Secured loans preventing remortgaging

Emmatuk

Hi all,

I am new to this and not very money minded, just need some advice.

My mum and dad are struggling at the moment with loads of debt, they are just about making all the monthly repayments. The main debts they have are their mortgage and a secured loan on the house.

There is just about enough equity in the house to pay both these debts off, however when they have applied to remortgage their house, the Finance company who supply their loan wont let them because the loan is secured on it. I asked the mortgage advisor why? and basically she said because they will be losing out if they dont go the full term with the loan and pay it off early.

Surely finance companies have a duty of care to their customers to help them get out of debt as soon as possible.

Does anyone have any ideas on how they could get around this or if the finance company are working within the law?

Ultimately it will end up with my mum and dad going Bankrupt and I am really worried.

Thanks

Emma

_Andy_

They are well within their rights to refuse a deed of postponement.

opinions4u

Emmatuk wrote: »

There is just about enough equity in the house to pay both these debts off, however when they have applied to remortgage their house, the Finance company who supply their loan wont let them because the loan is secured on it. I asked the mortgage advisor why? and basically she said because they will be losing out if they dont go the full term with the loan and pay it off early.

They do have to provide a settlement figure if a customer wishes to repay a loan early (e.g. from the proceeds of a remortgage). That settlement figure could have redemption charges built in to it which they can reasonably do.

Surely finance companies have a duty of care to their customers to help them get out of debt as soon as possible.

No. They have a duty to their shareholders to generate profits. Keeping customers in debt (legally) is part of this.

If the remortgage will clear all the debts owing on the property then the finance company loan will be redeemed and they can't stop it going through (although the solicitor completing the remortgage would need to ensure the legal charge is properly cleared).

If the remortgage isn't enough to cover the mortgage and the settlement figure for the secured loan then it won't go through.

If bankruptcy looks like a genuine option then they should contact CAB or Shelter for help and advice sooner rather than later.