Mortgage Adjustments – When to Modify Your Borrowing Agreement

Homeowners are looking for wily solutions to reducing their mortgages and increasing their living space footprint without truly selling up, which method extensions, rentals and change of use – all of the aforementioned situations impact on the validity of a mortgage and as such borrowers need to ensure they consult their lenders and update their mortgage where appropriate.

Extensions and improvements

Many home owners are looking to stay put and concentrate on maximising on current assets, instead of an upgrade or upsize – which method improvements and extensions. The homeowner is obliged to inform lenders of any major works carried out to the character, plus they might want to borrow additional finance to help fund the project. When the improvements have been made, a new valuation should be completed and the results communicated to the lender.

Rentals

Homeowners who are looking to create an income from their home via rental, be it holiday or residential, need to consult the mortgage provider. Providers can be flexible for short-term situations, i.e. renting for a year or two, and may allow owners to keep on their existing mortgage agreement. Buy-to-Let mortgages are obtainable and are generally used for investors who are purchasing for long-term investment gains.

Change of use

Setting up business from home can have implications on your mortgage – many specify residential use only – in addition as insurance. You should always inform your lender of changes to the use of the character as it could place you in breach of the mortgage conditions. Lenders make individual decisions based partly on the character of the business and in many instances only object if it is going to occupy more than 60 per cent of the character. in spite of of business kind, homeowners should consult with their lender to ensure their home based business does not breach the terms of their contract.

Interest only and payment holidays

Homeowners who are experiencing pressure on finances should speak to their lenders – defaulting on mortgage payments should not be unavoidable. Ensure that the lender understands the situation, they may be able to offer some solutions, such as a payment holiday or changing the mortgage agreement to interest only payments, which will reduce monthly mortgage payments.

Change of employment

If you change jobs before buying a house, you might be surprised by the negative effects on mortgage approval. Since your income and employment position are considered carefully by mortgage lenders, changing jobs can consequence in higher interest rates or already rejection. Homeowners who change employment position, from PAYE employee to either self-employed or unemployed should always consult with their lender, who may choose to adjust the mortgage agreement or provide short term financial respite, respectively.

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