Remortgage: joint mortgage, husband permie, me contractor - thoughts?

[Glencky]

Hi all,

I've read several threads about contractor mortgages so think I understand the principles. I haven't found anything about my specific situation though. I will be contacting a specialist contractor mortgage broker over the next week or so as I do appreciate this is the way to go (I'll go with one of the recommendations on here). But in the meantime, looking for any relevant personal experiences.

It appears I'm in a relatively unusual situation. My husband and I are both professionals - he's permie, I'm a contractor (14 months, set up in Jan 2014, first year's accounts will be prepped at tax year end as I changed my LtdCo year end to make various things easier). My husband has nothing to do with my limited company (isn't a secretary or shareholder, draws no income - literally nothing to do with it).

Our mortgage is currently base plus 2.15%, so currently 2.65%, for life of mortgage. It's a good rate, but not the best, and we'd like to a) fix, ideally for 5 years, and b) get better, even if only slightly.

Our current mortgage is equal to c.5x husband's salary. We could pump in cash to make it c. 4.25-4.5x. As company director, I draw a full salary (operating inside IR35). If both of our current salaries were taken into account, our mortgage would be c. 2x combined salaries.

Loan to value is c.60%, down to 50% or less if we pumped in extra cash.

I'm about to come to the end of a 6 month contract with a large FS company, and they just offered a 6 month extension. I'm undecided whether to take it, for lots of reasons, I know having a 6 month contract may be critical for remortgage. Worth mentioning (without being cocky, as nothing is certain) I've a few people (who I know and therefore I know have credible prospects) chasing me for work at the moment so if I don't take this extension I don't anticipate being out of a contract long (although anyway warchest big enough not to worry for a good few months). I don't know how lenders do 'annualisation' calc but current net day rate x 220 again puts me in the territory of having a mortgage only twice my annualised contract rate without taking into account husband's salary.

All in all, we're a pretty good risk from a lender's perspective. But given my relatively 'young' company and other factors, I think we fall between a number of lending criteria - neither of us can quite meet the criteria on our own, and anyway property currently held jointly with joint mortgage and we'd rather not change that. There are headline rates out there quite a bit better than our current rate but I think because of our situation we may not qualify. Not going to stop me trying, though! We've always managed our mortgage carefully to ensure we never pay over the odds, so trying this now because I feel we 'should' be able to get better. I think we may find we can qualify for some sort of remortgage but the rate isn't as good as we're on at the moment even, because we don't quite tick the boxes. But we'll see!

So - any thoughts? I haven't found anything about contractor mortgages where it's a joint mortgage and one of you can almost support the full mortgage as a permie on conventional lending criteria. Anyone had any experiences with this and beaten the system?

[Mark McBurney@CMME]

Hi Glencky,

Believe it or not you are not alone. Many people that I speak to are in the position of having a wife or husband who is a permie, and need to mortgage together, so don't worry from that point of view.

You look in a good position from the information in your post, however it's worth noting that until you're actually back in contract your options are pretty much none, without any trading history, as lenders will not consider a contractor mortgage without the relevant contract backing it up.

To be honest, the bigger point I would make is that you're very unlikely to find a five-year fixed rate at less than the 2.65% you're currently on? There isn't a great deal of value in 5-year deals at present and as an example, Clydesdale Bank's best 5-yr rate is 2.79% - and generally they offer better value than most over 5yrs. The problem is, after whatever rate you take, that lender's standard variable rate is going to be at least 4% (Halifax is 3.99% - the second lowest around), and you're back to 'square one' as far as rates are concerned? You will however find a 2yr fixed rate at sub-2%.

Have a chat with a broker (I'd suggest speaking initially to a couple and see what your thoughts are; it's important you trust your broker and speaking to a few will give you a chance to have a think about who you feel most comfortable with), and they can see which lenders you would be able to approach, and also often access better rates that you'd get either going direct, or even with a lot of other brokers.

Good luck.

Mark

[Glencky]

Hi Mark, thanks for the reply and sorry for the delay - I thought it would notify me of any replies but I obviously set up wrongly.

I'm writing in haste - but all useful input, thanks very much indeed.

[Willapp]

Just a personal recommendation for Contractor Mortgages. We dealt with Louise there last year for our mortgage and they were fantastic especially given our situation was probably more complicated than yours - I had been a contractor for 2 years but just switch back to perm 6 months previously, but my wife and I were getting a mortgage with my brother-in-law who also runs his own business so there was a lot of factors involved. CM dealt with them superbly and managed to get us the mortgage we needed and at a great rate.

Good luck!

[alphadog]

2.65pc isn't bad.

Personally if I was in your situation, I would wait until I get my contract sorted and have at least one year of company accounts filed before approaching a freelance mortgage broker.

[Power Mortgages Ltd]

... To be honest, the bigger point I would make is that you're very unlikely to find a five-year fixed rate at less than the 2.65% you're currently on? There isn't a great deal of value in 5-year deals at present and as an example, Clydesdale Bank's best 5-yr rate is 2.79% - and generally they offer better value than most over 5yrs....

Halifax 2.44% *Exclusive rate
Metro Bank 2.59%

They're just the contractor friendly lenders. If her hubby can secure a mortgage based upon his own income (which I appreciate may be a stretch) then:

Woolwich 2.29%
Virgin Money 2.29%
Abbey 2.35%
Nationwide 2.44%
Natwest 2.49%
Platform 2.59% *Exclusive rate

[Mark McBurney@CMME]

Halifax 2.44% *Exclusive rate
Metro Bank 2.59%

They're just the contractor friendly lenders. If her hubby can secure a mortgage based upon his own income (which I appreciate may be a stretch) then:

Woolwich 2.29%
Virgin Money 2.29%
Abbey 2.35%
Nationwide 2.44%
Natwest 2.49%
Platform 2.59% *Exclusive rate

Absolutely - there are some good deals out there. The question for the OP and their broker is whether a drop in rate of 0.3% is worth the cost of doing it, and then reverting to an SVR of 4%+...

[Power Mortgages Ltd]

Absolutely - there are some good deals out there. The question for the OP and their broker is whether a drop in rate of 0.3% is worth the cost of doing it, and then reverting to an SVR of 4%+...

All depends upon what will happen with interest rates which nobody can predict so it will largely depend upon the client's attitude to risk and I am guessing as she has said because she would prefer to be on a fixed rate, they would see it as an advantage. Also depends upon the loan size because that 0.30% saving over a 5 year period could easily save back any fees payable to remortgage and that is without factoring in any potential interest rate increases which would hike the rate they are currently on.

[Glencky]

Hi folks, thanks to all of you who have replied, I appreciate your input. I'm sorry I've been tardy in my replies - busy day!

I'm interested by the suggestion it's not worth looking at until I'm absolutely certain I've got the X years' accounts/ whatever contract in hand. It's ALWAYS worth reviewing one's mortgage, at least on the assumption that for most people it's their single biggest outgoing. As others have implied, even a small percentage difference makes a big difference on a larger mortgage, which ours is (though I appreciate I didn't say that). Obviously fees are large these days too so one needs to consider total cost but still.. I always watch the mortgage market closely and I've been aware for a year or so that there were starting to appear, rates that were better than ours. For a while they were 'only fractionally' (0.1% or less) making it not worth the hassle for any marginal benefit. But these days that's different. The only question was would we qualify. The second we're getting into the zone where we will, I'm looking into it. Anything else is poor financial management.

Some great suggestions and recommendations, thanks very much. I've also received a great PM from another broker off the back of this thread so overall, I'm glad I posted.

Thanks for your help, folks.

[morf]

Definitely take the extension if you want to remortgage!