Converting a mortgage to an equity swap?

beaujolais-nouveau

I wondered if anyone has tried doing this.

I have a self-certificated mortgage on which the repayments are quite high because it is only for 10 years (I am 59). The interest rate is tied to LIBOR which has started to creep up again and, given how little the banks trust each other now, will probably continue to go up.

As the mortgage is for only about one-quarter the current market value of my flat, I wondered about finding a bank or building society that would pay off my mortgage in return for owning a quarter of the property and getting their money back when I sell the flat - which I can't do now but would probably have to do in the next 10 years (it is a first floor maisonette flat accessed by steep stairs).

I don't want to go for equity release, and I can't find out much about equity swaps on the web - except where it refers to default credit swaps (a factor contributing to the global financial crisis).

PS - forgot to say - my mortgage was with a subsidiary of Lehman Brothers and was "securitised " in a fire sale last year. So the organisation to which I now pay the monthly instalments has absolutely no interest in things like repayment holidays or going onto interest-only payments for a time; I don't want to put the mortgageor's name here because it will come up in an Internet search, and they have a bad reputation for moving direct to repossession.

dimbo61

Have you considered selling up now and moving into over 55,s rented apartments or even part rent part buy!
Money to enjoy life and not all tied up in property.
Property rich and cash poor !

beaujolais-nouveau

dimbo61 wrote: »

Have you considered selling up now and moving into over 55,s rented apartments or even part rent part buy!
Money to enjoy life and not all tied up in property.
Property rich and cash poor !

Selling up is now difficult because (a) 65 years left on lease, (b) extensive penetrating damp at the rear of the property which will cost about £15,000 to put right (long story), and (c) it appears that the current freeholder cannot afford the work of making the building watertight.

Extending the lease is very expensive and not worth it for this property in this condition. To me, it has been worth the money paid in mortgages for, this being London, had I rented somewhere to live for the past 31 years instead of buying, it would have cost me a great deal more. At some point, I might be able to sell it to the local authority for social housing but that moment has not arrived yet.

Anyway, am now writing to the bank to suggest an equity swap. If I learn anything useful, I will report back here.

RenovationMan

I dont understand the problem you have. Are you struggling to meet your mortgage repayments? If so, I would advise speaking to one of the debt charities or CAB to see if there is anything that can be done.

If the the company that holds your mortgage is reluctant to look at soemthing as straightforward as repayment holidays or going interest only, then I can't imagine they'd look at anything as complex as equity exchange.

If you own 75% of the flat (you stated that the mortgage is 25 percent of the value of the flat), then are you not in quite a good position to either remortgage to a better provider and rate or to take a hit on the sale price and get rid of the flat?

beaujolais-nouveau

RenovationMan wrote: »

If the the company that holds your mortgage is reluctant to look at soemthing as straightforward as repayment holidays or going interest only, then I can't imagine they'd look at anything as complex as equity exchange.

My mortgage has been securitised, as I said, and is not with my bank. I am thinking of trying to interest my bank in paying it off for me in exchange for equity in the property. This is because the EU has a sovereign debt crisis, quantitative easing is about to come to an end, the Coalition government will have to make drastic cuts everywhere to reduce the UK deficit, and there is £1.5 trillion of US commercial property loans about to mature in negative equity which will definitely bring down several more banks if not the entire system.

RenovationMan wrote: »

If you own 75% of the flat (you stated that the mortgage is 25 percent of the value of the flat), then are you not in quite a good position to either remortgage to a better provider and rate

No one is selling self-certificated mortgages now.

RenovationMan wrote: »

or to take a hit on the sale price and get rid of the flat?

I still have to live somewhere.