Any useful advice on sorting out my mortgage mess please

chivers1977

Your mortgage with the Woolwich would have been a "term adjusting" mortgage. That meant that the DD would stay the same regardless of what debit/credit Offset interest was accruing. On an Offset mortgage interest on the drawn reserve/loan pots is added to the mortgage balance. Therefore you needed to be covering this interest.

The loan pot was only to repay the capital and you had a regular transfer from your current account to the loan pot. The loan pot facility was taken away in 2007 when woolwich was merged into Barclays and the balance of the loan pot debited to the current account. You would have been sent letters about this but clearly not at a good time for you. This meant that the reg payment has been leaving and bouncing back to the current account each month and you would have seen it on your statement.

You said that you had made cash payments of £30k into the current account. Was the DD coming from the current account?

The mortgage balance has increased as you have not been making any interest payments towards the amount that you borrowed on the reserve facility. Your monthly statements would have shown that your mortgage balance was increasing and they showed the amount of interest that was being charged.......

You are requesting that interest not be charged. Why would interest charging be stopped when you still owe c. £90K

Hopefully if a calculation of your account is being carried out this will confirm the above but unfortunately although your personal circumstances have clearly been awful <hugs> you were sent information every month.

If you want to pay off the BTL, you would need to remortgage which you would be able to do at the Offset 0.75% tracker rate IIRC.

Sorry if the above isn't what you want to hear.......

getmore4less

OK this is what I think has happened.

The account transfer to barclays will have been a mortgage account and the reserve to a mortgage current account.

Both these are just copies of the old Woolwich ones.
Other offset savings accounts may have also moved(I don't have them so don't know)

The £100k reserve has been acumulating interest at the mortgage rate and added to the main loan because there have been no payments(£400 returned)

The normal mortgage payments were not enough to cover this so the total has been going up.

there have also been other cash withdrawels for building work as well as cash injections

My guess is that the amounts are probably about right and once you get all the paperwork together this will show that so you really do have this debt to deal with.

without more details it will be difficult to comment further.

The main problem is that you have just spent those £400's, so not been paying down the debt like you thought you were.

On the interets in Jan,Feb

The way these mortgage work is that the payments go out on the 16th and the interest is charges on the 1st([EMAIL="£230k&#64;1.3%/12"]£230k@1.3%/12[/EMAIL] = £250 so about right), it will be normal to see the interest the important thing is the payment on the 16th is more than the interest so the debtis not getting bigger.


Anyway were now.

BTL assets
You have 4*£50k + £140k?(is it still worth that)
so that is £340k against a £260k debt so one solution is liquidate the BTL. even with reduced prices you can clear the debt completely.

Establish if the BTLs are making money or not and make sure that a portion of the rent is going to the interest and debt repayments.(lets say 2% of estimated value) I would want a minimum gross yield of 5% but closer to 10% long term.

When you say the big rental is just about breaking even are you including the mortgage (money borrowed to buy it was that £140K?) or not, if not then you are making a loss and need to review. I would want £600+pm on this
[EMAIL="£140k&#64;2%/12"]£140k@2%/12[/EMAIL] = £235pm towards the mortgages covering £140k

What about the other 2 worth around £50k I would be looking for rents of over £200pm on them, more if possible and that should also be going into the mortgage pot if you can't do all of it then at least £85pm from each which covers £100k ,

So with 3 BTL that should be over £400pm towards the debt with total gross rent of £1k, sell the other 2 and the £30k BTL debt is cleared and £70k of the Barclays debts. leaving around £160k.

Say £170k with costs, repayment over 25years is £800pm.

lavenderlady

Many thanks people, some interesting help here.

Ok Chivers, no I'm not sure what you are saying is my actual case but I'm probably not getting my head around it properly. I'l reply best I can.

It cant have been term adjusting because the DD was changed every time there was a rate change. They automatically changed it at their end. Surely term adjusting means payment stays the same and the time changes?

Also the loan pot was not to pay the capital, just the interest. Woolwich worked out a figure for me that would cover the interest. The plan was to look around for a good deal on maybe a loan or a BTL mortgage. However that never happened.

Yes I paid in £30,000. That went straight into the current account. I assumed as the whole thing is under the same umbrella that it would simply be offset on my mortgage. Yes the DD was coming from the current account.

I see what you say that why should I ask for the interest be stopped but this mortgage I have now isn't what I signed up for. The recent letter I had from the Woolwich says that "the payment that was set up has not been hitting the mortgage account and has been returned on a monthly basis since the changes from the Woolwich account to Barclays"

With regards to changing my BTL's over. I have approx £50,000 still in my reserve pot so I believe I won't need to remortgage but simply use the money already in the pot so I think it would be cost free. I havent done anything at this stage however.

I think that answers everything. It does seem i'm not on the mortgage you mentioned but have a look at my answers as I could be wrong.

Thanks again

lavenderlady

Hi Getmore4less.

Ok what you say sounds correct. The interest has been adding up because of the payment not being made. So it seems then that what used to be all my accounts under one umbrella and it didnt matter where your savings/debt was as they were sweeped together at the end of the day is not right anymore.

Onto the BTL. All I want to do is get rid of the lot of them! I have the two for sale and I've reduced them down to a bare minimum but still no sale. One of them is subject to a council buy out under a regeneration clause and the whole neighbourhood are fighting together to get a sale from the council (who don't have the funds to buy them) so that one I've done everything to sell including sending it to three auctions.

The other two small ones are making money. I can get between £80 and £90pw for them and have secured tenants on these so they can stay as they like for now.

The big property I purchased is still probably worth around the £140,000 mark. One on the block went for £180,000 two years ago but im assuming its less in the current market. The rent is £550 and I've had the same old couple in since I purchased it. (about four years) I have never put the rent up and to be honest I don't want to until the market is more stable. They have lanscaped the garden and are good tenants. I don't want to risk putting the rent up and losing them.

There's also the tax implications of selling all at once. I've got two on the market and as soon as one sells I shall try and get a tenant for the other. However both are in need of repair due to c, rappy tenants trashing them.

My hope is to sell one a year to get shut of them with all the profits going to pay off my mortgage. I hope this makes sense.

Thank you again

getmore4less

lavenderlady wrote: »

Onto the BTL. All I want to do is get rid of the lot of them! I have the two for sale and I've reduced them down to a bare minimum but still no sale. One of them is subject to a council buy out under a regeneration clause and the whole neighbourhood are fighting together to get a sale from the council (who don't have the funds to buy them) so that one I've done everything to sell including sending it to three auctions.

I think I would give up trying to sell if there is a possession order no one will buy unless they think they can get more from the council, get a tennent in if you can.

The other two small ones are making money. I can get between £80 and £90pw for them and have secured tenants on these so they can stay as they like for now.

thats good rate(gross 8.3%) for a £50k asset I would just keep these going

The big property I purchased is still probably worth around the £140,000 mark. One on the block went for £180,000 two years ago but im assuming its less in the current market. The rent is £550 and I've had the same old couple in since I purchased it. (about four years) I have never put the rent up and to be honest I don't want to until the market is more stable. They have lanscaped the garden and are good tenants. I don't want to risk putting the rent up and losing them.

gross 4.7% is a bit on the low side but if costs are low and they are keeping the place good then stick with it for now

There's also the tax implications of selling all at once. I've got two on the market and as soon as one sells I shall try and get a tenant for the other. However both are in need of repair due to c, rappy tenants trashing them.

can there be that much capital gain on any of these?

My hope is to sell one a year to get shut of them with all the profits going to pay off my mortgage. I hope this makes sense.

Thank you again

Overall I think it is not as bad as you first though, cash flow is the key to not losing control, presumably the place the mortgage is on is worth a bob or two and if you have other income to cover the mortgage is should sort itselve out as you dispose of the under perfoming BTL's

I think I would probably get rid of the BTL mortgages at nearly 5% using the reserve and overpay the Barclays debt.

silvercar

From what you say there appears to be little capital gain. Remember that you have a personal capital gains allowance of £9,600 each tax year, so it can be advantageous to sell each property in a different tax year.

CGT calculations are much simpler since April 2008, if you feel you may have a liability I can do a calculation.

chivers1977

Please see my responses below

lavenderlady wrote: »

Many thanks people, some interesting help here.

Ok Chivers, no I'm not sure what you are saying is my actual case but I'm probably not getting my head around it properly. I'l reply best I can.

It cant have been term adjusting because the DD was changed every time there was a rate change. They automatically changed it at their end. Surely term adjusting means payment stays the same and the time changes?
If you had an interest only mortgage the payment would be amended each time there was a rate change. A payment adjusting mortagge would have taken the DD to include the interest required for the loan pot/reserve and the main mortgage payment. A term adjusting mortgage only takes the payment required for the main mortgage. It does not reduce if there is any offset benefit earned and it does not increase when there is any debit offfset interest. I think that you had a term adjusting one as you state that your balance came down due to the linked savings you had at the start.

Also the loan pot was not to pay the capital, just the interest. Woolwich worked out a figure for me that would cover the interest. The plan was to look around for a good deal on maybe a loan or a BTL mortgage. However that never happened.
The interest was added to the mortgage as an offset mortgage. The payment that you were quoted on the loan pot was the £100k simply divided by either the number of months remaining on the mortgage ofr the term that you wanted to pay the loan pot off over

Yes I paid in £30,000. That went straight into the current account. I assumed as the whole thing is under the same umbrella that it would simply be offset on my mortgage. Yes the DD was coming from the current account.

I see what you say that why should I ask for the interest be stopped but this mortgage I have now isn't what I signed up for. The recent letter I had from the Woolwich says that "the payment that was set up has not been hitting the mortgage account and has been returned on a monthly basis since the changes from the Woolwich account to Barclays"
Your loan pot (capital) payment has been leaving the current account and bouncing back. As the loan pot balance is transferred back to the current account, you don't need to have a payment to it but do need to have plans to repay the reserve by the end of the mortgage term.


With regards to changing my BTL's over. I have approx £50,000 still in my reserve pot so I believe I won't need to remortgage but simply use the money already in the pot so I think it would be cost free. I havent done anything at this stage however.
If you have available reserve then you will be able to draw this but you will need to be aware that interest is being added to your mortgage balance and you will need to increase your payments to cover it.


I think that answers everything. It does seem i'm not on the mortgage you mentioned but have a look at my answers as I could be wrong.
To summarise I think that you are on a term reducing offset and your loan pot has been consolidated into the current account. Your mortgage balance has increased as you have not been covering the interest due on the current account and you have not been making the payment that you believed towards the loan pot (now current account) capital.
Thanks again

lavenderlady

Hi Chivers.

Oh ok I'm understanding it a bit more now. Thank you for that it looks like you have got your head round it for me!

Dumb question but are my pots now not connected at all? Sorry I've looked for paperwork to tell me but cant seem to locate anything. If they are all separate then putting all that capital in to a current account was a waste of time.

Silvercar thank you thats very kind. I do believe I will have to pay quite a lot as I've made a good profit. (considering how much I paid) One was purchased in 1997 for 14k, hope to sell for 50k The other was purchased approx 2000 for 18k and worth 50k however this one could go anywhere between 40k and 60k as its subject to the council regeneration scheme. We are fighting to get a fair price however its had an arson attack on it since its been empty. It was valued at 69k before the regeneration order

Sorry I honestly can't be more exacting with the figures. I know the facts i've given you arent very helpful but I've said 50k each which is a conservative figure.

I would love to get rid of one each tax year and that was my plan however the regeneration one has been on the market for about two years and is now hopefully going to be purchased by the council in the coming tax year. The other one has been on the market since last June.

The houses are owned jointly by my husband and myself so the relief is on each of us.

getmore4less

lavenderlady wrote: »

Dumb question but are my pots now not connected at all? Sorry I've looked for paperwork to tell me but cant seem to locate anything. If they are all separate then putting all that capital in to a current account was a waste of time.

Get on-line banking set up, you can manage all your openplan/offsetting that way.

Is will say on any barclays statement if it part of an offset mortgage.

chivers1977

See below,,,,,,,,,,,

lavenderlady wrote: »

Hi Chivers.

Oh ok I'm understanding it a bit more now. Thank you for that it looks like you have got your head round it for me!

Dumb question but are my pots now not connected at all? Sorry I've looked for paperwork to tell me but cant seem to locate anything. If they are all separate then putting all that capital in to a current account was a waste of time.

Your mortgage current account will still be linked as will any linked savings accounts. Putting your capital into the MCA has reduced the balance of the loan pot which has been transferred into it - hope that makes sense. However your monthly mortgage payments coming out of that account will have increased the balance up again if you see what I mean.....

Silvercar thank you thats very kind. I do believe I will have to pay quite a lot as I've made a good profit. (considering how much I paid) One was purchased in 1997 for 14k, hope to sell for 50k The other was purchased approx 2000 for 18k and worth 50k however this one could go anywhere between 40k and 60k as its subject to the council regeneration scheme. We are fighting to get a fair price however its had an arson attack on it since its been empty. It was valued at 69k before the regeneration order

Sorry I honestly can't be more exacting with the figures. I know the facts i've given you arent very helpful but I've said 50k each which is a conservative figure.

I would love to get rid of one each tax year and that was my plan however the regeneration one has been on the market for about two years and is now hopefully going to be purchased by the council in the coming tax year. The other one has been on the market since last June.

The houses are owned jointly by my husband and myself so the relief is on each of us.