Remortgaging to escape rising repayments?

A reader from Hull is looking to remortgage as his variable rate mortgage is costing more each month.

Paul White, a consultant at Belgravia Insurance Consultants, part of our team of Independent Financial Advisers (IFAs) from unbiased.co.uk, offers a helping hand.

Trevor from Hull asks:

I have a mortgage with Future Mortgages arranged through a broker two years ago. The deferred rate ends end of next month and the mortgage will increase by 200/month, and continues to be linked to further Libor increases.

Over the past two years, the mortgage has increased at the end of every quarter, starting in Feb 06 at £645 and has now reached nearly £1,200. The loan was £145,000 which was 100 per cent of asking price of property.

I have bad credit due to a failed business venture, but no mortgage arrears.

The sales people at Future tell me that they cannot give me any advice as I must deal via a broker. No information has been provided by the company to me about how I will continue to pay what is now a very large chunk of my income.

Remortgage seems hampered by loan to valuation at around 80 per cent, which most companies are telling me would not be helpful to me given that we have been trying to sell at much reduced market price compared to valuation by the agents.

I am now in a corner wondering which way to turn. Can you advise?

Paul from Belgravia Insurance Consultants replies:

It looks like you were trying to sell before the mortgage deal ended, had no luck, so are now considering a remortgage. Unfortunately, you have a London Inter Bank Offer Rate (Libor) type mortgage, where inter-bank lending has been challenging to say the least, due to the 'credit crunch', therefore rates have risen as a result.

At the moment, you have maintained your mortgage payments, which counts in your favour.

The valuation from the estate agents also indicates that the property has appreciated since the Future Mortgages started, which is also good.

The fact that you were trying to sell at below market price is not particularly relevant, as you were asking a low price to achieve a quick sale. Any remortgage would be based on the surveyor's opinion of the present full market value, not your "priced to sell" amount.

If the original mortgage broker is not available, I recommend that you go to another broker and give him or her your credit report from Experian, which can be bought over the internet.

Armed with this information, the broker should be able to do a remortgage for you, where I hope that the payments will be a lot lower than they are with Future.

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