Barratts dream start help desperately needed - we may be forced to sell our home
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I have even considered one of those no-risk "mis-sold mortgages" companies but they all seem a bit dodgy to be honest.
Interest only was your choice. After 10 years on a repayment mortgage you would have had far more options. We've had low interest rates for the past 4 years. So part of your problem may have been overstretching at the outset.
No grounds for a complaint.0 -
What other assets do you have that you can sell to raise additional funds?"You were only supposed to blow the bl**dy doors off!!"0
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Hi - I'm in the same situation as well. Bought the property for £145K back in 2008, with a mortgage of £109K and 25% on the dreamstart loan - £36K. We're 5 years in to the 10 year period.
A realistic selling price for the house now would be around £110K, and we have £100K outstanding on the mortgage, so selling now isn't possible (not that we want to move anyway) - we've started overpaying the mortgage as much as possible to try and even things out a bit. If all goes well, we actually should be OK in 5 years time.
My first bit of advice would be to go through your finances with a fine toothed comb and seeing if there is anywhere you can save money in order to overpay the mortgage for the next couple of years, it's really surprising how much difference a small extra monthly payment makes!
I remember going through all the paperwork for the dreamstart package, as the 25% is a second charge on the property - and I'm sure it says that you can extend the period on a basis of 'hardship' - although I guess that would be negotiable. I'm also sure it says that they start charging interest on the 25% loan after 10 years is up. As far as I can see, it doesn't say that if I don't pay it all in one go they would start some some sort of repossession order, although I might be wrong there.
Also, surely it would be in their interest to negotiate some sort of monthly repayment plan - it would be daft of them not to, because they wouldn't get any proceeds from a sale anyway? It has to be worth trying to negotiate something with them, perhaps a solicitor may be able to assist with this? Most offer some time\advice for free.
There's probably a lot of us stuck in this situation! I do look back and think I was such a naive first time buyer - but I can't change that now, so all efforts are going towards overpayment!0 -
In all the gumph I've read about shared equity deals, there's nearly always something saying that the loan can be extended depending on circumstances - normally they just whack a bunch of interest on and your carry on as usual. Like runicfire says, it would be pretty silly for them not to do this - make some money out of interest rather than having to fight with a bank to get some money in the even of repossession.
Not sure the maths of the OP really adds up, though.
They bought for 160 with a mortgage of 120...In 8 years they've paid off 8k of the mortgage - which doesn't sound like very much for someone who's been overpaying by around 1/3 (to be the same cost as increasing the mortgage, as Thrugelmir suggested)...but, in any case, they're in 12k of negative equity - meaning their portion of the house is now worth 100k...Meaning the builder's portion should only be worth 33k. If the builders think their portion is worth 37.5k, that suggests that the OP's portion's worth 112.5k - so no negative equity. Someone's got a valuation wrong somewhere.
I think the bigger issue, though, is what would be the point of OP extending the loan....overpaying the mortgage before saving to repay the loan has been a mistake...but even if they switched their efforts to saving a deposit now, it's going to take years to repay the thing - and the interest will be adding up all the time...Being blunt, if after 8 years no impression has been made on the equity loan, it's not going anywhere any time soon - you just can't afford it....So, actually, it may well be that selling up in two years, maybe taking a small hit on the equity and getting on with life in rental may be the best way forward. Alternatively, it's a case of putting an SOA on the DFW board and cutting everything out of the budget you can, so the loan can be repaid super-fast. Really, on 46k income with a modest mortgage, it should be able to put a decent chunk aside for the loan each month. If you assumed that you'd need to get to 33k-20% (27k) in two years, you're looking at saving 1k/month, which is maybe not doable - but should be possible in 3 or 4 years, before any interest gets out of hand. And if you bought back, say, 10% of the equity in 2 years time a) You may be able to remortgage or b) they may cut some slack about repaying the rest.
Finally, I know we're all young once and life's a learning experience etc - but I find it hard to believe that so many people blindly accepted this "you're sure to be able to remortgage" thing. We're 4 years into a shared equity deal now and I have to say, I never had any illusions about the endgame scenarios
1) We pay back the loan
2) We sell
3) We re-mortgage *if* we've built enough equity to do so.
By the sounds of it, Barratts were a little iffy about how they sold the scheme - but people have to take a little responsibility for signing up on the basis of claims that were clearly fictitious...0 -
Also, surely it would be in their interest to negotiate some sort of monthly repayment plan - it would be daft of them not to, because they wouldn't get any proceeds from a sale anyway? It has to be worth trying to negotiate something with them, perhaps a solicitor may be able to assist with this? Most offer some time\advice for free.
Best done nearer the time I would say. Also have main mortgage on repayment basis. As this demonstrates that an effort is being made.0 -
Wow, a lot of info and ideas there thank you so much. I should clarify a couple of things regarding the maths, as it has of course been pointed out...
We do overpay but haven't for the entire time, we had several years on interest only when the rates were very low then went back to a high repayment two years ago. I was studying for several years so our income was a total of only 28k which is why we didn't save more. We're not party guys, we don't live beyond our means, just two working parents with a toddler.
Spicer McColl value the place at £148k, and barratts took that figure and presented us with the outstanding calculation at 37.5k. I didn't check the maths myself admittedly as they were pretty clear that this is the figure and it is correctly adjusted.
We really were so stupid to believe what Barratts told us, and it is absolutely our responsibility that we did so. Over the last few days we've decided we will sell rather than shackle ourselves to the house, which in the long term isn't big enough anyway. When we bought this place - a one bed coach house- the same money bought an ex council 3 bed house with a garden you could play football in. We were bowled over by the fine kitchen and the brand new fittings and the lovely little patio, but mainly it was the fact we moved in with a deposit of £500, which they then gave us back. We won't be so foolish this time round, I expect we'll rent as cheaply as possible and just try against the odds to save up and start again.
Every cloud....0 -
elizabethdane wrote: »Spicer McColl value the place at £148k, and barratts took that figure and presented us with the outstanding calculation at 37.5k. I didn't check the maths myself admittedly as they were pretty clear that this is the figure and it is correctly adjusted.
So where did the 12k of negative equity come from?
Of the 12k, you'd be responsible for 9 - and you've paid for 8 of those already. So, basically, if you sold now, you'd lose a couple of k in fees etc. If you keep up the overpayments, by the time the 10 years rolls around, you'll probably break even or even make a few quid if you sell and move on. And that's not such a bad situation, really - for the last 10 years you've lived in a nice, modern place...which was your own, you could do with as you wish, you had the stability of home ownership and you've been on to interest only etc which will mean you'll have been paying less than comparative rent - so probably enjoyed a better quality of life. When you look at it that way, you've still done pretty good out of the 10 year deal, even if it hasn't proved to be the step on the ladder you were hoping for.
But, all may not be lost...how much could you save per month between now and the 10 years? Think about it...you need 16k, probably, to remortgage on a 10% LTV...£666 per month. Maybe not impossible....If you were determined, there are probably ways you could get hold of a couple of thousand to help you out at the end...So maybe saving £500/month would be enough...You just need to decide if you really want to fight to make the ownership thing work, or whether you're willing to let it go.
Or, of course, you could just think about buying somewhere else...Switch back to interest only, if you can, get your outgoings as low as possible, save as hard as you can for the next two years and then look at buying somewhere cheaper than your current place. If 3 bed places were the same price as your coach house, presumably you could get a 2 bed for less? The cheaper the place you buy, the less deposit you have to save...
I would say, however, all the above is based on the 148 valuation and it's worth noting that it's in Barratts' interests to get a "generous" valuation - may be worth getting a second opinion.
ETA: Oh...and 25% of 148 is 37, not 37.5 - so worth understanding why they're charging you the extra £500....may be "fees" or somesuch they've added on...0 -
Idiophreak, you are a wiser man than I in these matters! We have just tried to do exactly as you suggest and move to an interest only in order to save and move to a larger property, but sadly they flat refused unless we can prove that we are unable to afford repayment. We blatantly can, so that's a no go.
I am concerned about the valuation as an equivalent property sold in our street just weeks back for 148 but that was freehold and we are sadly leasehold because we're attached to a block of flats. This costs a grand a year in ground rent and maintenance.... Mind you, that other one sold in four days at the asking price so Spicer may not have been kidding when they said these properties are in high demand.
I'm awaiting contact from a shared ownership scheme but I'm sort of loath to enter into any more silliness, perhaps we'll just sell and as you say we should actually break even come kicking out time.0 -
elizabethdane wrote: »I'm awaiting contact from a shared ownership scheme but I'm sort of loath to enter into any more silliness, perhaps we'll just sell and as you say we should actually break even come kicking out time.
Silliness is the word. Be honest with yourselves - you've not managed to repay the loan without paying any rent on it - moving to shared ownership is going to be repeating the same pattern - only worse.
There are no quick fixes for this stuff...If you want to buy, one way or another, eventually, you have to save a whole bunch of money. If that's what you want, start saving the money as quickly as possible. It's really that simple
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Sometimes you just don't want to accept the inevitable eh! It's just the though of putting away maybe 600 a month, 750 if we only eat dust... It'll take a long while to get to a deposit. Better get started.0
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