Both are over 60 and self-employed. They have missed three mortgage payments in the past year, including the last two months.
The property is valued at over £800,000 and last year’s accounts showed a joint income of over £180,000. Their commitments are costing them about £9,000 per month. What are their options?
Ramona Brown is marketing manager at All Types of Mortgages
“Morty and Melinda are approaching retirement, so we need to establish if they require a term that takes them into retirement and what their pension provisions and ability to repay the loan are. Some lenders set restrictions on the maximum age of applicants at the end of the mortgage term, so this restricts the lenders we could approach.
They have a substantial amount of credit outstanding and the best course of action would be to assist them in reducing their credit agreements and overall aggregated monthly payment.
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Unity’s medium adverse range would be suitable, as it allows three missed payments and two missed in the last six months. It also specialises in large loans at higher adverse risk levels.
It has a three-year self-cert fix at 6.69 per cent, reverting to LIBOR plus 2.55 per cent. There’s an arrangement fee of £995, which can be added to the loan, and there are no extended early repayment charges.”
Mike Pendergast is an IFA at Zen Financial Services
“Although the clients have large borrowings, they have significant equity in their property. Loan-to-value equals less than 50 per cent and they have more than enough equity to consolidate all borrowings onto the mortgage if they wish to do so. This would leave them with a mortgage of £550,000 against an £800,000 property.
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There would be a range of deals available to them on either fixed or discounted rates. However, they should consider whether this is the best course of action in the long run, as consolidating unsecured debt onto a mortgage, while reducing the interest rate and the short term monthly cost, will normally involve extending the term and paying more interest on the long run.
Also, they should guard against consolidating the credit cards and loans and then using them again. They should ensure that they reduce their credit limits or cut the cards up altogether.
Simon Tyler is managing director of Chase De Vere Mortgage Management
“This case is tough because the couple has missed the last two payments and that’s a big concern. It’s not clear how much money they are earning at the moment and how sustainable it is. A lender would need to be convinced they could maintain the payments without problems.
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That said, they could save a fortune by consolidating their debts.
It might make sense to choose a 10- year fix. Assuming they raise the £550,000, that they need and pay a rate of 6 per cent on a 10-year term, the repayments would be about £6,000 a month, saving £3,000 a month instantly.
If they chose an interest only loan, the repayments would be £2,700.
However, with their patchy repayment record, they may have to take a non-conforming deal, which could have a higher rate. Yet, this should still only be about 6.50 per cent.
The biggest challenge is proving that they can meet the repayments.
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