It is very likely that your circumstances could change during the process of you getting a mortgage or after you have gotten a mortgage. In this brief guide, we will cover the rules for when you have a change of circumstances during the mortgage application process or after.
What is a change of circumstance in a mortgage?
A change of circumstance when considering a mortgage could mean something that grossly affects your eligibility and especially your affordability for a mortgage.
A change of circumstance could be:
- A loss of a job which would affect your ability to repay your mortgage
- Taking on a new job with a different employment agreement (even if it is a higher paying job)
- Becoming self-employed which may affect your eligibility for the mortgage lenders product
- Receiving a house value which is way beyond the amount of mortgage the lender has offered you
- Becoming bankrupt which may affect your eligibility for the product the mortgage lender has offered you. This could also be the case with getting CCJ, IVA or debt management plan.
What are the rules when a change of circumstance occurs with your mortgage
When a change of circumstance occurs during your mortgage application you should always inform the mortgage lender as not doing so could be construed as fraud and misrepresentation. This may be a criminal offence.
If any of the above changes occur after a mortgage offer has been received and you have completed on the home then you may not have to tell the mortgage lender as long as you are sure that you can continue to maintain your monthly mortgage payments.
If you are not sure that you can continue to maintain your monthly mortgage repayments then you should contact your mortgage lender and inform them.
They may be able to help you be offering different solutions such as a mortgage payment holiday, increasing your mortgage term or reduced monthly mortgage repayments for a given time after which your payments will increase for a given time to cover the reduction in payments you hard earlier.
Mortgage payment holidays are good options but you should be aware that a mortgage payment holiday will mean you are incurring more interest than you usually would as the capital you owe the mortgage lender isn't reducing as first displayed or planned on your key facts illustration document which you will have received from the mortgage lender during the mortgage process and likely after a mortgage offer was given to you.
In short, a mortgage holiday or reduced monthly mortgage repayments will mean that you are paying more interest as your monthly payments aren't covering the agreed amount of capital repayments as they normally should meaning you have a bigger amount of capital to pay interest on.
If your mortgage circumstances change during your mortgage you may be able to get help from one of the below depending on what sort of the change in circumstance you have.
If you have lost your job or are too sick to work you could possibly use one of the below.
- Support for mortgage interest
- Mortgage protection (insurance)
A change in circumstances when you have a mortgage isnt the worse thing but you should consider if you can continue to repay your mortgage and inform your mortgage lender if not you could face worse situations such as a county court judgement, bankruptcy or even a home repossession.
If you are struggling to repay your mortgage then you may want to contact a mortgage broker to see if there are suitable mortgage lenders out there for you who could possibly offer you a cheaper monthly repayment if you remortgaged to them with the same mortgage term and the equity in your property.
If your mortgage circumstance has changed for the better during a mortgage then you could consider overpaying your mortgage in order to clear your mortgage quicker.
A mortgage management platform should be able to let you know if you can overpay your mortgage, by how much and how much you will likely save.