What is to become of the 95%-125% plus remortgagers?
Posted on 29 February 2008 by
Borrowers who took 100%-plus mortgages or 100% mortgages, who need to remortgage, may soon find that there are no deals available
Most will have accrued some equity to make it onto the few remaining 95% deals, and the lucky ones may have accrued enough equity to make it onto 90% deals, but the ones who don't will have to look at the other options:
Wait on the reversion rate/ Standard Variable Rate (SVR). If you live in an area that is likely to increase in value (like parts of London) then you could wait it out on your reversion rate. If this stretches affordability you may have no choice but to extend the term of your mortgage, go interest only temporarily, or take in a lodger to help.
The Bank of Mum and Dad. A parent/ friend or relative may be able to lend you the few percent you need to clear part of your debt and be eligible for a 90% deal. Beware that this needs to be paid back though; draw up a written agreement and if an equity share of the property is given, remember that your property might fall in value this year and you will be no better off.
A personal loan. This route is not ideal. whilst it would raise some money in the short term to allow you to take a 90% remortgage, personal loans can only be spread over a short term, so the monthly repayments might work out worse than staying on your lender's Standard Variable Rate.
nb: Northern Rock borrowers who had a Together Mortgage already have the part of their mortgage above 95% as a personal loan. If they stay with Northern Rock the rate on this increases dramatically, to about 15%. However, this is over 25 years, so individual maths would need to be done to work out if a shorter term on a better rate is more affordable monthly.
Definitely don't be tempted to use a 0% credit card; the interest rate after the 0% offer will be huge.
Sell up. This is also not so easy for people misfortunate enough to find that their property value is still not as much as their mortgage debt. In this case, you may need permission from the lender to sell. However, it is likely they will grant it if it means they get most of their money back.
So in short, It's about doing the maths, and working out what, in real terms, could be a cheaper option than sticking on the lender's reversion rate or SVR. By all means, have a broker go through all the numbers with you.
I imagine plenty of people will have to stay on their lender's SVR this year, and cut back on other things. Many lenders are agreeing to give permission to let, under the circumstances, if you call for permission to rent the property out, to live with a relative or something cheaper.
Categories: Mortgage Lenders, First time buyers
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