Buying your first property can be a struggle, so when you finally conquer the first rung on the ladder you’ll undoubtedly relax (and rightly so!) The problem that many homeowners are encountering, is that when their current fixed-rate mortgage deal comes to the end of its fixed term, they are finding themselves trapped in expensive variable-rate mortgages with nowhere to turn.
Why? Because with the current economic uncertainty, lender criteria and affordability checks have become more stringent since many homeowners took out their initial mortgages. As well as criteria changing, your personal circumstances may have altered, i.e., you've changed careers and have a lower income. Of course, this isn’t helped by property prices falling, which will have a negative impact on your mortgage deal.
The Pitfalls of being a Mortgage Prisoner
If a homeowner can’t remortgage then the only choice would be to select a rate offered by their current lender or switch to a standard variable rate at the end of their fixed-loan agreement term. The downside is that this is often far higher than a fixed-rate deal. This article by Money Wise delves deeper into how homeowners can become a mortgage prisoner.
What Can You Do?
Before you panic, there are some steps you can take to combat this happening to you.
1. Bring a Broker Onboard
The wisest move you can make is to get in touch with an experienced broker who knows the market back-to-front. A broker will know the best deals out there and be able to give you top advice on where to apply and how to keep yourself appealing to a lender.
Each lender sets its own affordability criteria and while you may not fit for one lender, another may snap you up. A broker will quickly and efficiently find the best options for you. Our Brokers look at well over 0000’s mortgage products which aren’t on the High Street and some which are unique to us.
2. Keep Your Finances Clean
Keep your credit history in order and your borrowing to a complete minimum. This will increase your chances of getting approved for a remortgage when you make the move to switch. This advice from Entrepreneur will give you insight into keeping on the straight and narrow.
3. Try a Building Society
While many high-street lenders decide affordability by computerised checks without taking into account any complex circumstances, some smaller lenders are considering the ‘mortgage misfits’. While a flood of borrowers can be rejected by the big banks, you may find more luck with building societies who are opening their doors to those who are stuck in a rut.
4. Avoid Major Lifestyle Changes
Sometimes this can be unavoidable. But if there’s any way you can avoid switching jobs, ramping up hefty socialising costs or spending your savings on your dream car – you should think twice. Lenders not only look at your income, but they look at your job history and how you spend your money to prove your reliability to make payments. Keep your finances as stable as possible to show you can be counted on.
5. Increase Deposit and Reduce Mortgage
These are two highly effective moves you can make to increase your chances of remortgaging. If you increase your current deposit by any means you have, this will heighten your chances of appealing to a lender. Likewise, reducing your mortgage by overpaying (if that’s an agreed term in your loan), will make it easier to remortgage simply because your loan isn’t as high.
Remember, the most sensible approach is to do this through an experienced and trusted broker who has your best interests at heart.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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