Depressed about the huge remortgage mistake I made...

zAndy1

Hi all,
Bit of background, I went bankrupt in 2005 and at that time had a mortgage with Nationwide. We managed to keep the house by virtue of the fact my brother bought the beneficial interest in the property from the Official Receiver. Despite myself going bankrupt my wife still had some quite significant debts so in 2007 (Aug) we remortgaged with a subprime lender to release some equity to clear off my wifes debts. The plan was to stay with the subprime lender for the 3 years we were committed to (fixed rate of 7.49%) and then remortgage with a more mainstream lender. And then of course everything went pear shaped, we remortgaged for 95% of the value as of August 2007 (value £175k, remortgage £166k) on an interest only basis and obviously the way house prices have been dropping since then we're going to be in significant negative equity with no sign of it getting any better in the forseeable future. The fixed rate ends in Aug 2010 at which time we go onto the SVR + 3.49% , I'm not sure what the SVR is but there's the distinct possibility our mortgage payments could increase by £300pm. I honestly wish I'd stayed with the Nationwide (who wouldn't!) and am angry with myself and frankly quite depressed about the situation we now find ourselves in. The only chance we'll have of remortgaging will be to save enough to reduce the mortgage to 90% of the house value which even now will probably mean a cash injection of £30k which we simply don't have and won't have any time soon. I know there's no easy answer to this but what do people suggest, do we just have to save as much as possible so we can get into a position where we can remortgage if not in Aug 2010 then as soon as possible after that? Are there any other options I haven't thought about as this is really getting me down to be honest

Cheers
Andy

inca_2

You seem to have the right idea about saving as much as possible to try and reduce the mortgage debt. If you can get out of negative equity would you consider selling if the rate on your mortgage became too much to handle? are there any luxuries you could cut out to release some cash towards your savings?

zAndy1

We can afford the increased mortgage payments but they'd take our monthly mortgage payment to almost £1400pm (interest only!) and that's a hard pill to swallow. We'd rather not sell to be honest, we like the area and the kids are settled. Personally I'd like to remortgage and then overpay the mortgage by £150pm in order to reduce the term to something like 15 years. As far as luxuries go there aren't any really, we've got rid of Sky and gone to Freesat, we do now (finally) have quite a bit of disposable income each month, we should be able to save £800pm if we put our minds to it. I've actually taken a pension 'break' in order to save some money as in my opinion it is more important to remortgage onto a far lower rate than we'll potentially be stuck with than it is to pay into a pension right now. I'm still paying £100pm into a pension but compared to the £400pm that's been going in for the last 10 years or so it's freeing up quite a bit of cash there to try and get ourselves out of the mess we find ourselves in. I guess we're in the same situation as a lot of people right now, what I'm angry with myself about is having gone bankrupt myself we don't have the luxury of choosing our mortgage provider so I should never have voluntarily left Nationwide in the first place. Oh well, hindsight is a wonderful thing isn't it... we live and learn.

oilit

zAndy1 wrote: »

We can afford the increased mortgage payments but they'd take our monthly mortgage payment to almost £1400pm (interest only!) and that's a hard pill to swallow. We'd rather not sell to be honest, we like the area and the kids are settled. Personally I'd like to remortgage and then overpay the mortgage by £150pm in order to reduce the term to something like 15 years. As far as luxuries go there aren't any really, we've got rid of Sky and gone to Freesat, we do now (finally) have quite a bit of disposable income each month, we should be able to save £800pm if we put our minds to it. I've actually taken a pension 'break' in order to save some money as in my opinion it is more important to remortgage onto a far lower rate than we'll potentially be stuck with than it is to pay into a pension right now. I'm still paying £100pm into a pension but compared to the £400pm that's been going in for the last 10 years or so it's freeing up quite a bit of cash there to try and get ourselves out of the mess we find ourselves in. I guess we're in the same situation as a lot of people right now, what I'm angry with myself about is having gone bankrupt myself we don't have the luxury of choosing our mortgage provider so I should never have voluntarily left Nationwide in the first place. Oh well, hindsight is a wonderful thing isn't it... we live and learn.

I dont understand why if on the SVR you would be paying SVR+3.49%??

However, I think you are doing the right thing - save as much as you can, and get ready to pay off as much of your mortgage as you can (I woudl save it in a seperate account rather than pay mortgage off as you go - that way if you do find things get worse, then you still have some cash stored away.)

zAndy1

Because it's a subprime lender and that was one of the clauses in the mortgage agreement, at the end of the fixed rate the rate reverts to SVR + 3.49%. Didn't see it as an issue at the time we remortgaged as the thought of being in negative equity 3 years down the line never really crossed my mind! Will just keep saving then and hope for the best , hopefully prices will start recovering by Aug 2010!

mark13

Good luck, keep saving as much as possible, the first step is recognising the situation you are in so you have made the 1st steps.

Radiantsoul

Have you considered speaking to the subprime lender?
You probably are ringing alarm bells with them at the moment as you are likely to be sharply in negative equity and with(no offense intended) a poor credit record. If you are able to introduce a lump sum at the end of the term they may be prepared to negotiate the interest rate.

The worst case scenario for them is you walk away from the property living a large shortfall and another bankruptcy that generates nothing. The golden rule with doubtful debts is to keep the security and get as much cash in. The prospect of this ought to please them.