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I’m a mortgage prisoner – What can I do?

I’m a mortgage prisoner – What can I do?
Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 26, 2022

What to do if You’re a ‘Mortgage Prisoner’

If you’re trapped in a mortgage and, for various reasons, are unable to switch to a new mortgage provider to get a better interest rate, you’re a mortgage prisoner.

It’s not unusual, if fact, there are thousands of people like you, trapped by circumstances beyond their control.

This is usually because their financial circumstances have changed, preventing them from meeting a new mortgage provider’s affordability requirement, or an issue with the property that occurred after you bought it.

The problem can be compounded if you’re on your lender’s standard variable rate (SVR), as these are usually more expensive than fixed rate mortgages.

How to escape from a mortgage prison

Depending on your financial circumstances, there are a number of options open to you to help you break out of the mortgage prison.

Overpay your mortgage

If at all possible, see if you can overpay your mortgage. This will have the double benefit of paying off your mortgage early and increasing your equity.

Your mortgage provider can tell you how much you can overpay without incurring early repayment fees.

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Increase your equity

How much of your home you own, also known as equity, will make lenders more receptive to your application.

You can increase equity through a cash injection or, as mentioned above, overpaying your mortgage.

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Protect your credit rating

A good credit rating goes a long way toward convincing lenders that you are financially responsible and a good risk.

Pay any debt such as credit cards, utilities, phone contracts etc on time. Get rid of any outgoings you don’t absolutely need … Do you really need Sky, Netflix and Amazon?

If you have bad credit, then take a few months to repair it before applying for a new mortgage.

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Downsize your home

If the kids have left home, ask yourself if you need a large home anymore? Moving to a smaller house or an area where property prices are lower might be something to consider.

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Increase your earnings

Easier said than done, but now that the impact of the coronavirus is beginning to lessen, you might be able to secure a higher paying job.

Alternatively, you could approach your employer for a pay rise or see if regular overtime is available.

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Switch to a lender prepared to relax borrowing rules

This may be the best option for many people trapped in mortgage prison, providing they meet the criteria.

The Financial Conduct Authority (FCA) set new provisions that allows lenders to perform a ‘modified affordability assessment’, which allows lenders to waive some of the affordability checks.

It is important to understand that it is entirely optional as far as the lender is concerned, so they can relax the affordability checks, but only if they choose to do so.

All lenders are different, but you could be eligible if:

  • There is a minimum of 5 years remaining on your mortgage
  • The outstanding mortgage must be at least £50,000
  • You have been up to date with your mortgage repayments for at least 12 months
  •  You do not intend to ask for a higher mortgage
  • Your loan to value (LTV) is no more than 75%
  • If you’re on an interest only mortgage, you’ll need a clear repayment plan in place

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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