Difficulties with re-mortgaging by Dean Dunham

It is becoming more difficult to remortgage especially in the following circumstances.

Age is an important consideration for mortgage lenders as they want to be sure that (1) you will survive the mortgage term and (2) that you will be able to afford the repayments throughout the term. With this being the case the older you get the shorter the term becomes that mortgage lenders will agree to lend over.

If this applies to you there are two things that you can do:

• apply for a shorter-term mortgage, although this will increase your monthly payments
• seek out one of the more flexible lenders. Leeds building society will let you borrow up to the age of 80 as long as you are not older than 70 when you apply.

You have an interest-only loan

Interest only mortgage previously have been very popular as they meant lower monthly mortgage payments. However, all has changed and after the Financial Services Authority announcement that they would look closely at interest only mortgages, lenders have now tightened their conditions for interest only lending. For example Santander have said that it will only offer interest-only deals up to 50 per cent loan-to-value and others have introduced similar conditions. Other lenders, including Co-operative Bank and Nationwide Building Society have decided not to offer interest-only mortgages anymore.

With this being the case it means that for most people on interest only mortgages, they will have to switch to a repayment mortgage if they want to re-mortgage to get a better deal.

You are in negative equity

If your house is worth less than the outstanding amount under your mortgage it will be very difficult to re-mortgage. The reason for this is that lenders typically want to see that your mortgage amount is no more than 90 per cent (sometimes less) of the value of your house.

However, whilst this will almost certainly rule out a re-mortgage with a new lender it does not mean that your existing lender will not offer you a better deal. In this respect your existing lender may allow you to switch to a fixed or tracker rate. Don't be afraid to ask.

You are self-employed

If you have recently changed jobs or become self-employed you may not have all the paperwork needed to get a loan. It used to be much easier, but the plethora of self-certification mortgages, which allowed you just to state your earnings, is now a thing of the past. Lenders now demand greater proof of your income. Many want at least three years' accounts.

However, there are still lenders that will lend in circumstances where you do not have three years accounts and other proof of income, although inevitably you will pay more as the lender is taking a greater risk. If this applies to you seek the assistance of a mortgage broker.

Final word of warning

If you feel that you need to re-mortgage ACT NOW as it has been announced that lending criteria are set change. As part of these changes lenders will be looking closer at your earnings and ability to make monthly repayments. 

For more information on re-mortgaging or on any other legal or consumer matter log on to Dean's website