessment of alternate payment
options as ordinarily required under MCOB - This proposal will allow lenders to be more
responsive to customer needs and offer forbearance in a simple way to customers
in an environment where the operation of collections teams made be also
impacted by COVID-19 - Customers will be made aware that interest will
accrue in the holiday period and they will need to make up deferred payments in
the future - Customers who wish to undertake a full
assessment of their ability to pay or financial difficulty may still do so.
How do I apply for a Mortgage Payment Holiday
Even if you had a mortgage payment holiday before, we always recommend speaking to your Mortgage Advisor in Durham. They will sort out everything out for you and work out whether you actually need to take a mortgage payment holiday. You can also go directly to your mortgage lender and enquire about taking one but this may not benefit you as you may not even need one. The main thing is not to panic and explore all of your options before rushing into anything.
Here are the steps you need to take if you won’t meet/aren’t meeting your monthly mortgage payments and have been directly affected by the COVID-19 outbreak:
- The customer would contact the lender and inform
them that they are being impacted
by COVID-19 - The lender would accept these details from the
customer and offer an automatic
three-month mortgage payment holiday - No evidence is needed for the lender
- The lender makes the customer aware that
interest will accrue and will be contacted at the end of the three months to
complete an assessment of the customer’s circumstances - At the end of three months, an arrangement to
pay will be agreed with the customer according to their circumstances to
recover any shortfall, also ensuring that the mortgage remains affordable and
sustainable - The lender notifies the customer that if they
wished to complete a full assessment now, there may be other forbearance
options more suitable to the customer.
For more useful information on how the coronavirus could affect your mortgage click here.
Will a Mortgage Payment Holiday impact my Credit Score?
In most cases yes, they can give a negative effect to your credit score. However, you are taking one because of a virus so lenders shouldn’t let it damage your score.
To ensure that this is the case, before taking out a mortgage payment holiday, you must contact them. You need to record their answer as well as the date, time and the name of the person that you spoke with. This will avoid any confusion down the line if anything changes. It all depends on your lender, there is no guarantee that every lender will say the same thing.
Will I still be able to Remortgage or take a Product Transfer with my lender?
You would’ve thought that everything would continue as normal, however, all lenders are now avoiding all remortgages and product transfers during a mortgage payment holiday.
This will affect borrowers approaching the end of their existing product as they may be forced to move on to a higher lenders variable rate. This could mean that borrowers who act too early and jump into a mortgage payment holiday deal straight away could end up accruing interest on a costly variable rate.
This is another reason why we say don’t rush into anything! Take it slow and evaluate your options with an expert Mortgage Advisor in Durham first, they will make sure that you actually need to take out a payment holiday first before diving in headfirst. There are lots of mortgage options out there so have a look first with your mortgage Broker in Durham.
What are my other options?
Some lenders could offer you a temporary switch over to interest-only in order to reduce your monthly payments but not to add any more to the loan amount by still servicing the interest payments each month.
You don’t need to put all of your mortgages onto interest-only, but doing so could help you out financially.
If you have savings, remortgaging onto an offset basis could really help you out, you will be cutting down on monthly payments massively. For example, if you have a £250,000 loan and £50,000 in your savings, you would only pay interest on £200,000.
This may all may seem a bit stressful and it this may have come around faster than expected, however, you should try to take it slow and calm down. As your Mortgage Broker in Durham, we are still here to help and relieve you of all of that stress. Remember, we are still open as usual operating 7 days a week. Receive a free mortgage consultation with a Mortgage Advisor in Durham today, we hope that we can help you out!
Mortgage Advice in Durham
How to Get a Mortgage Agreement in Principle?
What is a mortgage agreement in principle?
A mortgage agreement in principle (AIP) is more or less a preliminary confirmation from a mortgage lender, that should everything proceed as planned, they would be happy to grant you a mortgage.
This not only shows you have passed a mortgage lender credit score and are creditworthy, but shows the seller of the property that you are in a better position to proceed than other buyers who perhaps don’t have an AIP, meaning the sale is likely to occur faster. This is enticing for most sellers.
Whilst having an agreement in principle is a very good indication that you will be able to obtain a mortgage, it is important to remember that this is still not guaranteed. A mortgage lender will still have to conduct further background checks at full application stage.
The Value of a Mortgage Agreement in Principle
An agreement in principle is useful for more than just showing estate agents and sellers that you are in a position to proceed. Typically, an estate agent will actually require this before you can make an offer. When it comes to making an offer, it can also help you negotiate on property price.
We would highly suggest getting an agreement in principle as soon as you possibly can in your home buying journey. As a mortgage broker in Durham, we are typically able to obtain a mortgage agreement in principle for you within 24 hours of your initial appointment.
As briefly touched upon, there are a few main reasons why it is beneficial for those who are looking for a first time buyer mortgage in Durham, to get themselves an agreement in principle. These are;
- Negotiating Power
- Avoiding Disappointment
- Knowing Your Limits
Negotiating Power With a Mortgage Agreement in Principle
When you are ready to go ahead and start making offers you are ready to make an offer on a new home, you will need to show the estate agent that you do in fact have the funds to proceed with the purchase.
This will be needed in the form of bank statements and also an agreement in principle certificate that we are able to obtain for you. Once you have shown the estate agent this documentation, typically they will stop marketing the property and place either a sold or sale agreed board outside.
The prospect of going into the process of making offers when a mortgage has already been agreed in principle, is an attractive one to sellers, as it shows you have carefully thought about your plans and know exactly how you plan to make the purchase, as opposed to being spontaneous.
We sometimes find that in these cases, a seller might actually be more willing to accept an offer that is below their asking price, as you are very much ahead of other buyers who haven’t prepared themselves like you, making it a much quicker sale for them.
Avoid Disappointment With a Mortgage Agreement in Principle
Unfortunately with the home buying process, we find that some customers tend to act before they think, making offers on a property without being certain they have the means to proceed financially or if they even can get a mortgage at all.
This can of course lead to customers finding themselves quite disappointed when the mortgage application ends up failing, especially at a point where they may already have had their hearts set on a potential new family home.
The easiest way to avoid that disappointment is to simply get in touch with an expert mortgage broker in Durham ahead of time. Oftentimes there can be little things that are stopping a mortgage from going your way, that with a little time and TLC, can see a mortgage going in your favour.
Common occurrences that we hear of include issues with credit reports, perhaps even some type of phone bill dispute that can easily be fixed in short order. Another one is your electoral register information being either incorrect or non-existent, which again is easily sorted.
In some cases, a first time buyer in Durham may not even be able to get a mortgage at all, but it is definitely better to check with a mortgage advisor in Durham in order to make sure you know where you stand. They will also be able to provide you with tips to improve your credit-worthiness in the future.
Knowing Your Limits With a Mortgage Agreement in Principle
For many budding home buyers, they might think they have got it all figured out. You’ve got a good credit score, have never been declined for credit, all your electoral register information is correct, all your payments have been kept up. So what else could see you struggle?
In truth, approaching 10 different mortgage lenders could give you 10 different outcomes. Each one will have their own specific mortgage lending criteria and you might find yourself being offered a different maximum mortgage amount from each. They all calculate affordability in different ways!
For those who are self employed in Durham specifically, it can become quite confusing, as some mortgage lenders take net profit and salary, whilst others take dividends and salary, some take the latest year, some want to see an average of 2-3 years.
It’s important in any case to understand your borrowing limits, so that you can plan ahead for the future. Getting a mortgage agreement in principle can help outline to you the maximum a mortgage lender is willing to let you borrow, so that you know ahead of time.
A trusted mortgage broker in Durham will also be able to help you determine how much you could be paying back per month on your mortgage repayments, so that you are armed with all the key information you need to take on the next steps of your mortgage journey.
Book a free mortgage appointment today and we will see how we can help.
Debt Consolidation in Durham
Debt Consolidation Remortgage Advice in Durham
Many people are will experience some level of being in debt at some point in their lives. Sometimes due to personal circumstances, this can spiral very quickly out of control from a situation that would’ve been manageable, into something that is not.
When this happens, it can feel that once you have paid all your bills at the start of the month, there is little or no disposable income left for you to enjoy.
One route out of this for some applicants is to consider a debt consolidation remortgage in Durham, as we will take a look at here in this case study.
You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.
Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.
Keeping Within Your Limits Will Help in the Long Term.
Layla was a divorcee living on her own after her children had moved out. Her debt had started to accumulate with legal bills after her divorce and increased gradually over the years, having to live on one income with unreliable maintenance from her ex.
Finally, her daughter became pregnant quite young, and as any mum would, she tried to help her out financially, although arguably, she couldn’t afford to do so.
Luckily Layla had paid her mortgage off years prior, so that asset was there for her to potentially borrow against. Her take-home pay was around £1100 per month, and her credit commitments were taking up the majority of this.
She was not missing any of her payments on credit commitments, but she didn’t have an emergency fund to rely on. Furthermore, whilst Layla’s credit score wasn’t actually that bad, she was no longer able to obtain new 0% credit cards to transfer her balances.
She was recommended to me to see if there were any options at her disposal in order to improve the quality of her financial and in turn, personal life.
A Personal Loan Isn’t Always the Easiest Option.
When I met, Layla was feeling quite down about herself. She had cut back on all luxury spending, and it was evident that she was desperate to take the steps necessary to finally control her financial situation, before it got worse.
We explored the possibility of Layla taking out a personal loan, but her debts had mounted far too high for that to be a plausible solution.
Layla had no family members who were able to lend a helping hand, and downsizing was not an option. We agreed that the right way forward would be to remortgage her home in order to pay off the debts and reduce her outgoings.
Reliability – A Vital Trait For Lenders.
We managed to find a lender to meet Layla’s requirements. Although it has to be said that due to her low income, it was hard to find a lender who was willing to lend the right amount.
We managed to get her an Agreement in Principle, but regrettably, when we submitted the formal mortgage application, it was declined.
The reason the case was declined was that the Underwriter, who assessed the situation, noticed that Layla had been using cards to pay off other cards and then not closing down the cards she had paid off.
They felt that because she had transferred balances, there was a high risk that she should re-offend and rack up debts again. Layla was noticeably and understandably devastated.
She understood the concerns, but in her eyes, she had accepted she had a problem, and by engaging us had taken a positive step to remedy her position.
To her, their risk was minimal – the loan to value was under 40%, she had never missed any payments, and if the remortgage was successful, she could be a very large £500pm better off.
All the above was of course correct, she did have a point, but clients don’t always appreciate that taking a property into possession is the last thing a lender wants or needs. Doing so reflects poorly on the numbers they are required to report each year.
In the event of repossession, they have the considerable hassle of securing the property, ensuring it, marketing it, selling it, and paying the surplus of equity (if any) back to the previous owner.
As such, if there is reasonable doubt, then an Underwriter has the discretion to decline an application, even if it is within their published lending criteria.
Being Declined Doesn’t Mean Failure, You Can Improve For Next Time.
We pride ourselves on getting our recommendation right the first time, but this one didn’t work out that way due to the Underwriter’s adverse comments at the full application stage.
That being said, we knew this remortgage wasn’t as risky as the lender had made out, and it ought to be the right outcome for her, if we could find the right place to go with it.
Layla perhaps felt like she wanted to give up, but we went back to the drawing board to find a different mortgage lender. Sure enough, we found a new one who was willing to help.
Armed with the information we had from the previous lender, we were able to provide better supporting comments for the second roll of the dice, and luckily this time, it was successful.
We’ll Keep You on Track After You’re Back on Track.
Layla didn’t take this step lightly. She has now secured debt that was previously unsecured and may end up paying back more interest overall, depending on how quickly she can get the mortgage paid off.
Fortunately for Layla, in the short term, this has worked out pretty well. She now has had the burden of debt relieved from her shoulders, her credit score has improved, and she can save a little each month.
The savings we were able to help her make amounted to over 50% of her net take-home pay monthly and it has changed her life.
Upon completion of the remortgage, Layla cut up all her credit cards except one to use in emergencies only, and she has now got her financial life back on track.
If you are like Layla struggling with debt but are a homeowner with equity, please call us to discuss your options, ideally before the situation gets out of hand.
The earlier you take back control of your finances the better you will feel about things. We offer debt consolidation Remortgage Advice in Durham & surrounding areas.
Bonus: Debt consolidation, where does all the money go?
