Neg Equity/Northern Rock

lauraeast23

Hi

I took out a 125% together mortgage in 2006... At the time this was my only way of getting a mortgage, so was my only option.

I now as many others have fallen foul of the negative equity market...

My total borrowed is 132k, I have been paying repayment on 5.89% for almost 4 years and admittedly had to take a few payment breaks (which were part of the mortgage arrangement so not defaulted payment, offical holiday breaks) but have barely paid any off the original figure - perhaps £500 !!

My deal ends in August 2010, I am presuming this will mean that the only mortgage I will get is to go onto NR SVR as I am doubtful I will be brekaing even by then, flat value currently around 112k mark.

Any advice on how best to try to make the situation better for a years time ?

_Andy_

Hi

Yes no other lender will offer you anything.
Overpay by as much as you can to start reducing the mortgage.

lauraeast23

Thanks Andy I figured as much... !!

TrickyDicky

Overpay the mortgage, pray the value of your house rockets in a year. While you're paying it, its still a roof over your head. It just means you cant move. Negative equity is only bad when you need to move or sell the house. If you intend to stay, theres no problem.

Thrugelmir

lauraeast23 wrote: »

Thanks Andy I figured as much... !!

Those no magic wand to make everything disappear. Your future is in your own hands. There's plenty of support on this board where ever you go. So make a plan and stick to it.

lauraeast23

Collective groan.....

Also found out now that my lease is only 69 years, I do remember my solicitor mentioning something to me about the lease length at the time but thought that I would only be there for a year or 2 at most, now nearly 4 years. I also had no idea of the consequences of the shortened lease, we live and learn eh ?!

So now looking at a current negative equity of around 20k plus around 13k to extend the lease as it stands

Was thinking along the terms of extending the lease now and start to pay off what will have to be a loan to do so, and then keeping the property to rent out, only thing is I know that from reading on here that being a LL is no easy ride.

Am really in a pickle as to what to do for the best, I spoke to a FA and he advises that overpaying from now until the mortgage is up would be like throwing money into a bottomless pitt due to the mortgage I have (I've only paid off around £500 over nearly 4 years)

Any suggestions at all on the course of action you would take would be greatly appreciated !!

Correction to initial post - mortgage is up in August 2011 and not 2010

beecher2

lauraeast23 wrote: »

Collective groan.....

Am really in a pickle as to what to do for the best, I spoke to a FA and he advises that overpaying from now until the mortgage is up would be like throwing money into a bottomless pitt due to the mortgage I have (I've only paid off around £500 over nearly 4 years)

This is nonsense. If you'd overpaid by £50/month for the last 4 years you'd have paid off £2900 rather than £500 and would save yourself interest payments while doing so.

Why do you want to keep the property to rent out? Your only option seems to me to continue living in the property, and overpay as much as you can. Go onto the Debt Free Wannabee forums for help in cutting back expenditure elsewhere and throw it all at the mortgage.

lauraeast23

Thanks for your reply and apologies for my lack of knowledge here but from reading the above I am assuming that the additional £50 will go direct off of the capital ? As 780 per month for the last 4 years hasn't touched the sides....

Ideally I don't want to keep the property, however with the large negative equity shortfall to make up and now the cost of the lease extension I am trying to come up with the best way to deal with the whole situation.

beecher2

Hope you didn't think I meant you were talking nonsense - was just amazed that an IFA would think that overpaying was a waste of time.

Yeah the £50/month would go straight off the capital - my guess is you have a relatively long term which will be why you're paying so little in the early years of the mortgage. The authorised arrears won't have helped either. Realistically overpaying is the only way to get rid of the negative equity as quickly as possible.

lauraeast23

beecher2 wrote: »

Hope you didn't think I meant you were talking nonsense - was just amazed that an IFA would think that overpaying was a waste of time.

Yeah the £50/month would go straight off the capital - my guess is you have a relatively long term which will be why you're paying so little in the early years of the mortgage. The authorised arrears won't have helped either. Realistically overpaying is the only way to get rid of the negative equity as quickly as possible.

No not at all, I did think it was strange but just presumed that any extra off would be consumed by the interest aswell...

Yes you guess correctly term is 35 years.

With regard to the lease extension would I be best off to do this sooner rather than later as even if I am intending to sell (if I can bring my neg eq down enough, not by much as will need loan for lease ext !) then this will be the other sticking point for potential buyers.

Thrugelmir

beecher2 wrote: »

Hope you didn't think I meant you were talking nonsense - was just amazed that an IFA would think that overpaying was a waste of time.

Yeah the £50/month would go straight off the capital - my guess is you have a relatively long term which will be why you're paying so little in the early years of the mortgage. The authorised arrears won't have helped either. Realistically overpaying is the only way to get rid of the negative equity as quickly as possible.

Beecher2, you may missed this earlier piece of information.

and admittedly had to take a few payment breaks (which were part of the mortgage arrangement so not defaulted payment, offical holiday breaks

Doesn't help the situation.......