Nothing Makes Sense to Me any more...

symesd

I have just got planning permission granted on my falling down semi-detatched bungalow. I took the plans to local estate agent to get an estimate of the value once all work completed - 2 valuations £200,000 + £220,000. So I though great maybe I can get sorted. NO NO NO, financial companies do not want to help you, just make money.


I currently have a mortgage of £119,000 and debts of £34,800 - Total £153,800 ish, so if I got the extension done which will be about £40k, that would take lending upto about £193,800. Which works out at about 88-97% depending on final valuation.

I would be paying about half the amount I am paying at the moment for combined mortgage & debts so would be so much better off, financially and mentally as I would have a nice home and no personal debts.:rolleyes:

I would have a fresh start..... Be able to relax a little, buy all the essentials instead of deciding what we could buy this week and buy something else next week, I am sick of telling the kids they cannot go swimming or dancing or what ever it is that all their friends seem to be doing every night of the week.

Why is there not a scheme to help people get out of the spiral to clear debts and make a fresh start, to restructure finances which are obviously crippling them and replace with more managable stuff -

WHY WHY WHY do people in debt pay more for their loans - RISK RISK RISK, my foot, we are only RISKY because the banks lent us too much...

If I had one of the best rate mortgages, best rate loans, best rate credit cards etc, I could probably be able to get by, but because I have now got "bad credit rating" I cannot get any decent rates.

BUT I do have a super Fixed Mortgage Rate of 4.74% which I fixed before I got into trouble with debt - this runs out in Jan 2011, If I could re-mortgage using the equity I would clear all my debts and be paying about 80% less in payments each month - currently paying about £1300 on debt payments, If I re-mortgaged everything this would go down to about £200-£250 a month.

BUT Despite having a good income I know my current mortgage lender (even though I have been with them for over 2 years and never missed any payments - and was also with them for a previous mortgage for 5 years without any problems) would not give me the extra money on my mortgage to assist me.

Which is daft as I would probably be able to pay off more then as I would be better off and could use surplus money to make additional payments.

Anyone else get really annoyed about this kind of stuff......

I got into debt through a combination of redundancy, birth of 3rd child, lack of employment - 2 years unemployment - thankfully I now have a really good job, but 2 years has completely ruined my credit rating and I have built up debt which will take what seems like a lifetime to clear.

WHY does it need to be 6 years credit history - why not 2 or 3 years, a lot can happen or change in 2/3 years you can completely change your life around, I know I have started. I have gone from living on credit to paying off my debt. It will take me a while but I am getting there.

Sorry to have gone on a bit but I need to get it out of my system before I do something desperate.

silvercar

See a broker, they will know who will lend on building works.

The problem is that you are asking for the money before the extension is complete, so there is nothing to secure the debt on as the money they will give you plus the existing mortgage exceed the value of the property at the moment.

If you can't find a lender to give you the money up front, you may have to borrow elsewhere and then remortgage when it is built.

Next problem is that building works always end up costing more than first planned and you are already at 90% LTV, if prices drop further there may be little equity in the final property.

Thirdly your credit record is poor, so lenders will be less keen to take the risk.

beecher

symesd wrote: »

WHY WHY WHY do people in debt pay more for their loans - RISK RISK RISK, my foot, we are only RISKY because the banks lent us too much...
.

Some would say that wishing to up your mortgage to 97% LTV would be a case of lending you to much, particularly when house prices are falling.

Locoblade

Even discounting the issue that you need the money in order to increase the value of the house (so in effect need a temporary mortgage above the balue of the house), the longer term issue is you're asking the lender to significantly increase their exposure, despite it putting you in a better position to afford the repayment so less likely to default. From a business point of view its still more risky for them to increase your loan, at the moment you have a house worth say £170k with a mortgage of £120k, so if you can't pay the mortgage the house price easily covers that debt so the lender is happy, even if (unfortunately for you) it means that default on payment is a more likely scenario. They don't care about the £30k of unsecured loans because its not borrowed from them and not secured against the property, but if you lump it all onto the mortgage, suddenly it is their money, and because it will take you very near 100% LTV, they'd be putting themselves at much higher risk of not getting their money back if you were to default, especially if the house price drops which it's likely to do in the short term at least.

Its not good for you, but at the end of the day a mortgage is a loan secured against an asset, so that asset needs to be worth more than the money being loaned against it for it to be a viable proposition for the lender, regardless of the monthly payments involved in repaying the debt.

getmore4less

symesd wrote: »

I currently have a mortgage of £119,000 and debts of £34,800 - Total £153,800 ish, so if I got the extension done which will be about £40k, that would take lending upto about £193,800. Which works out at about 88-97% depending on final valuation.
.......
BUT I do have a super Fixed Mortgage Rate of 4.74% which I fixed before I got into trouble with debt - this runs out in Jan 2011, If I could re-mortgage using the equity I would clear all my debts and be paying about 80% less in payments each month - currently paying about £1300 on debt payments, If I re-mortgaged everything this would go down to about £200-£250 a month.
.

I have cut some of the not so relevent bits out.

It is pretty clear that the risk to a lender is too high in a falling market, Job loss(happened before) and they don't get there money back.

Putting debt onto the mortgage just means you are paying it off for longer and it costs more in the end.

What you should be doing is snowballing your personal debts, so get the current mortgage onto interest only(if lender will allow) and tackle the debt highest rates first, min payments on all the rest

Look for CC deals to reduce the cost of the debt, lifetime BT's with low charge or 0% purchace cards etc.

With £1300pm on £34800 you are paying capital off this debt(or should be).

You can get the debt gone in this No of months if you can get the average interest rates down.

0% 27m
5% 29m
10% 31m
15% 33m
20% 36m (this should be acheivable)

At 20% average if you spread the payments out over 5 years the cost would be £922

I would focus on the debt and review Jan 2011(28m) when a lot of the debt will be gone(@20% it will be down to < £10k).

If you tackle the debt at 20% over 36m you will pay £11673 in interest.

If you go to your £250pm @ 6%(current mortgage rates)that is over 20 years and you pay £24885 in interest over twice as much.

Based on your numbers you can be out of this in less than 3 years which is not that bad, when it gets to 5+ then that is the time to be considering DMP,IVA or even bankrupsy, you are no where near that yet.

Locoblade

Rather than remortgaging the entire debt amount of £35k, have you investigated whether you could borrow just some of this? Perhaps remortgaging for the house extension plus say £15k of your debts, use the £15k to pay off the debts that are costing you the most interest, and then carry on paying the rest off as you are doing now. That might bring you down under the lender's LTV percentage limits and would reduce the monthly burden of your unsecured debt to around two thirds its current level, so could help with the immediate issue of monthly cashflow.

This would depend on the current value of the house as it is now though, because they aren't going to lend you over say 90% of its current value even if that money is earmarked for an extension that will ultimately increase it's value.

The other alternative is to remortgage for an additional £35k JUST to cover the unsecured debt, then religously save that £1000 a month saving (£1300-£300 mortgage increase) that would have otherwise paid the debts off to do the extension in a 3-4 years time.

getmore4less

£200k done up, £40k extension, so max current value is £160k lets say £150k, not worth doing the extension otherwise, 80% LTV gives £120k.

Current mortgage is £119k allready mortgaged fully(chances are the current value is lower so LTV is higher than 80% allready)

There is no quick fix,

Reduce the interest on the current debt and pay it off as quickly as possible, is the only way.

So no luxuries for a while, The more that is cut back(mobiles,cable/sat tv etc) the quicker you get out of the mess and can build up a buffer fund so it does not happen again if out of work.

getmore4less

Woops missed the sig,

http://forums.moneysavingexpert.com/showpost.html?p=13921095&postcount=26

Its worse than I thought house is £140k 100% mortgage/secured loan

I don't think you will get a mortgage for an extension.

beecher

I'm a bit confused - your first post states you have £153,800 of debt, while your SOA gives the total of over £180,000. I'm also unclear as to how your payments could ever go down to £250/month.

Finally, is your mortgage interest only as the payments seem low at £469. How do you plan to pay it at the end of the term?

Locoblade

beecher, I think the OP meant that monthly payments of the unsecured debts would go down to £250 a month, rather than the £1300 a month just to service those debts at the mo (as shown in the SOA)

mrs_deadline

symesd you did well to get that long fixed-rate deal on your mortgage! Good luck with reducing the other debt. It would only take a lifetime if you couldn't change your situation, but you patently can now you're back in work and already turning things around.