Please can someone help this time.

polarbear79

First posted this nearly one year ago and did not get a single reply.

Wonder if there are any brainboxes out there who can see a way our of this for me.

Things are pretty much the same apart from having taken a 25% pay cut to become a researcher for 2 years.

PLEASE can anyone have a bright idea.

Steve




I am looking for advice regarding my house predicament. I can see now that our position is probably due to a series of poor decisions made when I was younger and certainly did not see the current economic and house market.

I bought a house in Aug of 2004. Great place which a loved, a little quirky coach house which has made it difficult to value. Bought it for 137,500. Professional status but first time buyer. Companies were mad keen to give me a 100% interest only mortgage. OK OK I see now but there we go, mistake number one, lets put it down to naivity of youth.

Fine no problems but then interest rates started to raise and in about 2005 I managed to find a discounted mortgage with my bank. 2% discount. They wanted a higher lending charge which I just thought was standard with these things and they were more than happy to value the place at 148000, and give 90%ish loan to value. This I think were mistakes 2 and 3. Now owed £141,000 interest only.

Then 2007 promotion. This means leaving the house and moving several hundred miles away. Buildling still going on, on the estate which means great amenities but also brand new houses every month. House prices not raised much above £144,000, therefore we opted to hang on and rent the place out. Have a letter of intent from the bank so therefore did not need to change to buy to let mortgage. Mistake 4 should have got rid when had the chance.

Had Tennents in most of the time and been able to charge for most of the mortgage and made up the short fall. Occasionally without Tennents which eats though savings very quickly. Then Credit Crunch hits. This has actually helped us in the short term as the drop in interest rates has made the mortgage very affordable, especially in a time where we needed to save for other things. Mortgage payments are about £486.

The problem is this place is now a ticking time bomb. It is affordable now but when the interest rates hike back up again it is going to bite. We cannot get a new mortgage anytime soon as they are looking for 25% deposits and we are not in the position to put forward anything like that.

Getting rid of the place is not a favourable prospect either. The latest estimate put it at £116,000, a £25,000 negative equity.

We are currently living in a very nice flat owned by a friend which is very reasonably priced.

The Bank have offered to fix the mortgage at 6.29% for five years (repayments at about £739 interest only, £900 for capital).

We cannot up the rent much more as the rental market is saturated with people who are desperate to rent out and is therefore quite competitive and some tennants is better than no tennants

I am finding it difficult to decide which way to go, i.e. which way will loose us the least.

If anyone could help with the dilemma or has any bright ideas then they would be much appreciated. I suspect there are many in my boat. Finanical advice so far has been unhelpful apart from the obvious, 'you're pretty screwed'.

Sorry for the long posts, and for making those more financially savvy shudder at my mistakes, I can promise I have learned my lesson.

Thanks for your time

S

silvercar

Do nothing.

Your rental more than covers your mortgage payments, you are renting elsewhere cheaply. Why sell and crystalize your losses?

6.9% seems high, even for a fix. What is the current rate and does it run out? What is the current variable rate from your lender?

Credit_Jake

I can't really help but I think you need to post a lot more information than what you have posted. Maybe a SOA will help people decide which outcome is better for you. Selling at -£25k is an awful thought but so is struggling to pay for a mortgage that you cannot afford. As you said you've made a series of bad decisions and maybe continuing with this property is your next one. You're only in negative equity if you decide to actually sell though so if you can afford it I would hold on to it.

polarbear79

Current rate is 4%. Makes repayment £468. Rent after letting agent fees (don't get me started on this 'shower of !!!!!!') and we get £455. Add the building and boiler insurance and we are loosing about £60 a month.

I agree current rate is fine and if things stayed as they were then I can see the 'stick it out' arguement. Problem comes when the interest rates begin to rise. I suppose the rent can go up but we are !!!!!!ed if we loose the tennents.

Problem with changing mortgage is the re-valuation. Current mortage lender say they would give the fixed on the strength of the previous valuation.

Whole thing just feels like an albatross around our necks at the moment, rather than a nest egg. I don't see us ever making back what we have already (and continue) to loose from the place.

Steve

Thrugelmir

Firstly take a long term view. There's no instant fix. Your decision to take change jobs and in the process take a 25% pay cut wasn't the best in terms of timing.

You need to reduce your outgoings to a minimal level. Then somehow tackle the "negative equity". In the short term this will mean paying off as much capital as possible whilst continue to let the property.

In time the situation will improve.

polarbear79

Thrugelmir,

I appreciate what you are saying. Firstly the move was not a choice. There was really one job going what I wanted available and I had to take it, which meant the initial move away. Also it is nature of my profession that if I am ever to make the higher salaries and do the job I want to do, a period of research is required. It was really a now or never decision.

Steve

Thrugelmir

polarbear79 wrote: »

Thrugelmir,

I appreciate what you are saying. Firstly the move was not a choice. There was really one job going what I wanted available and I had to take it, which meant the initial move away. Also it is nature of my profession that if I am ever to make the higher salaries and do the job I want to do, a period of research is required. It was really a now or never decision.

Steve

My comments were not a criticism in any way. As individuals personal circumstances are far more complex that information openly given on a forum.

For the moment accept that your are treating water. On the basis that pay down part of the mortgage however minimal , and in the expectation that a later date your salary will rise.

blackshirtuk

can you re-negotiate the letting agents fees.

full management is costly and it is possible to do it yourself with a bit of research. There are plenty of very knowledgeable Landlords on here who willing help out.

This could reduce your outgoings allowing you to pay a little off the mortgage every month.

I tend to agree with Silvercar. If you can stick it out for now, look forward to the time you have a better paying job rather than take a definite £25k loss now.

No one knows whether interest raes are going up, or when, but you would need a 2% base rate rise to even come close to the 6.2% remortgage.

Personally i don't think that will happen this year but don't take my word for it !!! There is plenty of debate elsewhere on this subject.

danielley

I agree with blackshirtuk, I doubt that the Base Rate will come up to the remortgage percentage for a good while, so I would be tempted to leave it on the SVR and start paying off the difference against the capital.

Good Luck, remember you are not alone. There are thousands (probably millions) in your situation and it is a tough time for everyone, but its time to think about the long term and not the short term and there aren't any quick fixes to negative equity.