A&L Plus Mortage, Fixed Term End, Negative Equity, What to Do!!

max101

I currently have a 2yr fixed rate interest only mortgage 7.080%, the fixed period is coming to an end, and i would like some advice on what to do.
The mortgage was a 'PlusMortgage' taken out with Alliance & Leicester, the property was bought for £112,500. The mortgage was for 95% of purchase price £106,875 and an additional unsecured loan of £25,000 to clear other debts. After the fixed period the repayments will revert back to 1.990% Standard Variable Rate above the base rate.

The property is currently rented out as i live with my partner. The mortgage repayments are £630 and the loan repayments are £130. What are my options regarding the mortgage, am i best to sell up and cut my losses or hold on to the property and ride out the storm. In the current climate i think the property is worth £120,000 (Scotland) which would not clear the mortgage if i sell, will i be able to get a new mortgage at a lower rate, i don't want to be in the position where i sell and can't get a mortgage again?

My partner and i are possible looking to purchase a new property oursleves in the near future.

Fliss_M

Well, it looks like it reverts to a 1.99% tracker, and there are no better rates out there for a mortgage like yours. (i.e. negative) So payment wise you may be better off. Selling up wise, someone may have better info, but I wouldnt advise it. I think you have to get permission from the lender to sell for less then is owed, but am not sure.

blued

I'm not sure what the current A&L SVR is but I'm sure its less than 7.080%. When your fixed deal ends you dont need to remortgage, just pay at the SVR. No doubt your monthly payment will drop. If so this is a chance for you to overpay (if A&L allows it without penalty) and reduce what you owe. Overpay as much as you can so that your LTV becomes 90% or less. This way you can remortgage in the future if necessary.

kieran1979

You need to clarify what "1.990% Standard Variable Rate above the base rate." means exactly.

The A&L SVR at the moment is 5.34%.

But not sure if your statement means SVR plus 1.99%, which will give you 7.33% - obviously not great, or it could mean above BOE rate which will give you 1.5 +1.99 = 3.49%.

If the latter is the case then happy days for you. Just overpay like mad.

payless

Do you have "consent to let " - if not and your lender finds out they would be within their rights to charge a higher rate or possibly even or call in the debt

max101

I wasn't aware i needed consent to rent out my property. How would they find out. What if i'm only renting a room out.

Once it reverts to the SVR am i better to pay more towards the loan to clear it or the mortgage to reduce the LVT?

payless

returned post ?
Insurance claim - thats another thing to sort asap
--
rent a room - in theory still needs consent - different tax rules apply

Are you aware you need to declare income to the inland revenue as well?

beecher

I think it is very unlikely that the property is worth more than you paid for it 2 years ago unless you got it for a real bargain price at the moment, which means your chances of selling and buying another property are going to be limited. Is there enough equity in your partner's property to allow you to pay off the shortfall? You'd then need 10% deposit in order to buy a new place so there's a lot to think about.