Partner considering becoming a contractor - mortgage due for renewal in June

[B80]

Hi,

I have a look around the forum prior to posting but I couldn’t find anything similar to this scenario.

Just wondering what your take would be on this situation mortgage/contracting situation. We’ll probably end up speaking to our lender (Yorkshire), but it’d be good to get some general advice here first.

The situation is that my wife has just been asked if she’s interested in a 6 month contract role. This would be a great chance for her to have Project Lead/Management experience on her cv. It would involve leaving her current permanent management role.

Our mortgage is up for its first renewal in June 2014. The contract is pencilled to run from February to August. I’ll hopefully still be in my permanent job of 25k a year. I’ve been in this role since August this year.

I know nobody can say for definite, but would you say taking the contract role could jeopardize us renewing our mortgage as this will be her first contract and it would be due to expire a month or so after the renewal?

Cheers.

[eek]

As power mortgages said to someone last week for internal transfers mortgages companies rarely care assuming you are still paying every month

[Sausage Surprise]

What do you mean by "mortgage is due for renewal"? I never knew you had to renew a mortgage.

[Power Mortgages Ltd]

I assume you mean your initial rate (like fixed rate for 2 years or tracker rate for 2 years) is due to expire and you will be reverting to the lender's standard variable rate which could be higher than the rate you are currently on?

You'll have 3 choices in this instance:

1) Revert to the lender's standard variable rate (SVR) and leave it as it is. Depending on the rate you are on now and what the lender's standard variable rate is this could either be better in terms of your monthly repayments (if the SVR is lower) or worse if the SVR is higher. If it is the latter then you're unlikely to want to chose this option.

Your wife's change in circumstances makes no difference to the above, this will happen regardless of whether she is contracting or employed or even if she is not working at all.

2) The second choice would be to remortgage to a new lender who can offer a new mortgage (like a new fixed rate for x years or a new tracker mortgage for x years etc). Your wife changing jobs is likely to have an impact on what options are available in this instance although it doesn't necessarily mean you won't be able to get a mortgage with a new lender. There are a few options from other lenders where the amount of time your wife has been contracting won't make a difference assuming there is no gap between when she leaves a permy role and starts contracting. This will all of course depend upon a number of other circumstances too (meeting the new lenders affordability and credit score criteria for example).

3) The third and final option is to see what Yorkshire can offer you to retain your business, commonly known as a product transfer. As Eek says, a change in your wife's circumstances won't make any difference to your eligibility for a product transfer as they will not need to underwrite a product transfer in the same way they would if you were switching to another lender.

My advice would be to investigate option 2, to see if you would be eligible to switch lenders and then once you know if this is possible (because if it is not, then that leaves option 3 as your best bet if option 1 is not beneficial) see what Yorkshire would offer you to retain your business (option 3) and go with option 2 or 3, whichever offers the best terms.

Hope that helps?

[ASB]

Re point 1. Is it not the case that it is really "revert to something which was agreed at the outset". Of course that can be svr but all of the mortgages I had with a promo rate of some description changed to a base rate linked rate.

[Power Mortgages Ltd]

Re point 1. Is it not the case that it is really "revert to something which was agreed at the outset". Of course that can be svr but all of the mortgages I had with a promo rate of some description changed to a base rate linked rate.

Hi ASB, yes, it would always be reverting to something which was agreed from the outset as per the key facts illustration / mortgage offer you would have been given. In the majority of cases once you have finished your initial product there are no early repayment charges keeping you tied to that lender so you are free to move should you wish.

Regarding what type of rate you revert to, it depends on the lender. Some do revert to a base rate tracker (Woolwich/Barclays are one of them) but others will revert to a standard variable rate.