A Mortgage Prison – What Is It?

Are you in mortgage prison? Find out more in this blog!

The Bank of England’s interest rates can pretty much rise and fall at any given moment (usually due to economic factors), but it seems like they’re constantly changing. But, why care about changing interest rates? Well, if you’ve got a mortgage you most definitely should. Early August of 2018 saw the interest rates rise again. The ripple effect of this is that those on an SVR mortgage will have seen an increase in their monthly repayments.

By no means a completely new term, Mortgage Prisoners are those who are no longer on their introductory rate. They are now ‘locked’ into their mortgage deal with their current lender on an SVR. Now, they’re not having a gun held to their head… No, they’re simply unable to pass the strict affordability criteria, which means they can’t get off their current deal.

According to the Telegraph, there’s around 150,000 mortgage prisoners in the UK. Find out if you’re a mortgage prisoner, below.

Mortgage Prison

So, how do you know if you’re in mortgage prison? If you’re one of those whose introductory rate has finished, and you cannot switch mortgage lenders because of strict affordability criteria, then you’re a Mortgage Prisoner. Sorry… But, don’t distress! There could be a way out. We’ve got to talk about the bad before we get to the good.

See, when it comes to passing these affordability criteria, it’s not as simple as it used to be. It doesn’t matter if you’ve been paying mortgage payments with a higher interest rate; even if the mortgage you’re applying for has lower repayments, you may not be approved. This is because lending criteria have changed in a big way. It’s become a lot stricter in recent years and has become significantly harder to switch off your current mortgage.

If you’re still tied into an introductory period, you may not be able to exit your mortgage so easily without paying high repayment charges. However, if you’re stuck with your lender’s SVR, the only thing stopping you should either be your credit rating (we have a whole blog dedicated on credit ratings, scores and how to improve yours) OR, meeting a new lender’s affordability criteria. Great…

However, where there’s a will, there’s a way.

Yes, Zing team are here to help. Although you may not have passed the affordability criteria of a select few lenders, doesn’t mean you’re stuck in mortgage prison. Our expert advisers have the knowledge and contacts to hopefully find you the right mortgage deal. We’ll be able to find one that you’ll be accepted for too, so you can get off that SVR mortgage. If anyone can break you out of mortgage prison, it’s Zing.

Should you re-mortgage?

It might be the right time to get away from your mortgage prison and find yourself a fairer and more affordable mortgage deal. This could help save you some money too! On an SVR mortgage (the rate all lenders will move you to after the end of an incentive period), you’ll find that changing interest rates will make your monthly payments fluctuate. Whereas, re-mortgaging to a fixed deal means you’ll be unaffected by changing interest rates. However, this is only whilst in your ‘fixed’ period that is… – the clue is in the name ‘fixed’.

If you answer ‘yes’ to one or more of the criteria on the list below, it may be time to re-mortgage.

1. Is your introductory deal about to expire?

2. Is your home worth more now vs. when you took your mortgage out?

3. Do you want to borrow more money?

4. Are you stuck on an SVR mortgage?

What we should say, before banging the re-mortgaging drum, is that if there’s a high repayment charge on your current mortgage, then it may not be the right time. This is due to the fees of exiting early can sometimes outweigh the savings from re-mortgaging – so be aware. If you are in real Mortgage Prison however, you shouldn’t have any Early Repayment Charges to worry about (every cloud and that?). Your lender will be able to tell you of any exit fees, just give them a call.

If you need money and can find a loan with interest rates cheaper than the exit fees on your mortgage, consider that instead of re-mortgaging. (Like a Second Charge, which we can arrange!)

If you’re thinking about re-mortgaging, but not entirely sure of your options and if it’s the right one for you, we’re here to help. The Zing team are professionals with years in the business and have access to thousands of mortgage deals, so our expert staff can tell you whether it’s the right time to re-mortgage.

Give the Zing team a call today to talk about the next step.

Find the full article HERE.

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