Help & advice needed for our RIDICULOUS mortgage!

1jim1

Hi there im new to this site and have visited in desperation for some good advice on how to make a positive step in the right direction with our mortgage.
We borrowed £120k in march 2007, interest only,fixed rate 5 years, from Northern Rock to buy a property for £105k and consolodate some debt (stupid i know but i was naive and wanted to consolidate and they threw it at me!) £95k is secured and £25 unsecured.
We have been paying £607 pm since then and had a 3 month mortgage break in 2008 when we had our son. Our statement now reads around £123k, which i cant understand..that means we have paid around £25k in 4 years and our mortgage has gone up??? Whats all that about?
Our situation is now this...we need a bigger place and have put our place on the market...it has now sold for £100k....we have £15k which has been stashed away to get us into a bigger home, afetr fees and stuff this means we have £10k to put into a new place which NRAM now say means we can buy for £110k, which means porting the mortgage and throwing £10k in.
We both work full time and have no problems paying the mortgage or anything, we just dont know what to do though? It doesnt make sense to keep paying money into a mortgage that is not going down? even with £110 k it is looking increaingly unlikely that we can find the right property in the right area? We are now thinking that we should just sell our current property...go and rent in the area we want to live...then take on the rest as a loan! We are just up the wall with not knowing the right thing to do for the best for the future for our little family!
Anybody that can give us any advice on what to do for the best PLEASE HELP! We know we have made a mistake or two somewhere along the line and feel like idiots but we just want to live in a bigger place and go in the right direction now whereas the mortgage is concerned.
Thanks in advance for any advice!

WellKnownSid

We have been paying £607 pm since then and had a 3 month mortgage break in 2008 when we had our son. Our statement now reads around £123k, which i cant understand..that means we have paid around £25k in 4 years and our mortgage has gone up??? Whats all that about?

Your mortgage cannot go down as you're paying "interest-only"... when you took a payment holiday you weren't paying that either, so the interest (and the interest on the interest) has mounted up.

Others on here would be better able to advise, but will probably require more information including income and outgoings. Have you taken on any more loans / debt / credit cards / overdrafts / etc since buying the house?

getmore4less

1jim1 wrote: »

Hi there im new to this site and have visited in desperation for some good advice on how to make a positive step in the right direction with our mortgage.
We borrowed £120k in march 2007, interest only,fixed rate 5 years, from Northern Rock to buy a property for £105k and consolodate some debt (stupid i know but i was naive and wanted to consolidate and they threw it at me!) £95k is secured and £25 unsecured.
We have been paying £607 pm since then and had a 3 month mortgage break in 2008 when we had our son. Our statement now reads around £123k, which i cant understand..that means we have paid around £25k in 4 years and our mortgage has gone up??? Whats all that about?

Interest only and took a break your debt goes up.
Your £25k was to rent the money

Our situation is now this...we need a bigger place and have put our place on the market...it has now sold for £100k....we have £15k which has been stashed away to get us into a bigger home, afetr fees and stuff this means we have £10k to put into a new place which NRAM now say means we can buy for £110k, which means porting the mortgage and throwing £10k in.

Um, so the mortgage part has gone up from £95k to £100k

We both work full time and have no problems paying the mortgage or anything,

But it is interest only so you are not paying off the debts.

we just dont know what to do though? It doesnt make sense to keep paying money into a mortgage that is not going down? even with £110 k it is looking increaingly unlikely that we can find the right property in the right area? We are now thinking that we should just sell our current property...go and rent in the area we want to live...then take on the rest as a loan! We are just up the wall with not knowing the right thing to do for the best for the future for our little family!
Anybody that can give us any advice on what to do for the best PLEASE HELP! We know we have made a mistake or two somewhere along the line and feel like idiots but we just want to live in a bigger place and go in the right direction now whereas the mortgage is concerned.
Thanks in advance for any advice!

Ask NR what the rate will be on the unsecured debt if you pay off the mortgage?


Could be time to sell up rent pay off debts and start saving for a new deposit

Annisele

Before making any decisions, you might want to find out:

• As getmore suggested, the rate NR will charge on the unsecured debt if you repay the mortgage.
• The cost of renting the kind of properties that you want to live in, in the area you want.
• Whether there are plenty of properties available to rent in the area you want, and whether landlords would be happy that your income is enough to take on the tenancy (talk to an estate agent or two).
• The cost of converting your existing mortgage to a repayment mortgage.
• Whether it would cost you anything in fees if you used your £15k to reduce your existing mortgage.

I also think you should make yourself a list of the advantages and disadvantages (and costs) of: staying where you are; buying a new house for £110k; and selling up and renting in your preferred area.

Some of the things you might want to think about (by no means an exhaustive list!):

• Private renting gives you very little security of tenure - so you could be asked to move on every six months. The cost of moving every six months and getting referenced adds up.
• If you sell up, you might find it difficult to buy for a while. Lending criteria are very different now, and if you were being credit checked for your current mortgage you might find that nobody would lend to you due to your debts - so if you sell, you might need to pay them off before you can buy again.
• Do you really *need* to move?
• Can you afford to live in the area / size of house you want to live in?

dunstonh

Our statement now reads around £123k, which i cant understand..that means we have paid around £25k in 4 years and our mortgage has gone up??? Whats all that about?

You have said you are interest only. So, you are not paying any capital. In 25 years (or whenever the mortgage term ends) the lender will say thank you very much, now pay me the £123k that you owe.

Our situation is now this...we need a bigger place and have put our place on the market...it has now sold for £100k....we have £15k which has been stashed away to get us into a bigger home, afetr fees and stuff this means we have £10k to put into a new place which NRAM now say means we can buy for £110k,

That doesnt add up. You have sold your house for £100k. You have a mortgage of £123k which puts you in negative equity. To allow the sale of the house to proceed, you will have to pay NR £123k. £100k of that will come from the sale of thouse. £15k from your savings but that leaves you a shortfall of £8k. And thats before you have put any deposit down on the new house. which will require around 10% of its value.

Your figures in the early part of your post contradict the figures later in your post.

Also, based on what you have said so far, it really sounds like you are in a serious debt situation. So, is moving to a bigger house really a sensible option when you have not been able to afford the one you are living in now?

kingstreet

Do they plan to leave the NR unsecured element in place?

1jim1

Thank you all for your time and advice.
The situation is this,
NR have basically told us that if we move to a different property the mortgage will stay exactly the same...as in...if we sell for 100k and buy for 100k nothing changes...if we sell for 100k and throw 10k in and buy for 110k then the mortgage stays the same....nothing changes.
We *need* to move because the place we are in at the moment is two beds and too small for our fanmily as we have another baby on the way. We have no other debts at all.
Dunstonh....i appreciate what you are saying but as i said in my first post...yes we have a ridculous mortgage situation and have made an error, we CAN afford to live in the property we are currently in...we both have fairly well paid full time jobs and pay ALL of our bills comfortably every month...the problem is that we have got ourselves into a mortgage that isnt the right one for us and cant find a way to get into a proper family house even though we CAN afford one.

If we are to keep our mortgage we just want to be paying it off...not paying off interest and getting nowhere. Our mortgage deal ends in march next year so im wondering if we found a house for £110k, carried on as we are...(as NR have said we can) then re-evaluated things next March, could we change our mortgage to a better deal somehow?

Again...thank you all for your time and advice

shortchanged_2

1jim1 can you really afford to live in the property you are in if you are paying interest only? Do you have a suitable repayment vehicle in place to pay the capital off the mortgage when it ends?

Otherwise you are not really doing anything but glorified renting with the extra negative aspect that you are responsible for the upkeep of the property.

anselld

1jim1 not sure why you think this mortgage is "ridiculous" - unfortunately you have £23k negative equity and it seems very understanding of NR to allow you to "port" this to a new property. Your interest rate is a bit high by todays standards but probably still much less than you would be paying if the £25k was still unsecured.

Under the circumstances you are now in there is no way anyone will offer a better deal, not until you have paid of the neg equity and saved a decent deposit.

Your best hope is to sit it out with NR, keep saving and hope the SVR remains low when the fixed term ends.

dunstonh

Dunstonh....i appreciate what you are saying but as i said in my first post...yes we have a ridculous mortgage situation and have made an error, we CAN afford to live in the property we are currently in...we both have fairly well paid full time jobs and pay ALL of our bills comfortably every month...the problem is that we have got ourselves into a mortgage that isnt the right one for us and cant find a way to get into a proper family house even though we CAN afford one.

You are in negative equity and not repaying any capital. That is not something you do unless you cannot afford the repayments.

That just rings alarm bells. The longer you leave it before moving to repayment mortgage the more expensive it becomes. Within no time, you would not be able to afford it and you lose your house. You would be effectively putting off repossession for another day rather than avoiding it.

Thrugelmir

Using your savings to reduce the mortgage balance you would save yourselves money. As its highly improbable that you'll be earning as much as you are paying.