The Mortgage. The Split. The Debt. ADVICE MUCH NEEDED.

MerseyLad

Hi Everyone,

Firstly, please let me apologise. This is going to be quite long winded and it could quite easily have fitted into 3/4 sub forums on here, but I think this is most relevant. I am in desperate need of some advice and guidance.

In Feb 2007 I split from my long term girlfriend. We had a house and we were only just starting on a new 3 year fixed mortgage. The split was amicable and has been dealt with very politely. For the first 18-20 months since the split, she lived in the house and I continued to pay half of the mortgage [she paid all the bills]. I agreed to this as it was my decision to split and I felt a responsibility not to leave her in trouble.
Since then she has moved out and the house is now rented out.

The Fixed Mortgage ends at the end of February. It is currently around the £700 p/m mark for the mortgage and this will obviously drop slightly with the reduction in interest rates. The rental amount we get at present is £545 p/m and the shortfall is made up between the pair of us. The mortgage company would not even entertain allowing us to change to "repayment only" during the fixed term and so we have had hands tied with that. I have recently written to them to ask can this be considered - but was previously advised that we would need to show we had X amount in credit in our accountto justify moving to repayment only [is this right?]

The rental agreement is 6 montly and is due up in mid March and I am considering biting the bullet and taking on the house from my ex, and moving in. To say us both from loosing money, but also as she no longer lives anywhere near here now it makes sense that I may as well take it on [even though it wouldnt be my first choice due to memories].

The house was bought for 133,500 and was last on the market at £125k 12 months ago in the midst of the house market plummet.

Alongside the mortgage, we took out at £25k consolodation loan. This was £22k mine, and 3k my ex. I have paid the £150 p/m for this since day one and in effect she would owe me the full 3k should I take the house on. The loan is at the mortgage interest rate, but if I was to move mortgages the APR would rise by 4% but I would be allowed to keep it.

Due to issues in the current economic climate, and seperation costs and losses I have now built up further debt of £15k. Please be assured at this point that this is all in order, and I am not struggling to make repayments or anything, and it isnt a problem other than it is restricting me.

SO AFTER ALL THAT......WHAT DO I WANT???

1 - Can I take on the house, and change my ex's name on the mortgage to me and my new partner? My new partner is in a better paid and more secure job than my ex. She works in the public sector and I feel is a better proposition to a lender than my ex.

2 - What would you do with the debt? The original £25k that was tied in with the house.....my ex would have to give me £3k on that, and with me having paid 3 years already I would estimate that would leave me with about £20-£21k.
I think leave this to run alongside the mortgage, but can I just simply remove my ex from this loan?

3 - The further £15k debt is on credit cards and a loan. For the first time ever, I no longer have any cards and I have asked to go on repayment only with the companies so that I clear the cards and then they close. I pay £200 p/m to Egg Cards, £200 p/m to Capital One and £150 p/m on a Northern Rock Loan.
I work in a job where we have a credit union whereby they insist you have 10% of the borrowed amount as a deposit and then pay a monthly amount on top of the loan amount so that you are saving alongside. I am contemplating putting £2k of the £3k my ex will own me [as detailed above] into the credit union account and borrowing £15 over 5 years with them. The remaining £1k I will use to pay off one of the cards in full.

The bottom line is.........I want to take the house on so I am not wasting money away needlessly. But I want to be able to afford to do it, and clear my debts at the same time.

At present I take home a basic of £1650 p/m, but can work OT without problems [although I appreciate not to rely on this as standard]. If I take the house on without sorting my debts I would be paying out as follows:

£350 towards mortgage.
£300 towards household bills.
£150 Northern Rock
£150 Loan attached to Mortgage
£200 Egg
£200 Capital One
£200 my car

As you can see, im running out of funds without considering petrol, food, mobile phone and so on. So I really need to address the debt alongside everything.

Any advice would be greatly appreciate - and I hope you can "pick the bones" out of what I am trying to say???

If not, I can clarify or add anything you may need to help me.

Thanks in advance.

ML. :T

beecher2

If you do take on the house, be aware that because your LTV is high, you won't get another deal regardless of salary multiples. This means you run the risk of the payments shooting sky high once interest rates rise. Since you don't have enough money just now, I don't see how this is a risk you can take.

All I can suggest is getting professional advice. You're both jointly responsible for the mortgage, so need to work out a plan with your ex.

I

MerseyLad

Thanks for the above.

I think the outstanding Mortgage is now about £122,500 and the value of similar houses on the estate is at £127,500 now.

beecher2

Would the loan have to be paid if you sold up? Or would the interest rate go up? If you can sell up and pay off the mortgage then I would. If you're not sure, phone up your lender and ask them.

MerseyLad

Hi,

The loan would be allowed to stay if the mortgage moved or was paid off. However, the rate would go up by 4%.

The issue I have with the second point is that the house had very little interest in the 18-20 months it was on the market [it has been off for 12 months now] and the market has not picked up greatly yet so I am concerned it still won't sell, or if it does it will do so at a loss.

But secondly, I am living back at home with parentals - at 30 years old its not exactly what you want. I was thinking if I could move in and spare:
1 - financial loss
2 - crippling myself

that it would be a happy-medium.

beecher2

No, I'm sure it isn't what you want at 30 but taking on a mortgage when interest rates can only go upwards seems to me to be a surefire way of crippling yourself financially.

MerseyLad

OK.

The prospect however is grim. 7/8 more years living with Parents until I clear debt then.