If you become redundant, your mortgage will likely be the biggest concern. But what if you’re due to remortgage? Darren Paulson offers reassurance and guidance to the reader dealing with job loss and mortgage renewal
Question
My wife and I jointly own our home, and our current fixed-rate mortgage deal expires later this year. Until recently, we were working full time, but I was laid off three months ago and am still looking for a new role.
I’m receiving redundancy pay and have some savings, but that will run out in a year. We are concerned that when we come to remortgage, lenders may be reluctant to offer us a competitive deal because our circumstances have changed.
So we have several questions. Should we remortgage now (there are less than four months until the current deal expires) or wait and see if I get a new job? Or should we talk to our current lender first about switching?
Also, how do lenders evaluate applications when one of the co-owners is temporarily out of work, and what options might be available to us? Thank you very much for your thoughts and advice.
Darren’s answer
This is a stressful situation, and you have practical options. It’s good that you’re asking the right questions early enough to stay in control.
I want to reassure you that you are not stuck and that there are options available to help.
There is still one household income that, depending on your mortgage amount and affordability, may allow for a remortgage.
You have two main options:
Return the mortgage to the new lender:
- A mortgage broker can search the market based on the outstanding mortgage balance and the value of the property to see what rates are available to you.
- This will be a new mortgage application which can incur legal costs and other preparation fees (your broker can guarantee free legal proceedings and a free valuation with some lenders). Some lenders also offer cashback deals for remortgage situations.
- There will be a credit scoring application and a full assessment of income/expenses.
- As mentioned above, repetition may make this choice difficult.
Switch to a new rate with your current lender:
- This is classified as price switching or product shifting.
- The benefits of this are almost no credit score or need to provide proof of income because the lender has already assumed the risk for your existing mortgage.
- There is also no need for a valuation as the lender will have their own internal valuation of the property which may mean that the loan to value ratio is positively influenced by the lender’s valuation rather than the market value.
You’re within four months, which is usually the window to secure a new rate with your lender or look to remortgage with a new lender.
Even if you get a new rate now and your circumstances change in the next few months, you still have the option to review again (within an appropriate time frame).
Talk to a broker who can review rates with your current lender and those on the open market to secure the best rate. Also discuss the opportunity to review if rates are open and will guide you through the process.
