Manchester Mortgages received a phone from a potential client asking us to review their mortgage and existing credit commitments.
The client was in their early 50’s, single with no children, employed with a salary of £38,500 per year.
Client had a small shareholding in their employer’s company for which they received £9,000 per year paid in dividends but client was unable to produce evidence of this income from HMRC and therefore this income could not be used for lenders affordability purposes.
Their property was in Monton and was worth £ 230,000 with an existing repayment mortgage with the Bank of Scotland which had £110,000 outstanding with 15 years remaining – their existing fixed rate had recently expired and they were paying lenders standard variable rate of 4.99% which was costing £ 825 per month.
They had 4 unsecured loans with £17,130 outstanding for which they were paying in total £ 415 per month and owed £21,000 on credit cards which they were paying minimum payments of £475 per month.
Including the mortgage the cost for all of the above was £1,715 per month and in total they owed £ 148,130.
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.
Clients were left in a position every month of seeing their monthly salary 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 client 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 being stretched meaning that future payments may not be met.
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 above debt and consolidate it to one payment so they could then see what was left in their bank account each month and budget accordingly.
This case did not fit the majority of lenders criteria because of the large amount being consolidated.
Clients were also willing to extend their mortgage term from 15 years to 18 years to achieve their monthly budget of £ 815 per month.
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 £148,130 which included repaying existing mortgage and all their existing credit card balances and the 4 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 2.19% with Accord Mortgages over18 years which reduced the mortgage payments to £ 815 per month – a whooping reduction of outgoings of £900 per month.
The lender offered a free standard valuation and free legal fees via their nominated solicitor 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 – Manchester Mortgages also provided client with the monthly costs on how to make overpayments to reduce his mortgage term to 15, 16 or 17 years.
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.
With their mortgage payments reduced clients are seeing the benefit of their £ 900 per month savings and are now enjoying stress free finances for the first time in many years.
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.
Take a look at our main remortgaging your home page for some great advice.