Copy article

METRO: Help! What are my mortgage options? READER Q

Journalist: Sarah Davidson, Freelance

ended 07. October 2022

Lola Has to remortgage in March. She can’t afford what she’s been quoted. Her financials (what I could prise out of her) are below. Both loans are with NatWest. What are her options?

London flat – is BUY TO LET

Current payment 1.79% fixed monthly payment = £259.94pm

Outstanding amount £173991 interest only 19years

Loan to value 53%

Kent cottage residential repayment

Current payment 1.26% fixed monthly payment = £727.20pm

Outstanding amount £149,382  19 years

Loan to value 50%

Other answers:

Why did she choose interest only last time?    All I could afford.  LET to BUY mortgage.  LET one out, in order to BUY another to live in

What’s her income / employment status  - Full time staff, £42,000 approx

Any other big fixed outgoings?  - No

How long does she have left on her term -  - See above 19 years

How old is she - 50

Is she borrowing jointly with someone else?   - No

Any missed payments, CCJs or bankruptcy in the past six years?  - No

Any other savings?  - No

Any other debt?  - No  (I’ve three loans, totalling about £300 a month, fyi)

 

Writing this up now and have to file by 12. 
Specifics welcome!

4 responses from the Newspage community

Copy all

Star Quote
Copy

Michael Webb
Managing Director at Mortgage Republic
There is a lack of info to be able to fully recommend any mortgage remedies. However, Lola is actually not in the worst position she thinks she might be. If things really are unaffordable for her, and remortgage deals, or Natwest product switch offers prove beyond monthly budget, she should consider selling the buy to let London flat. The equity from this, net of any capital gains tax, is substantial and can then be used to pay down, possibly in full, but likely a substantial amount, her residential mortgage, making her monthly outgoings much more affordable. An addition to this is, as she did a let to buy she would have paid the additional stamp duty on her residential purchase as a second home. If she is selling within a 3-year window, this can also be claimed back.
Star Quote
Copy

Graham Cox
Director at Bridging Hub
B2L It's hard to know without knowing what rent Lola is collecting. But she's going to face a stress test rate of somewhere around 7% right now. So assuming she's a basic rate taxpayer, at 7% her rent needs to be at least £1268.68 to cover 125% of the interest on the £173991 mortgage balance. 173991 x 7% = 12,179.37 p.a. 12179.37 / 12 = £1014.95 per month 1.25 x 1014.95 = £1268.68 Residential Does she have a family member who would be willing to join her on the mortgage on a Joint Borrower Sole Proprietor basis? Or could they gift some equity to reduce the loan size? She may also want to see if the bank would be willing to consider interest-only for a while. The only other option I see is for Lola to sell her buy-to-let property quickly by pricing slightly more cheaply than comparable properties, and make sure the prospective buyer can move fast. A cash buyer is ideal. The last thing you want is to be chasing the market down. This is where a good estate agent can come into their own.
Copy

Jonathan Burridge
Founding Adviser at We Are Money
Sarah - are both up? what is the current rental income? Does she have any dependents?
Copy

Stuart Powell
Managing Director at Advice Guru
There is only one option. Seek the advice of a regulated, experienced mortgage broker who will complete a full Fact Find and research to enable them to explore all your options.