High repayments, secured loan & redundancy looming

stuarthannam

Not a straightforward topic but i know with the help of this forum i can at least get some direction and alternative views - so here goes.... My wife and I are in the 2nd year of our 3yr fixed term (high repayments mortgage with Future due to our credit history) - we pay £800 per month on a £135K mortgage having put down £15k borrowed from a friend. Unfortunately, we had to repay that £15k loan immediately as the friends circumstances changed so we had no option but to take out a secured loan with Welcome Finance (borrowed £13k over ten years and repay £285 a month - again due to our poor credit history the choices were Welcome or nobody). I have just been told that i am losing my job (only just been made permanent from agency so no redundancy monies). As we live away from where i need to seek alternative work, we have the following questions i need help with.
1. We are looking to sell up but with house prices dropping in this area and not a lot of movement on those up for sale around us, we are faced with a negative equity and secured loan issue. What will happen if we sell for less then the mortgage borrowed?
2. Is not paying the mortgage/secured loan an option - i know it will result in repossession but with £1100 saved a month we could put that money aside each month over the next 3 months whilst my work place go through the notice of redundancy period and put that money towards renting something in an area i know i can get work.
3. What pitfalls are there by doing no.2 - how will affect our private rent options?
4. What will happen to the secured loan - we are being helped by the CCCS but a former colleague of mine had similar situation and just up and left, basically did a disappearing act and is happily living in private rent without the debts - is it just me being responsible and suffering each week/month and paying our debts or should we be more selfish.

Just to clarify, we moved a distance away from where i work as i did intend to retrain and become self employed but this did not work out and the commuting each month takes away all our spare income, hence over the two years the build up of debt and the CCCS help.

A long post and lots of interlinked issues - appreciate any advice or help from anyone.

CloudCuckooLand

1. You will owe the shortfall, and have to borrow to satisfy the lender - at who knows what %.
2. Repossession will damage your credit rating more than selling for less than needed and funding the gap.
3. Damaged credit history will limit your rental options, either needing a guarantor or 6-months rent up front. If at all.
4. If you never want a mortgage in the future, or a mobile phone contract, or a credit card, or to buy a sofa on credit, then perhaps a trashed credit record is something some people can live with.

I'd take a large pinch of salt with whatever other people say they are getting away with. It might be true. It might be half the picture, if that.

Even if the option you choose does not trash your credit history, the likelihood is that it will make credit more expensive to obtain in the future, so its a false economy, "robbing peter to pay paul".

Just like borrowing the deposit appeared to be a short-term "good idea", but turned out to be a long-term millstone around your neck...

Please stop taking shortcuts. They mostly worsen the position in ways you may not appreciate now, but will bite you when something else arises.

You could try getting consent to let from your lender, rather than sell?

FraudBuster

I'd take a large pinch of salt with whatever other people say they are getting away with. It might be true. It might be half the picture, if that.

Agreed. Check out the members of CIFAS:

http://www.cifas.org.uk/default.asp?edit_id=721-28

madeupname1

stuarthannam wrote: »

1. We are looking to sell up but with house prices dropping in this area and not a lot of movement on those up for sale around us, we are faced with a negative equity and secured loan issue. What will happen if we sell for less then the mortgage borrowed?
2. Is not paying the mortgage/secured loan an option - i know it will result in repossession but with £1100 saved a month we could put that money aside each month over the next 3 months whilst my work place go through the notice of redundancy period and put that money towards renting something in an area i know i can get work.
3. What pitfalls are there by doing no.2 - how will affect our private rent options?
4. What will happen to the secured loan - we are being helped by the CCCS but a former colleague of mine had similar situation and just up and left, basically did a disappearing act and is happily living in private rent without the debts - is it just me being responsible and suffering each week/month and paying our debts or should we be more selfish.

(1) You will still owe the Bank the difference between what you (or they) sell the property for and the amount outstanding on your loans
(2) You will not save the £1100 per month. If the Bank repossesses and cant sell for the property for what you owe or more they will continue to demand the balance from you. You may end up in some form of insolvency proceedings if you can't reach agreement with them for repaying the balance
(3) You're credit rating will be affected. A properly advised landlord will credit check you before letting a property to you. If this shows up, good luck on securing a rental property. The LL would have no reason to suppose that, if your situation continues to be tricky you wont run off and leave him in the lurch too (or worse stay in the property until you are evicted by court order)
(4) Dont know - what is a CCCS?

Have you tried speaking with your lender / Welcome? You may be able to switch to interest only (if you are currently on repayment), or push the loan repayments out over a few years or get consent to let the property (would the rental value cover the mortgage payments?).

Sorry for your problems. Hope you are able to work something out.