Q My spouse and I made a fortunate purchase of a house four years ago. Thanks to generous contributions from our parents, we were able to make a substantial down payment of 40% and still had enough left over to make significant improvements to the property, which was in dire need of them. Now, as we approach the time to remortgage, we estimate that we will need to borrow approximately half of the current value of our home.
Despite having a sizable deposit, we still had to borrow a substantial amount, equivalent to five times our combined salaries. Since then, our family has grown from one to three children, and my wife has completed a well-paying contract job, with limited prospects for finding another one in the near future.
In a year, our current mortgage fixed term will expire, and I am concerned that we may not pass the affordability checks required to explore different options and secure a new deal with another bank. This means that even though we possess a significant amount of home equity, we would be trapped and forced to switch to our lender’s unfavorable standard variable rate. Frankly, this situation doesn’t make any sense to me. Am I overlooking something?
SW
A As it turns out, you are missing quite a lot of information. Pete Mugleston, a mortgage expert and the managing director of onlinemortgageadvisor.co.uk, explains, “If you are currently dealing with a mainstream lender, it is crucial to recognize that you have more choices beyond the standard variable rate. Lenders typically offer various fixed-rate options for you to consider. Additionally, when opting for a rate switch or product transfer, your lender usually does not require proof of income, details of your expenses, or information regarding dependents. This makes it easy for you to select a new deal without having to provide any additional documentation.”
Of course, if you were considering changing lenders entirely, rather than simply switching mortgage deals with your current lender, you would need to undergo comprehensive affordability assessments. Therefore, I suggest sticking with your current lender for the sake of simplicity.
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