What can I do if I can’t afford to remortgage?
When you have a fixed rate mortgage you can apply to remortgage your property when that deal ends. You don’t have to remortgage, of course. But it often means you get a better deal than staying with your current deal.
Any changes since you last applied for your mortgage might mean your current lender says they don’t think you can afford to remortgage. There are many reasons why that might happen.
It could be due to a change in your personal circumstances or higher interest rates. You’re not alone! Reports say that thousands of UK homeowners are facing higher rates than what they’ve been used to, which is resulting in issues with remortgaging.
Other reasons include your credit rating falling or your property’s value may have reduced. It might simply be down to a higher cost of living meaning you fail affordability tests.
If you have applied to your current lender and they have refused to remortgage, the first thing to do is not panic! Here are our tips to help you.
What can I do if I can’t afford to remortgage?
If your current lender has turned you down for a remortgage, don’t despair. Not all lenders are the same, so another might be able to help.
Get advice from a broker
If you sourced your current mortgage yourself, then you may have visited a high street lender. This is often the bank or building society that you have a current or savings account with. If that’s the case, then they can only access limited mortgage products. Getting advice from a mortgage broker gives you a broader choice.
That’s because mortgage brokers don’t use a single lender. They can access more deals and lenders that specialise in home loans that high street lenders can’t offer. If you used a comparison website, then they don’t get access to the deals or lenders that a broker can.
The Mortgage Dog is a broker. Our team is always available for a no obligation chat about your options. So contact one of our team today.
Don’t apply straight away
If you’ve taken out a loan for a car, a credit card or other loans recently, then this impacts your credit rating. This type of transaction leaves what is known as a ‘hard search’ on your credit record. These leave an imprint on your credit report, which lenders are often wary of.
Before taking out the loan, you may have approached a number of lenders. Too many hard searches in a short space of time raises concerns for lenders. They may be concerned that you are desperate to borrow money, even if that’s not true.
There are also ‘soft’ searches, but these tend not to affect your ability to get credit.
By delaying your application until your credit score improves can increase your chance of remortgaging. You can also check your credit score with the likes of Experian to see what is holding you back.
Look at extending your mortgage term
When remortgaging, you can choose to extend your term. For example, from 20 to 25 years. Extending your term means monthly repayments are lower, which tends to make them more affordable.
Of course, you will end up paying more interest in the long run and some lenders may not agree to extending your terms. But it is worth checking out this option.
Remember, that you can always reduce the term when it comes to remortgaging next time if your situation improves.
Consider an interest-only mortgage
Interest-only mortgages are not as common as they once were. But they can help lower your repayments so you can stay in the home you love.
This solution is better as a short-term option so you don’t have to repay the remaining mortgage balance at the end of your mortgage term.
Being accepted for an interest-only mortgage depends heavily on your income and the amount of equity you have in the property.
Stay with your current lender
If you have had no issues with your current lender, you could consider a product transfer. That means you get a different product but you don’t have to go through affordability checks. If product transfers are on a like-for-like basis, there is no need for further underwriting. The issue with this option is you won’t access the best rates. And your broker will be limited to whatever the lender offers, especially if you have had a change of circumstances, such as becoming self-employed. But it could be a solution until your situation changes.
Pay off a lump sum
If you have available savings, then you could use them to pay off a lump sum. This helps reduce what you owe on your mortgage and makes repayments smaller.
It all depends on the loan to value (LTV) percentage of your mortgage. Most mortgages have a limit as to the amount the lump sum can be. So check your paperwork.
What should I do?
If you need help with your remortgage, our team would be happy to help. Contact us today for more details.
Remember, your home may be repossessed if you do not keep up your repayments on your mortgage.
