House move options with a second charge?

jess1981

Hi, I'm hoping someone may be able to offer some advice or guidance.

My husband and I bought our current home in 2006. Since that time we took out a £10k loan with Welcome Finance and a further £5k with Citi Finance. Oh the joys of hindsight but that's another matter!

We're in a position now where we'd like to move and it's likely we'll move to rented accommodation so we can take some serious time to consider what we want to purchase next and indeed save for a bigger deposit.

Our preferred option is to sell our current home but from what I can gather I may be prevented from doing this due to the second charges. The house will either just break even on the valuation or be slightly short but only by a few grand, but I believe once the house is paid from the sale, Welcome and Citi (in which order I don't know) would naturally be looking for settlement as second charges on the property.

So I guess what I'm asking is has anyone experiences this themselves recently or does anyone have experience of secured loans being transferred into unsecured loans?

Any advice gratefully received
Many Thanks

dannyxx25

Wouldn't you save more continuing paying the mortgage rather than renting?

jess1981

Hi, yes of course, I should have said we're very unhappy where we are at the moment, we've had troublesome neighbours to say the least and ideally we wanted to settle into a house (we currently live in an apartment) rented or otherwise before we started a family next year.

silvercar

The house will either just break even on the valuation or be slightly short but only by a few grand,

By break even, do you mean clear the mortgage or the mortgage and the two charges and enough to pay the estate agent and the solicitor and the HIP?

Fire_Fox

Is the entire £15K secured loans? What do you mean a 'bigger deposit' - you are in negative equity aren't you?

jess1981

The valuation we've received for the property is equal to the value of the remaining mortgage, so if we sell at valuation we'll clear the mortgage, although we may need to drop by a few thousand depending on offers made.

jess1981

The whole £15k is secured. By bigger deposit I mean we have some savings but nowhere near enough to clear this loan, so the intention was to keep saving into that ISA to create a larger deposit for when we do want to purchase the next house. Sorry if I'm not being very clear...

Fire_Fox

You need to clear your debts before you start saving for another deposit, as your loans will be costing you more in interest that your ISA is gaining in interest IYSWIM. You will not be in a position to purchase another house until the loans are cleared anyway as lenders now calculate the net value of your deposit (savings minus debts). Use the snowball calculator if you aren't clear:
http://www.whatsthecost.com/snowball.aspx

I would also strongly recommend you work to pay off the debt/ negative equity before you consider reducing your income by starting a family. Without meaning to be rude, if you have spent £15K over and above your income since 2006 then you need to take control. There is a mine of information on this forum, but the best place to start is a full budget - go through your last six months of bank statements and complete this:
http://www.makesenseofcards.com/soacalc.html

Once you know what you are spending look at threads such as 'Live on £4k for a Year' (a whole family!), 'Eat Healthily on 50p per Day' - as well as looking at cutting outgoings look to increase your income with a second job, matched betting, online surveys, focus groups, cashback sites.

silvercar

jess1981 wrote: »

The valuation we've received for the property is equal to the value of the remaining mortgage, so if we sell at valuation we'll clear the mortgage, although we may need to drop by a few thousand depending on offers made.

That makes it a non-starter. As well as clearing the mortgage you need to pay off both secured loans and the solicitor and the estate agent.