mortgages for debt.

gary50_2

is it wise to get a mortgage say for 160k then buy a house for 110k using the left over money to wipe your debts of?
are there any problems in doing this as i have spoken to various people who inform me that tis is possible.

alecpr

Hi,

The house you buy would have to have enough equity in it to borow that amount of money, the banks will value the property before lending you the money.

You would be securing your debt on the house, obviously failure to pay your mortgage could result in re-possesion, most people on here, I beleive, aren't fans of securing debt on your property.

So in answer to your question, is it possible? Yes, if your house is valued in excess of your borowing requirement.

Is it a good idea? Depends on circumstance and you confidence that you can pay the money back, but as a general rule, it's better to find some alternative.

Apple_2

gary50 wrote:

is it wise to get a mortgage say for 160k then buy a house for 110k.

If the house is costing 110k and is worth 110k why would a mortgage lender lend you 160k on that house ? Am I missing something ?

Mrs_Sparkle

Apple wrote:

If the house is costing 110k and is worth 110k why would a mortgage lender lend you 160k on that house ? Am I missing something ?

I'm confused too. You could probably at a push squeeze them to 110% to pay for furniture etc but the interest rates would probably be a lot higher for a deal like this so would cancel out any benefits.

lynzpower

Basically if you do this the house will already be in negativve equity by a startling 50k.

Bearing in mind the property market is going to take a battering in the next year or so, and interest rates are set to rise. Now is barely the time to be taking on a mortgage IMHO, especially one in negative equity.

Also how is your credit rating? I bet a bit battered? Will any decent lender consider you for a morgage or will you go down the Ocean finances of this world option. Avoid them like the plague is my advice.

Have you posted an SOA, we coud try and help you find another solution?

Lynz
x

nearlyrich

gary50 wrote:

is it wise to get a mortgage say for 160k then buy a house for 110k using the left over money to wipe your debts of?
are there any problems in doing this as i have spoken to various people who inform me that tis is possible.

The phrase "wipe your debts off" is key because actually you would still owe the money but now if you don't pay the lender can take your house away. Those ads on daytime TV might make you think you have wiped them out but they will just be there for longer and costing you more in interest month on month.

If you have £50k of unsecured debt are you in a position to qualify for a mortgage? Have you had a look at your credit ratings recently?

Why not do a SOA (Statement of affairs ) and let's see if we can help you to tackle some of the debt in a more sensible way?

Have a look at the top of the board and the stickied posts which will help you to sort it all out and then lots of helpful and knowledgeable people, some of whom have been there will make suggestions for getting out of the debt.

Hope that helps;)

Kevicho

lynzpower wrote:

Basically if you do this the house will already be in negativve equity by a startling 50k.

Bearing in mind the property market is going to take a battering in the next year or so, and interest rates are set to rise. Now is barely the time to be taking on a mortgage IMHO, especially one in negative equity.

Hi lynz, you always give good advice and I was keen to learn why you think the above?

I know that the house prices are probably too high anyway thanks to low interest on mortgages so do you think the market is going to take a tumble?

TBH i know nothing about housing currently but in the next 2 years im going to be looking at mortgage etc so what do you recommend?

Cheers Chick

Toto

I agree with Lyn, I believe property prices will fall when interest rates rise. But, if you ask 10 people what is likely to happen in the property market you will get 10 different answers generally.

However, the housing boom has gone on and on and it is impossible for it to keep rising as it has been. Already we are seeing first time buyers being priced out of the market. wages aren't rising in line with housing inflation.

My guess is, that as people are clearly overstretching themselves to get on the property ladder when the interest rates go up many more people will struggle to pay.

My mortgage was £780 10 months ago, but my introductory period ended and rates went up and it is now £1106 interest only. So, I am selling to rent because I would rather get out now while I can guarantee the equity, rent cheaper, be debt free and save for a time when I might feel it is right to buy again.

Right now, I wouldn't buy. But that is purely personal opinion.

As for the OP, buying a house starting out with 50k negative equity in today’s market is not a good idea at all. I would be amazed if a reputable mortgage lender would allow this, in fact, I am not sure I would want to deal with one who would lend me 150% of my house value.

As the other posters have suggested, I would post a SOA and see if the folks here can help you out. I would certainly look for a better way to deal with debt than this plan. Perhaps call payplan or the CAB. You can also look at the national debtline’s website, there are loads of fact sheets there to help you decide how best to tackle your debts.

lynzpower

Kevicho wrote:

Hi lynz, you always give good advice and I was keen to learn why you think the above?

I know that the house prices are probably too high anyway thanks to low interest on mortgages so do you think the market is going to take a tumble?

TBH i know nothing about housing currently but in the next 2 years im going to be looking at mortgage etc so what do you recommend?

Cheers Chick

Where to start? Well there are a couple of interest rate rises on the horizon for the end of the year, add this into the almostr daily news bulletins about the amnount of debt people are in ( not that we need telling :rotfl: ) and the amount of bankrupcies there are. there was something like a 10% rise in bankrupcies last month over the figures in May. The banks are taking a battering from all sides, and the bank of england were ready to set the interest base rate higher this month, till one of the chaps involved in organising it unfortunately passed away. Chances are that this means when the rise does come it has to deflate more, as its been too long without a corrective force IYSWIM.

Have a good nose over on Property, theres lots to take in.

IN saying that the rule of thumb for property buying is a) only buy what you can afford b) save the biggest deposit you fesibly can so less interest c) never overstretch yourself as you will end up in the situation that Toto and I are in. Dreading an interest rate rise as we know we will end up being stuffed
d) NEVER TAKE INTEREST ONLY if you cant afford to save the difference.

Pobby

Agree with Lynz and Toto.I have friends with MAD mortgages and they have them as interest only!{Around £300k}In a rising market I can see the idea behind it.Pay with I/O and get out with the equity.

Yes,I agree that interest rates are about to go up.The BOE have very little choice as global pressure is pushing up IRs.Inflation is ,imho,much higher than the figures being used by our government.All of us have seen huge rises in utility,petrol and council tax.The BOE has a remit to keep inflation down so IRs must go up.

Interest only mortgages is renting from the bank.

sparkle84

lynzpower wrote:

Where to start? Well there are a couple of interest rate rises on the horizon for the end of the year, add this into the almostr daily news bulletins about the amnount of debt people are in ( not that we need telling :rotfl: ) and the amount of bankrupcies there are. there was something like a 10% rise in bankrupcies last month over the figures in May. The banks are taking a battering from all sides, and the bank of england were ready to set the interest base rate higher this month, till one of the chaps involved in organising it unfortunately passed away. Chances are that this means when the rise does come it has to deflate more, as its been too long without a corrective force IYSWIM.

Have a good nose over on Property, theres lots to take in.

IN saying that the rule of thumb for property buying is a) only buy what you can afford b) save the biggest deposit you fesibly can so less interest c) never overstretch yourself as you will end up in the situation that Toto and I are in. Dreading an interest rate rise as we know we will end up being stuffed
d) NEVER TAKE INTEREST ONLY if you cant afford to save the difference.

I agree with everything Lynz says (as always) but just to be absolutely correct BOE were not going to raise the the IR at the last meeting they voted 7-1 to hold interest rates David Walton (who has since died) was the only one who voted for a rise. The next meeting is on 6 July - so we will see what happens then.