100% mortgage cant afford to pay the mortgage!

tux130582

Hello

Im writing on behalf of a work colleague that isnt that clued up with his money so i said i will pass his information on here to see what the clever people on money saving forum to see what they say.

Here goes.....

He earnt about 27k in 2008-2009 but now our hours have been cut and we are likely to earn a few thousand less next year.

his partner earns about £7500 but i can confirm that later. They also have a baby about 18months old

The only thing they claim is family allowence for the baby, ive looked on here briefly for information on working tax credits and it seems they might be able to claim a bit. Do they have any other options?

The mortgage they currently have is a 106% mortgage with northern rock. they borrowed 155k and bought the house for 145k back in summer 2006.

They think they have 10% equity in their home (advised by the bank) but to leave the fixed mortgage is a staggering £5k

What options are availablt to them is there any way to get a better interest rate with northern rock? they are currently fixed on 6.29%

They are really struggling to pay the mortgage (as many are) and are worried about repossession if they dont do something soon, im going to get him cheaper insurances etc to save money in that respect but is there anything they can do in terms of the mortgage!?

many thanks money savers

beecher

I'd be gobsmacked if their house has gone from 106% lTV to 90% LTV since the Summer of 2006. Much more likely to be in negative equity, surely?

In terms of leaving the mortgage, they'd have to pay the 5k. They'd be unable to go elsewhere as their LTV is going to be too high.

Only options I can see is upping income, renting out a spare room, selling up. They could ask if they could go interest only, but that's really only delaying the inevitable as they'll sink further into negative equity.

They probably need professional advice - you could point them towards

http://www.direct.gov.uk/en/campaigns/RealHelpNow/DG_172616

swanny65

tux130582 wrote: »

Hello

The only thing they claim is family allowence for the baby,

many thanks money savers

Cant offer much re the mortgage but make sure they are claiming Child Tax Credit

silvercar

Sounds like a northern Rock together mortgage where some of the loan is secured and a small part unsecured. When the bank says that they have 90% LTV, chances are that is the secured part only. So if they move that elsewhere they could get a 90% LTV mortgage with another lender. The downside with that is the redemption penalties and that the interest rate on the unsecured part will jump to something like 13%.

Looks like they won't be able to remortgage elsewhere.

Could his partner work more hours? If she worked over 20 hours they would be eligible for working tax credits which should cover a lot of the childcare costs.

Fliss_M

silvercar wrote: »

Could his partner work more hours? If she worked over 20 hours they would be eligible for working tax credits which should cover a lot of the childcare costs.

Well that depends on her pay. Childcare is extreamly exspensive! Depending on where they live, you need upwards of £147 per week after tax for it to be worth while. If they can get free childcare, sure as grandparents, or low cost like a surestart centre, their no good for full time workers, but part time can be helpful.

Or a night job so one parent is at work while the other looks after the children. Not the best but anything to keep the roof.

Another thought, if hours are being cut, is it worth considering income protection ins? I know their trying to save money (and if they already have this, could they move it to somewhere cheaper) But if his hours are cut, is there a chance the job could be lost? Every eventualitiy I guess, just a thought. Its why I took out another policy for my husband, current climate makes you jumpy.

tux130582

thanks for your replies so far, all good advice that website looks good beecher

reading that website it looks like it maybe best to write / ring northern rock and see what options are available with regards to reduced payment / interest only (though i dont think this is a good idea)

It is in the interests of northen rock (and many other mortgage companies) that are going to lose alot to repossesions so im suprised they wont lower the interest rates or something so that the customer can pay back the money and the repo can be avoided (hope i make sense!) i know it not fair on other people though from a moral point of view.

tux130582

forgot to mention he has some income protection already, so hopeefully that is covered.

childcare is not paid for and is done by grand parents etc

Rednoseranter

Does your employer have a Child Care Voucher Scheme - this is where you pay directly out of your salary for the costs of child care, but the money is taken out before tax (and NI I think) - I've just done this and saved over £80 a month.

They're not going to be able to get out of the mortgage rate without paying the fee - however if they are on a repayment mortgage they could look to extend the term - this will bring down the monthly payment - but of course they will be paying the mortgage back over a longer period. This will not work if they are on interest only basis.

Another - short term option - if they are on a repayment basis is to convert it to an interest only basis, but without a repayment vehicle this should be only be considered as a short term measure - as soon as they are able they should convert back as every payment they make only services the interest and does repay any of the capital.

If they are struggling they should contact Citizens Advice or another free debt advice agency.