PLEASE HELP!!! Need to get out of my Northern Rock mortgage

charliew21

Hi
I'm hoping someone can give me some advice.

My husband and I bought our house back in October 2007 (bad decision i know but hey!!) and took out a Together mortgage to cover the purchase price of £101,000 - £85,500 secured & £14,500 unsecured at a fixed rate of 7.29% fixed for 5 years. We also included costs in our mortgage so our actual starting balance was £102,020. We were both very naive about money back then and believe me now we are not.

My mortgage payment is £680 per month for a one bedroom house. When i hear what other people pay for bigger better properties i feel sick to my stomach. I worked out that by the time the fixed rate ends (october 2012) we will have paid Northern Rock somewhere in the region of £40,000 but a house similar to ours recently sold for £85,000 so we will be lucky to cover the secured part of the mortgage, however our house is better as has a conservatory, garden and off road parking.

I feel we need to get out of the house as soon as possible as if we wait another 18 months to put the house up for sale we will have paid a further £12,000 and i feel i may as well flush my hard earned money down the toilet. We currently owe about £86,000 on the secured and £14,000 on the unsecured so in the last 3 years we have only cleared £2000 from the balance but have paid about £25,000. ARGH!!!

almost forgot if we want to get out of our mortgage early we will incur a early repayment charge of £4420 to the mortgage company.

My questions are as follows
1, Would it be wise to sell my house now and hopefully make enough to cover the secured part of the mortgage and the ERC?

2, What would happen if we did not sell for enough to achieve question 1?

3, What if we just decided to hand the house back to Northern Rock? What would we be liable for?

Please someone help.
If you need any more info please let me know.

Thanks

Charlie

TonyMMM

charliew21 wrote: »

Hi
My questions are as follows
1, Would it be wise to sell my house now and hopefully make enough to cover the secured part of the mortgage and the ERC?

2, What would happen if we did not sell for enough to achieve question 1?

3, What if we just decided to hand the house back to Northern Rock? What would we be liable for?

All mortgages seem to hardly pay off anything at first - because you are paying mostly interest. So it's normal to not see much drop in the capital you owe for a while ..but, you borrowed £85,500 secured and now owe £86,000 ..... doesn't sound right , have you had any payments missed or payment breaks ???

Answers to your questions:

1) Depends on what your plan is afterwards ....buying another property ? Rent somewhere ? Do you have any cash available as a deposit , should you want to remortgage ?

2) You can't sell for less than the amount required to clear the secured part unless you have the funds available to make up any shortfall, or Northern Rock agree (unlikely).

3) They will sell for whatever they can get for it (probably at auction) and then come after you for the rest, plus all their fees and selling costs. You credit record will also be trashed.

katsu

Just to agree with TonyMMM, you clear very little capital in the early years of your mortgage, it is nearly all interest, that would be the case whatever your house was worth.

If you can afford the mortgage then I would keep paying and look to save money or overpay in order to reduce your loan to value. I can't see the point in selling if you would not clear the mortgage you currently have.

charliew21

Hi both of you thanks for that. We plan to go into rented as we are struggling to live with the amount of our mortgage.
We did take a payment holiday last year and also our fees were included in our mortgage so that is maybe why it is higher.

We plan to go into rented after we sell so basically we need to raise enough from our house sale to cover the secured part????
We should be able to get £90,000 so we may be ok.

I have read on the NRAM website that the ERC could be waived?

Is that likely???

Please help

Thanks

Thrugelmir

charliew21 wrote: »

We did take a payment holiday last year and also our fees were included in our mortgage so that is maybe why it is higher.

Interest will rapidly compound on the debt if a holiday is taken. So yes, your debt will increase.

If you clear your mortgage and rent. You may find that the interest charge on your unsecured loan increases considerably. So worth asking before making a decision. Though the ERC will be waived.

Having got a foot on the property ladder. Don't make a rash decision. You have a home that one day will be yours. Once renting you may struggle to raise the deposit to buy again.

Have you visited the DFW board ? Plenty of advice and support on there.