NR mortgage BTL help

clairet707

We had our letter from Nr yesterday saying that as of 1/1/09 our mortgage payments will be going up by almost £300 a month (currently £793 will be £1081)

At our present state we cannot afford this so will be looking round but thats where the problem lies

We bought the house almost 3 years ago £185k, mortgage for £167500 with a help with costs £1000 cashback on a 3 year fixed, 3.5 year HWC

We lived in the house till August 07 when I changed jobs and we had to move out of the area, we rented the house out (by the book and we have a lovely tenant who is no bother at all so we rarely have to go down there at £850/month)

We are currently having to rent two sets of property as I have recently changed jobs again (damn contracting work and credit crunching) so are paying rent of £1150 (though that might change again - again due to the stoopid credit crunch, I have another risk of loss of contract.. 3 jobs in 3 months currently, I hope it doesnt end up being 4 in 4)

We have cut back all we can but just will not be able to afford this increase.. So our option is to remortgage elsewhere..

But which deals do we look at, obviously we need BTL but we cant afford to put up another big deposit.. We have looked at HSBC and Halifax but both their fees seem very high (is that normal for a BTL - we dont know as we got permission from NR to rent out on our residential mortgage):eek:

Help....

GDB2222

Do you know how much your house is worth now, compared to teh mortgage outstanding? At a guess, you have no equity or you may have negative equity, so you won't be able to move to a new lender.

The £1081 may include capital repayments, and you may be able to save a bit (correction: reduce your monthly payments a bit) by switching to interest only.

On the rented places that you don't need, hand them back to the landlords and tell them that you are ending the tenancy. You are still liable for the landlords' losses until they find new tenants, but they have a duty to minimise their losses.

clairet707

GDB2222 wrote: »

Do you know how much your house is worth now, compared to teh mortgage outstanding? At a guess, you have no equity or you may have negative equity, so you won't be able to move to a new lender.

The £1081 may include capital repayments, and you may be able to save a bit (correction: reduce your monthly payments a bit) by switching to interest only.

On the rented places that you don't need, hand them back to the landlords and tell them that you are ending the tenancy. You are still liable for the landlords' losses until they find new tenants, but they have a duty to minimise their losses.

Not sure how much house is currently worth, though looking at similar sized houses in area possibly not far off what we paid.. (there are 2 available round the corner at 199950 & 199000 though both are semis and ours is terraced)

That 1081 is repayment rather than interest only, we have managed to knock the mortgage down to 155000 (ish, cant remember exact figure as we were overpaying at one point) We will investigate going to interest only

At the moment we do need both rental places, I currently work 80 miles from my husband and dont want to commute that round the M25 each day so live here monday to friday and go back to him at weekends.. At the moment I dont know if / when my job situation will change (but then neither does anyone else in my company - its purely a waiting game at the moment)

Thanks for the advice though

GDB2222

Have a look on Nethouseprices.com and see how much properties have actually sold for. Asking prices can be pretty misleading at the moment.

Premier_2

Most BTL mortgages currently come with a 2% arrangement fee.

Also most need at least 75% LTV.

Apart from Halifax, the only company that I know that offer 80% LTV (which you appear to need unless you have some spare cash) is the Cheshire Building Society who will do you a fixed 2 year deal for 6.69% and £1499 arrangement fee.

The problems you'll probably encounter is that the annual rental income usually must equate to a minimum of 125% of the annual mortgage payments, and that doesn't appear to stack up in your instance.

PasturesNew

clairet707 wrote: »

At the moment we do need both rental places, I currently work 80 miles from my husband and dont want to commute that round the M25 each day so live here monday to friday and go back to him at weekends.. At the moment I dont know if / when my job situation will change (but then neither does anyone else in my company - its purely a waiting game at the moment)

Have you looked for a cheap B&B to stay at Mon-Thursday nights? I used to work 200 miles from home and I'd stay in a B&B. Staying in a B&B is tax deductible, whereas renting a flat is unlikely to be as you could have benefit from it outside of your needs for fulfilling the obligations of the contract.

Certainly a cheap B&B (say, £30/night) reduces the commitments of having a whole flat, paying bills, paying TV licence, paying council tax, etc. Not to mention agent fees for each new contract and potential loss of a deposit.

You might even be able to find a B&B cheaper than £30/night, but with a good poke about online, it's possible usually to find a private B&B/guesthouse within 2-3 miles of a contract.

I am now returning to contracting and will be booking B&Bs 4 nights per week for this precise reason: I don't want to be tied to flats that are potentially not tax deductible, along with the associated responsibilities and fears for premature closure on a contract.

SquatNow

Basically, you're screwed.

You're going to have to accept the higher payments.

Then in about a years time you'll fall behind, the place will get repo'd and you'll be left with the N/E bill to pay off.

You should have sold the house a year ago.

Yes my comments are harsh. I don't do fluffy-fluffy-hug-hug I do "this is what your situation means".

Put the house on the market at the lowest possible price you can take. Get a £10k unsecured loan to allow you to lower the asking price even more. Then pray it sells as if it doesn't you'll end up bankrupt.

Barratts just started offering 40% of list prices. Houses price drops are going to accelerate.

GDB2222

SquatNow, you may well be right, but you don't know their whole financial position, so you are being a bit dogmatic.

I do agree, though, that sticking the property on the market would be a very, very good idea. The OP might have to take a bit of a pasting, but not nearly as much as if they leave it longer until they sell.

Doozergirl

If it isn't manageable then I think you do have to address either whether you're keeping the house at all because I think the chance of remortgaging BTL is very slim indeed with your figures. I've worked out £155,000 at 6.5% being £852 interest only (very quickly indeed!)- it's not going to be far off what Northern Rock are offering you, plus you have another £1500 to pay out in fees which wipes out the difference, essentially.

Or whether you swap to interest only with NR and then reconsider where you work, or where you both live - ie. rent somewhere in the middle of your two jobs. Owning one house and renting two sounds a little bit mad to me when you've got financial issues looming.

clairet707

PasturesNew wrote: »

Have you looked for a cheap B&B to stay at Mon-Thursday nights? I used to work 200 miles from home and I'd stay in a B&B. Staying in a B&B is tax deductible, whereas renting a flat is unlikely to be as you could have benefit from it outside of your needs for fulfilling the obligations of the contract.

Certainly a cheap B&B (say, £30/night) reduces the commitments of having a whole flat, paying bills, paying TV licence, paying council tax, etc. Not to mention agent fees for each new contract and potential loss of a deposit.

You might even be able to find a B&B cheaper than £30/night, but with a good poke about online, it's possible usually to find a private B&B/guesthouse within 2-3 miles of a contract.

I am now returning to contracting and will be booking B&Bs 4 nights per week for this precise reason: I don't want to be tied to flats that are potentially not tax deductible, along with the associated responsibilities and fears for premature closure on a contract.

I cant find a B&B as I need to leave my stuff here over the weekend, I cycle to work most days and dont want to have to bring bike etc back every weekend,

This £400 includes all bills so that is it i dont have to pay any more apart from food..

Some weekends I have stayed here and some weekends my husband has come up to me (when he has had interviews etc up here) - a B&B would simply not be practical..

I am lodging with a family so dont have a contract as such..

Not sure what you mean by tax deductible? Tax deductible from what?

clairet707

SquatNow wrote: »

Basically, you're screwed.

You're going to have to accept the higher payments.

Then in about a years time you'll fall behind, the place will get repo'd and you'll be left with the N/E bill to pay off.

You should have sold the house a year ago.

Yes my comments are harsh. I don't do fluffy-fluffy-hug-hug I do "this is what your situation means".

Put the house on the market at the lowest possible price you can take. Get a £10k unsecured loan to allow you to lower the asking price even more. Then pray it sells as if it doesn't you'll end up bankrupt.

Barratts just started offering 40% of list prices. Houses price drops are going to accelerate.

Thanks for that.. yes it was harsh and you do not know (or would probably understand) our reasons for keeping the house

As said we cannot afford it 'in our present state', once we are no longer renting two places we can afford it again, which is why I asked for places to look for a mortgage as we cant really stay with NR (and who would want to - the way they are treating existing customers)

Having had a look round at similar houses in the area, it looks to have kept most of its value,

Never having had a BTL mortgage I didnt know the ins and outs and costs - hence my questions about the fees seeming high

Having talked about it briefly last night we will see if we can drop to interest only for a few months after our fixed rate ends, see what the market does and then think again, hopefully our job situation will be a bit more clear by then too