Case Study: Holly & Jason – Reducing Mortgage Payments with Expert Advice

Megan Addy BA (Hons), Cert CII (MP)

Director | Independent Mortgage & Protection Adviser @ Prism Mortgage & Protection Advice

Holly and Jason were referred to me by an existing customer as their existing 2 Year Fixed Rate mortgage with Halifax was about to expire. They were worried about an impending increase in their monthly payments and were unsure of their remortgage options. With just six weeks until their mortgage reverted to a much higher Standard Variable Rate (SVR), they needed guidance to reduce their monthly costs and secure a new mortgage deal. 

Customer Background:

Holly and Jason had purchased their home as First Time Buyers two years ago. They were currently paying £621.19 per month on a 4.11% fixed rate with Halifax, but they received a letter informing them that unless they selected a new rate, their payments would soar to £1,019 per month, as they would move to Halifax’s 8.49% SVR.¹ 

When they reached out to me about their remortgage, they knew they needed to take action, but they felt overwhelmed by the numbers and their options. Halifax had offered them a 6.31% 2 Year Fixed Rate deal with payments of £808.07 per month or a 5 Year Fixed Rate at 5.76%, which would result in payments of £759.36 per month.

Both options were well over £100 more than their current payments, and they wanted to explore ways to reduce this financial burden.

They needed to know whether they could remortgage to a more cost-effective lender, or was a Product Switch with Halifax their only option? 

Challenges and Objectives 

Holly and Jason faced several hurdles in securing a better deal: 

1. Jason’s new job: Jason had just started a new career, which limited their remortgage options since most lenders required at least three months of employment history in his new role. 
2. Time constraints: Their fixed rate was ending in just six weeks, while a remortgage typically takes about eight weeks to process. This posed a real risk of them rolling on to Halifax’s SVR before completing the remortgage. 
3. Property value concerns: Halifax had estimated that their property value had decreased since they purchased it, offering only 95% Loan To Value (LTV) products. Holly & Jason were shocked by this; They had hoped they’d be eligible for products at 90% Loan To Value as these are typically lower. 

Their main goal was clear: To remortgage to reduce their monthly mortgage payment and avoid rolling onto Halifax’s Standard Variable Rate (SVR). 

The Solution:

After carefully reviewing their situation, I outlined a plan that balanced their time constraints, employment situation, and property value challenges. 

1. Complete a Product Transfer: Holly and Jason considered the option of applying to remortgage with a potentially more cost-effective lender. However, after discussing the risks, they decided that time was too short and the potential saving was too small to justify it.  In addition, there was a chance the application wouldn’t be successful – This could have left them back at square one.  A Product Transfer/Rate Switch with their existing lender, Halifax, was a much more straightforward process as it didn’t require the same underwriting or conveyancing process as a full remortgage, making it the ‘safer’ and faster choice.

2. Challenging the property valuation: Holly and Jason believed that their property value had increased since purchase, so I suggested we challenge Halifax’s valuation. This step could enable them to access 90% LTV products and lower rates, though there was a risk the new valuation could come back lower. 

3. Extending the mortgage term: To further ease their monthly payments, I recommended extending their mortgage term from 33 years to 40 years. While this would increase the total interest over the life of the mortgage, it would significantly reduce their monthly outgoings – Holly and Jason’s main concern at this point. 

The Outcome:

By successfully challenging Halifax’s valuation, we were able to secure a much more favourable outcome. The property valued higher than originally estimated, which allowed Holly and Jason to qualify for a 90% LTV product, opening up lower rates. They decided to lock in a 5 Year Fixed Rate at 5.15%, significantly better than the 5.76% initially offered by Halifax. 

Additionally, by extending their mortgage term to 40 years, Holly and Jason reduced their monthly payment to £660.72. This was only £39.53 more than their previous payment of £621.19, and much lower than the £759.36 they would have paid had they stuck with Halifax’s initial offer. 

Conclusion:

Thanks to timely advice and a proactive approach, Holly and Jason managed to avoid a substantial increase in their monthly payments. By securing a lower rate and extending their mortgage term, they achieved a manageable monthly payment, saving them from significant financial strain. 

Holly and Jason told me that had they handled the product transfer themselves, they wouldn’t have thought to challenge the property valuation or extend the mortgage term. This is a great example of how expert advice can make all the difference. 

If you’re facing an upcoming rate change or are unsure of your mortgage options, don’t hesitate to get in touch with us. At Prism, we can help you find the right solution for your needs – let’s chat and see how much you could save! 

Book your free initial consultation or contact us for more information.

1. All rates correct as of September 2024 ↩︎