Northern Rock 100% mortgage/Negative Equity, needing to move on, advice please.

michelle26

Hi everyone I am new to this forum but would like to ask for a little help and advice.

Just a bit of back ground info.

Myself and my husband purchased a one bedroom flat in January 2007 valued at £78,000 we had another £12,000 unsecured loan added to considate our debt. The total of £90,000 (100% no deposit) mortgage was taken out with Northern Rock on a fixed rate of 6.14% for 5 years, ending December 2011. Silly decision, I know!

Our last statement (31/5/10) says that we owe £88,029.70. £72,404.52 secured and £15625.18 unsecured.

If we were to Repay our mortgage early at this point we would have to pay £91,243.70. Early Repayment Charge of £2,964.00 and Discharge of Mortgage fee £250.00...

Would we have to pay the ERC if we only pay back the secured part of the loan??? and keep the unsecured loan?

We now have to move as we now have a 4 month old son and he needs his own bedroom.

The same flats are selling for anything between £65k and £75k. To rent out we would get £400 per month. We currently pay £557 per month mortgage??

I just dont know what we are going to do from this point onwards, any which way we would end up with x amount of debt:(....any advice or help would be greatly appreciated.

Thank you all in advance for looking

betmunch

Why was it a silly decision? It was only silly if you KNEW the house price crash was coming or if you KNEW interest rates were going to drop. Sounds like a perfectly good decision at the time to me.

Anyway, that doesnt help your situation.

I am afraid that I dont think you will be moving, unless you can come up with the cash to fund the difference in the property values (plus fees) yourself. Sorry about that

beecher2

Contact NR and ask what would happen if you sold for £65k - I'm sure someone on here said they had a deal to repay the money over time. You'd have to go into rented accommodation though - buying another place will involve getting rid of the debt and building up a deposit.

michelle26

We will move into rented accomodation, its our only choice, if we can get out of this flat...

I just wanted to know if anyone else had been in this situation before and if they did let us keep the unsecured part of the debt, what interest rate would I be likely to be paying on that. Just a rough idea...

Thanks for your replies

opinions4u

I'd make the phone call Beecher suggests.

I've read on here that the unsecured loan would change to a rate between 19% and 25%. But I don't know as well as those Northern Rock people know!

Raggs_2

At 4 months the baby doesn't really need it's own room. How much could you throw at the mortgage over the next year or so (and hoping that house prices stabilise or rise)? Until the baby reaches an age where he really does need a room of his own.

GMS

Beecher is correct.

Call Northern Rock and explain the situation to them.

See if you can come to an arrangement with them. If you need to move out to a bigger place then they may allow you to rent the flat out. You could try to get mortgage payments down to match the rental income, possibly by going on interest only for a while.

Their are people who have had agrements with Northern Rock. The best thing for all involved is to reach an ammicable arrangement. The last thing Northern Rock want is for you to hand back the keys to a flat worth less than their outstanding debt.

michelle26

thanks everyone, I have called northern rock and they are going to get someone to ring me back. See what they suggest.

Thanks again

Thrugelmir

Raggs wrote: »

At 4 months the baby doesn't really need it's own room. How much could you throw at the mortgage over the next year or so (and hoping that house prices stabilise or rise)? Until the baby reaches an age where he really does need a room of his own.

Agree, as the fixed term ends in just under 15 months.

So then would be a better time to consider the options.

michelle26

well after a call from Northern Rock I thought I would update the thread.

They said if we were to sell our property for £72,000 we could D'LINK our mortgage and the £15,000 unsecured would have an additional 8% adding to the original 6.14 making it 14.14%, which I estimate the payments going up to £180 per month for the remaining 26 years of the mortgage. Then when the fixed rate ends in Jan 2012 it would change to the SVR (currently 4.79%) + 8%.

If our property was valued at anything under £70,000 we would have to ring Northern Rock and their shortfall team would call our estate agent to confirm the value and then make a decision to see if we could port the remaining secured mortgage to the unsecured loan, if the flat sold.

We will not be charged any Early Repayment Charges as we would still have the unsecured with them for the remainder of the fixed rate term.

I think we are going to put the flat up for sale soon and take the shortfall with us. Then once the fixed term is up, get a personal loan for the unsecured part and get rid of it over 5 years instead of the 25 remaining with Northern Rock.

beecher2

That's good that you have a clear plan from them anyway - best of luck in sorting it out.