CLIENT’S SITUATION
Manchester Mortgages received a phone from a potential client asking us to review their mortgage and existing credit commitments.
The clients were in their mid 40’s with four children, clients were both employed with a joint income approaching £60,000 per year.
Their property was valued at £ 200,000 with an existing repayment mortgage with the TSB which had £113,000 outstanding with 9 years remaining – they had renewed their mortgage rate with TSB in September 2017 and had chosen a 2 year fixed rate which resulted in mortgage payments of £1,080 per month.
They had two unsecured loans with £5,000 outstanding for which they were paying in total £ 210 per month and owed £20,500 on credit cards which they were paying minimum payments of £570 per month.
Including the mortgage the cost for all of the above was £1,860 per month and in total they owed £ 138,500 but had an Early Repayment Charge ( penalty ) of £ 2,500 if they moved lenders.
All payments were up to date with no payments missed.
The personal loans were gradually reducing but the credit cards were not as the payments mainly covered interest with very little capital repayment.
THE PROBLEM
Our clients were left in a position every month of seeing their monthly salaries credited to their bank account only to see it go out as the above payments went out along with daily living expenses.
This left the clients feeling that they were working just to pay the bills and each month they could see no benefit from all of their hard work and their finances were stretched meaning that they had not been able to have a family holiday for the last four years.
A new unsecured personal loan would only be repayable over a maximum 7 year period which meant that any new loan payments was outside clients budget.
Clients wanted to repay all the debt and consolidate it to one payment so they could then see what was left in their bank account each month and budget accordingly.
Clients were also willing to pay any Early Repayment Charge and to extend their mortgage term from 9 years to 20 years to achieve their monthly budget of £ 725 per month.
THE SOLUTION
As Manchester Mortgages are a whole of market / independent broker we were able to research the mortgage market and recommended that clients re-mortgaged to a new lender and increase their mortgage to £141,000 which included repaying existing TSB mortgage along with the Early Repayment Charge and all their existing credit card balances and the two unsecured loans *.
(* Manchester Mortgages fully discussed with the clients and provided the monthly costs regarding the options of leaving the unsecured loans outstanding or to be included in the re-mortgage and clients preferred to include them in the re-mortgage – in their words- ‘ they wanted to wipe the slate clean and have one monthly payment so that they could budget accordingly’.)
After fully discussing clients requirements Manchester Mortgages recommended a 3 year fixed rate at 1.94% with Nationwide over 20 years which reduced the mortgage payments to £ 710 per month – a whooping reduction of outgoings of £ 1,150 per month.
The lender offered a free standard valuation and £500 towards legal fees along with no arrangement fees.
Therefore clients now have only one payment per month and do not have to worry about personal loan and credit card payments and know exactly where they are up to with their finances – and with the monthly savings have now been able to book that all important overdue family holiday.
THE DISCLAIMER
Clients were made fully aware of the implications of transferring short term loans to long term commitments and although they were reducing their immediate outgoings over the new mortgage term, in the longer term the total charge for credit was likely to be higher.
In addition by transferring unsecured borrowing (such as credit cards and unsecured personal loans ) on to a secured basis they were potentially placing their home at a greater risk in the event of mortgage payments not being maintained for the term of the mortgage.
CONCLUSION
With their mortgage payments reduced clients are seeing the benefit of their £ 1,150 per month savings and looking forward to their family holiday which should be the first of many !
If you have an existing mortgage and outstanding loans or credit card balances or wish to improve your property give MANCHESTER MORTGAGES a call on 0161 706 0242 to see if we can make a difference to your mortgage payments.
