Remortgage - First Time User

CBK_2

Hi,

I've not posted here before but could really use some help.

Until now I've let my husband deal with all of our finances and to be honest, he's made a mess of it. (I love him dearly, but....!) He has kept from me how bad things are and so now I'm trying to pick up the pieces. Part of that is I think we need to remortgage our house. We moved in during 2003 and I think we had a 5 year or 3 year mortgage deal. I'm not totally sure, whichever, it has now terminated and we are on the default agreement. (Sorry if I'm not using all the correct terminology but I've never had to deal with anything like this before!)

I think we need to remortgage but when i asked hubby he said that there was no way we would even be considered. We don't have bad credit ratings - well not to my knowledge anyway. No payments have been missed but I haven't tried to get a credit report on either of us yet. Also I don't think we have negative equity although I can't be totall sure. The other problem is that we have an interest only mortgage of £167,000 and I think that the house is now only worth approx £172,000. Although I am going to get an estate agent to tell us what they think.

Anyway, to cut to the chase - is it worth us trying to remortgage to try to save a little bit of money or is it as hubby says - total waste of time?!

Any help at all would be fantastic. I don't even know the different types of mortgage out there! I'm not stupid, well I don't think so anyway, I have just never had to do this and so I'm starting at the beginning and having to learn as much as possible as fast as possible!!!

beecher2

If the house is worth £172,000 then you don't have enough equity to remortgage. The house would need to be worth £185,000 or so to allow you to get a deal elsewhere.

do you have a plan for repaying the capital? I'd concentrate on that if you don't.

blueberrypie

Your husband is correct when he says that you will not be able to remortgage - your LTV (loan-to-value - how much you owe compared to how much the property is worth) is too high. Assuming your house is indeed worth £172k (owners tend to over-value - as do estate agents!) you would only be able to borrow at most about £155k - and if you have problems on the credit report, even that is pushing it.

There are two things you should do as soon as possible. One is to get copies of your credit reports - see http://www.moneysavingexpert.com/banking/credit-rating-credit-score for how to go about this. Do not pay for the "credit score" - it is meaningless. You just want a copy of the report. The second thing you should do is to sit down and write out all your income and expenses - this is known as a Statement of Affairs and it's an extremely useful tool for seeing where your money is going and where you can save.

Also read this: http://www.moneysavingexpert.com/loans/debt-help-plan?dd
And see the Debt-Free Wannabe forum at http://forums.moneysavingexpert.com/forumdisplay.php?f=76 - there are lots of people there who can help you with very good advice.

Well done for taking control of the situation - there will no doubt be some difficult times as you sort things out, but stick with it and you'll get there. Good luck.

CBK_2

Thank you so much for your replies. I didn't think we would be able to remortgage due to the LTV (see I'm learning already!) but I'm not sure whether to believe hubby or not now on anything! I have completed the MSE Budget and tonight we are starting to look at the Money Makeover to see what else we can save on. We aren't in any debt yet and I would like to keep it that way but our savings have diminished considerably. It's a pile of bums and I really don't want to do it but I have to and that's that. Thank you again for your help.

JimmyTheWig

The other thing to note is that Standard Variable Rates (SVR) are at a particular low point at the moment due to the Bank of England base rate being so low.
The chances are (depending on who your mortgage is with) that you're on a decent rate anyway.

Generally in today's market, the benefit of remortgaging is to get onto a fixed rate so that when rates go up (they probably wil in the next few years) then your repayments won't sky rocket. But given that you would be unable to do this, it's a non-starter anyway.

So, you need to work out a budget and stick to it.
In that budget you need some money going towards mortgage repayments (i.e. not just the interest).

JoeA81

How much did you pay for the house in 2003?

I ask becuase if your interest only Mortgage is £167,000, then even assuming you had a small (or even no) deposit, then the house must have been worth at least £167,000 in 2003 and I cant believe it is only worth £172,000 7 years later?

And yes, how were you planning to pay off the £167,000 capital at the end of your mortgage term?

CBK_2

The house was £137,500 when we bought it in 2003, we had to borrow against it to pay off hubbys ex wife - VERY complicated and if we had to do it all again I would take charge of it because I don't think we did it in the best way but only now am I coming to realise how badly hubby managed the money then AND now. I'm getting there slowly but it's like trying to put an octopus into a carrier bag, every time you get one tentacle in another comes out!

The plan back then was to live in it and then pay it off when we sold it as the houses were rising at a huge rate. If we had sold it when we intended which was about 2 years later then we would have made a nice profit even after paying everything as it was a new build and we bought from plans, the day we moved in the price had incresed by £20k!! (Or that's how much they were selling the other houses of the same spec on the estate) But hubby was made redundant and I fell pregnant so that plan went out the window. I am hugely prudent with money but I've now realised that hubby is not and has taken a LOT of risks. I just need to try to make some savings everywhere I can to try to build our savings back up so that we have a chance again.

I will get there, the budget shows that we are well in the black every month but I need to look at where all the rest of the money is going to make him have to spend extra money every month - his smoking is the first thing to go!! I feel so mean but that's all I can do really. I've felt sorry for him for too long for too many reasons and I'm saving his life in more than one way! (no smoking and sorting out the financial mess) He owes me big time. I think that means at least one month of doing the washing up!

Thank you everyone for your replies.

JimmyTheWig

CBK wrote: »

it's like trying to put an octopus into a carrier bag

I'm loving the simile. :T

JoeA81

What exactly are you looking to achieve? Do you want to be reducing your month to month mortgage payments, in order to save money elsewhere, or you do you want to start reducing your mortgage capital?

If I understand correctly, if things carry on as they are then you you have no problems paying all the bills etc, but there is the small(!) matter of this £167,000 of capital that needs to be paid off at some point in the future.

So to tackle this, the questions are:
Who is your mortage with?
What is your current mortgage rate?
How easy is it to switch to a repayment mortgage rather than interest-only with your current providor (and can you afford it?)
Can you make overpayments on your current mortgage without penalties?