Help, I'm a Mortgage Prisoner Get Me Out of Here!
- AuthorPaul Hajek
Neologisms are not new to the Housing Market (see what I did there?)
We've already had the "Bank of Mum and Dad" and the Government's latest initiative to get the housing market going with finance for "shovel-ready projects"
Now comes the "mortgage prisoner".
Mortgage Prisoners are a by-product of the credit crunch and the new world order of mortgage finance post 2008.
Mortgage Prisoners are people trapped with their existing mortgage product and unable either to move their mortgage to another property or remortgage with another Lender.
Who are likely Mortgage Prisoners?
People who took out "Self certified" mortgages which were popular with self employed people pre 2008 would be foremost among the ranks of mortgage prisoners.
Surprisingly, perhaps would also be people trying to port their existing mortgage to their new property.
Porting a mortgage simply means the transfer of an existing mortgage product which may be fixed or variable to a new property without incurring a financial penalty such as an Early Repayment Charge.
These mortgages would have been originally marketed as "portable"
Problems with Porting Mortgages:
The Financial Ombudsman recently reported that they are dealing with a rise in complaints relating to mortgage “porting”.
Unfortunately many home owners don’t realise that when they ask their Lender to port their mortgage that they will still need to complete an application form and be assessed based on the lender’s current underwriting criteria.
Customers would still be subjected to an “affordability” check as if they were new customers.
Lenders may refuse to transfer your mortgage as lending criteria are very different to what they were a few years ago. So for example, if you have had a change in your financial circumstances; taken a pay cut; reduced hours or if your total debt has increased this could have a direct impact on whether your lender consents to port your mortgage to your new property.
The Value of Independent Advice:
If you feel you may be indeed a mortgage prisoner, your best bet may be to approach an Independent Mortgage broker first before consulting your Bank or Building Society directly.
An Independent mortgage broker can not only give you a useful second opinion but can also advise you on the whole mortgage market.
Most Banks and Building Societies can only offer their own range of mortgage products, which may be limited, so may not offer what may be best for you but only the best of what they have.
The situation mortgage prisoners should avoid is being officially refused by their current Lender. This would make it extremely difficult to then get finance elsewhere.
What may have started as a more pragmatic approach to lending following the financial crisis has often resulted in perfectly good low risk applicants being turned away by Banks because of a stifling, unshifting and "tick-box" mentality.
So if you are a mortgage prisoner, there may be no other option but to stay where you are for the time being
Whatever you decide, be sure at least to take advice of an independent mortgage broker.
In the present mortgage market: It's a jungle out there!
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