Re-mortgage problems

jo476

Hello,

My partner and I are concerned that we won't be able to get a re-mortgage, so advice would be great.

We got a 100% fixed mortgage with Northern Rock in Feb 07 for 2 years for £147000 It was interest only and so haven't actually paid anything off.
We received a letter from NR saying that as our fixed rate was coming to an end shortly we either move lenders or stay with them and pay 7.5% variable rate!

The problem is that i think the value of our house will have come down to £140000 so we are in negative equity. We could afford to stay with NR but i am concerned that they could keep putting their rate higher and higher!

I don't know what the next step to take is. We have never missed a payment and both have good salarys and are now in the position to pay full repayments.

Advice would be great!

arkie

Hi
both of your concerns are correct, you will not be able to get a remortgage with another lender.
it looks likeyou will have no option other than stay with NR and pay the variable rate. They are not looking at offerring new deals to exisiting clients and there is no lender offerring 100% remortgages/mortgages and they wont be for the short-mid term future.
If you can afford to switch to repayment do it at least you have started paying off the loan.
The rate NR charge could go up or down

jo476

Thank you for that information.

I was also told by a bank that it would be an idea to get a 10% personal loan so i could then switch mortgage lenders, is this a good idea?

beecher

jo476 wrote: »

Thank you for that information.

I was also told by a bank that it would be an idea to get a 10% personal loan so i could then switch mortgage lenders, is this a good idea?

sounds like a bad idea to me as the interest rates would be high - it'd cost a fortune which would be unlikely to be worth it.

Also it would have to be more than 10% because of the negative equity - to have an LTV of 90% you'd need to be borrowing £126,000 if you are accurate with your £140,000 valuation. So you'd need to borrow £21,000.

I thought that loans couldn't be used for deposits anyway so that is very odd advice from a bank!

0james0

jo476 wrote: »

Hello,

My partner and I are concerned that we won't be able to get a re-mortgage, so advice would be great.

We got a 100% fixed mortgage with Northern Rock in Feb 07 for 2 years for £147000 It was interest only and so haven't actually paid anything off.
We received a letter from NR saying that as our fixed rate was coming to an end shortly we either move lenders or stay with them and pay 7.5% variable rate!

The problem is that i think the value of our house will have come down to £140000 so we are in negative equity. We could afford to stay with NR but i am concerned that they could keep putting their rate higher and higher!

I don't know what the next step to take is. We have never missed a payment and both have good salarys and are now in the position to pay full repayments.

Advice would be great!

You will prob find that 95% of what you borrowed will be a mortgage and the extra 5% will be as a personnal loan. Unless you have made improvements to your house it is unlikely that it will have risen in value, if anything it will have reduced.

Just so you know, if you decide to take the mortgage elsewhere but keep the personal loan with N Rock (many people have to do this) then they will add 8% to the personal loan, giving you an average rate of 15%. This may sound expensive but will prob still be cheaper than the rate offered by the bank.

Many banks will let you take a loan to fund the equity (if the loan is from them!) and if you then do the mortgage with them. -funny how their normal rules go out the window if they will benefit. I'd imagine someone like Halifax or Lloyds would do that for you.

You need proper advice though so someone can do the maths for you and tell you what would be best. I'd book to see a mortgage broker asap, make sure you see one who is not tied to a bank before going to see one from a bank.