Mortgage Mess !!

Mrtickle24

Hi,

I have been reading through these forums over the last couple of hours in the hope that I can see the answer to the questions that I have relating to my financial situation. I haven't quite been able to locate the answer hence the post for help.

My Situation:
I am a home owner and my property is now worth in the region of 100K, however, I have a mortgage of 109K and an unsecured loan of 30K which is tracking along side my mortgage. Both of these products are provided by Northern Rock.

I want to move house, however, my current situation isn't allowing me to move. My house is in negative equity and we have a large unsecured loan. I have spoken to NR and they have advised that if I delink my loan from my mortgage then there is an additional 8% above their standard base rate applied to the monthly interest which would take it to 12.79% (as of today).

We currently pay £890.00 in house related (mortgage and unsecured loans) payments per month to NR.

We have a number of other outstanding debts (Cards, Loans etc) which total in the region of 20K and this consumes circa £900 of our monthly income.

We are quite fortunate that we have a good income and do have a surplus left each month which we are using to pay of our debts, but I really want to firstly ensure that we maximise our surplus amount each month ensuring that we get the most from it and then understand how we can afford to move house.

Northern Rock have advised that they are not offering any new products at this time, and we know we cannot get another mortgage without have a large deposit, which isn’t going to be possible with our current debt. Does this mean that I am stuck in my current house until I clear my debt or do I have other options that I am not aware of? If we do sell our house will my loan interest rate rocket costing more cash per month or can we lend to pay off Northern Rock?

Current thoughts
- What would happen if we stopped paying our mortgage?
- Can we just leave our house and allow it to be repossessed?
- What would happen in this situation?
- What would happen to the unsecured loan that I have from NR?
- What happens to your credit score in this situation and will they try to obtain the money owed via other channels i.e. repossessing other items that I own etc?

I am not looking to avoid paying back the monies that we have borrowed, but I am looking for a way to firstly free up some money each month to allow me to pay of my debts quicker and secondly move house.

I am not sure if I have provided enough information for anyone to be able to help, but would appreciate any advice or input from someone else in a similar position.

Thanks for you time
Jon

Trying_to_be_good

If your house is repossessed (you stop paying the mortgage, or you pay less than the minimum payments) they will chase you for years for what you still owe, i.e. the difference between what the house achieves at auction and how much your mortgage and other costs add up to. Your credit rating will be trashed for years - you won't get other credit.

The unsecured loan is also still payable, and you have been told the interest rate will be much higher.

I think you're better off posting on the Debt Free Wannabe board, posting an SOA and cutting down on your monthly outgoings to see what extra you can free up for repayments. Ultimately, it's about whether you need to go bankrupt or whether you can pay off your debts.

The mortgage should be your first priority. Good luck - you are facing up to your finances, which is a great first step, but I'd put off all thoughts of moving house for a while.

Conrad

I'm unclear as you say you are lucky to have a healthy income but at the same time you seem to imply you might walk away from the mortgage. Why not just pay down your debts asap. If it takes 5 years so be it. You want to move home, but maybe see your self as one of the lucky few in the world that does not live in abject poverty without running water, rather than unluckly that you cannot trade up.

Someone we know libves in a 1 bed flat with 6 kids - honstly I'm not excagerating. They have bunk beds in the hall etc.

Robertf

You borrowed the money. You bought a house. presumably to live in? Surely you still want to live in it?

Seems a bizarre way to look at a place to live. Its still the same place. You said you can afford the repayments.

Its worth less now, in 3 or 4 years when you have cleared the worst of your debts it will start to increase in value again.

opinions4u

Mrtickle24 wrote: »

Hi,

- What would happen if we stopped paying our mortgage?

You'd get fees and interest rolling up on your mortgage. They'd repossess. They'd sell it for less than you would achieve selling it yourself. You would then be liable for their losses for the next 12 years, and be unlikely to be able to borrow again.

Can we just leave our house and allow it to be repossessed?

Yes, but the consequences would be far reaching for you.

What would happen to the unsecured loan that I have from NR?

You'd still owe them money.

- What happens to your credit score in this situation

Your credit file would catch fire and be too hot to touch. For over a decade.

and will they try to obtain the money owed via other channels i.e. repossessing other items that I own etc?

Potentially, yes.

I am not looking to avoid paying back the monies that we have borrowed

So why ask?

but I am looking for a way to firstly free up some money each month to allow me to pay of my debts quicker and secondly move house.

Join the real world and fulfil your obligations. You borrowed the money. Make sure you pay it back.

Repossession is an option for people who can't afford their mortgage. The consequences will affect them for years.

You can afford to meet your repayments, so do exactly that.

Stop building up card balances, start reducing your debts, and forget about moving home. You can't afford to.

tartanterra

The first thing you should do, is step over to your window, look out and gaze at CREDIT CRUNCH LAND.

You have 9K of negative equity:eek: (which is probably increasing by the day), You have a 30K loan:eek: , 20K of further debt:eek: and if it were even slightly possible that someone would lend you money to buy another house, you would incur removal costs, buying fees, selling fees etc.

I see your mortgage and loan are with NR. Has the thought "Why did NR go bust?" never crossed your mind?

You don't need to move house. What you need to do is deal with your debts. Start with the Debt Free Wanabee thread, because frankly, no lender is going to touch you with a bargepole in the current climate.

beecher

All I'd like to add is that you aren't a 'home owner' as you state since you don't own any of it, and in fact owe more than it is worth. You're not in a position to be thinking of moving house in this situation, regardless of how healthy you think your income is. Definitely go onto the Debt Free Wannabee forum to get help with saving money elsewhere in your budget - cancel sky/gym membership/holidays/sell cars in order to get out of this debt.

poppy10_2

beecher wrote: »

cancel sky/gym membership/holidays/sell cars in order to get out of this debt.

Not the Sky!!! Have some humanity, how can you expect people to live without their £60/month premium HD multiroom package?!