At Crunch Mortgages, we always say that being self-employed shouldn’t prevent you from getting a mortgage, but is this still the case in the confusing landscape of 2020?
The COVID-19 lockdown has sent many industries into a standstill, so it’s no surprise that many self-employed workers have questions about the current state of the property market.
The advice of an expert mortgage broker can save you time and money, especially with lenders currently being inundated with mortgage holiday requests. While social-distancing restrictions have changed their everyday working environments, Crunch Mortgage brokers have always delivered their service online and over the phone, so we’re still working hard to help you save time and money with our years of expertise.
The government has relaxed some of the restrictions on moving house to try to restart the property market in England, from Wednesday 13th March, but restrictions still exist in Scotland, Wales, and Northern Ireland.
In this article, we outline advice from expert broker Rob Starr, who answers some of the burning mortgage-related questions of the moment.
Mortgages are definitely still available! In fact, rates are incredibly low at this point in time, even on five-year fixed terms. If you find an offer or rate that’s right for you, it’s perfectly feasible to “hold” that rate for up to six months.
One issue we are seeing is the Loan to Values (LTVs) changing daily – this refers to the amount you can borrow compared to the valuation of the property. Recently we saw most lenders reduce their LTV down to only 60%, although we have seen this rise back to 80% with some major lenders.
The other issue is that mortgage valuations may not be able to be carried out face to face, so these will be remote valuations and can affect the value you expect to see. Remember though, that you can challenge a valuation if you feel that it has come in low; you’re able to challenge and potentially have the valuation increased.
Rate switches (moving to a different rate with the same lender) and remortgages are still happening, even if a lot of moving and new purchases are paused.
If you’ve previously received a ‘mortgage in principle’ offer, it should still be valid, and can likely be extended for a further period if you need it to be.
Our top tip here is to get your rate agreed before your current deal runs out.
What can I do about my existing mortgage if I’m struggling to pay or have a reduced income?
As it stands, most lenders are allowing a three-month repayment holiday, which means you don’t pay anything for three months. This period will instead be added to the end of your mortgage term.
Understandably, whilst many people may want to take advantage of a payment holiday to take them through this difficult period, they’re worried that their credit rating could be negatively affected.
Fortunately, all credit rating agencies have said that they will not penalise anyone for taking a payment holiday due to the pandemic, as long as it is in agreement with the lender. So, the key here is to ask before you take. Ask your lender and, if they agree, you’re absolutely fine. If the lender doesn’t agree to allow a payment holiday, you may find your credit rating is affected if you go ahead and take it anyway.
Also, if you have a full capital and interest mortgage, you can ask your lender to temporarily change it to interest-only. You’ll need to switch back to full repayment as soon as you can, and any missed interest payments will still need to be made up within later mortgage payments. Bear in mind this could reduce your current payments, in some cases by over two thirds, and can be carried out for a year or more if needs be.
If you’re also looking to switch your mortgage rate, you should speak to your broker before requesting a mortgage holiday, as the timing of these two events is crucial to enable them to happen.
Ultimately, as long as you don’t ignore the situation and you engage with your lender as soon as you can, this won’t affect your credit rating once the country returns to normal.
I’m in the process of buying a house but haven’t exchanged. What do I do now?
The government’s official advice is that there’s no need to pull out of transactions. If you’ve had your survey and have your mortgage offer in place, then there’s no reason why you shouldn’t exchange. The advice currently being given is either to exchange and complete simultaneously or to agree on a flexible completion date.
Restrictions were slightly relaxed in England from 13th May 2020, though everyone is still subject to social distancing rules, but there are stricter restrictions in place in Scotland, Wales, and Northern Ireland.
If the property you’re due to move into is currently vacant, the government says that you’re able to continue with the transaction. If the property is occupied, the advice is to attempt to agree to a delayed sale. Mortgage lenders have been asked to be as flexible as possible in these situations.
The property market for moving depends on how far along in the process. Completions and moves where people exchanged before the lockdown are still going ahead. But putting your house on the market or making offers is mostly currently paused at the moment, as it’s often not possible to have visitors in your home to do a valuation, take photos, get a survey done, or look around with a view to purchasing. If your house is already on the market, it can continue to be promoted, although you won’t be able to offer in-person viewings. As mentioned above, a number of these restrictions are being eased in England, but they are still in place in Scotland, Wales, and Northern Ireland.
With regards to property values, no-one is able to say with any confidence how the property market will react after lockdown. However, if one looks at property prices over the long-term, the trend is always up. Certainly, values may fall or values may stay the same, but at some point, they will rise again. So as a long-term investment, for either your main home or an investment property, it’s fair to say that the value should always come back over time. Also, if you’re buying and selling, it’s largely irrelevant because your property fall in value will also be reflected in the falloff of the property you are buying. I think the message really is that property remains one of the safest and most popular forms of financial stability and that the market will inevitably recover.
Can I move my mortgage?
Of course – as long as the numbers still work.
Re-mortgages (staying with the same lender or changing to a new lender with the purpose of either getting a lower interest rate deal or releasing some equity for yourself) are subject to getting a satisfactory property valuation, but there are a number of lenders who will do a valuation for you remotely.
Remortgaging now might just save you hundreds of pounds a month in interest payments. Locking the best rate in today will mean you avoid any increases that may occur by the time your current rate does expire. Best of all, you won’t even need to go through the rigmarole of getting through to your bank (or trying to do it yourself online!).
Another option is to stay with the same lender and just do a rate-switch. Your broker will be able to very quickly take you through the best deals currently available from your lender as well as comparing the rates to the whole of the rest of the market.
What should I do now?
Available rates are still at an all-time low, but imminent rises are expected. With a post-lockdown recession on the cards, you can make sure you’ve pre-booked your two-year or five-year fixed rate today – ready to take when your current deal expires.
In this video, Rob Starr explains how being self-employed shouldn’t stop you from getting a mortgage.
Call Crunch Mortgages today on 0330 335 3399 to speak to a friendly expert broker, who should be able to give you all the information and help you want in 20 minutes or so.
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