Trapped in Northern Rock Mortgage until homeless!!!

NRAMageddon

Hello all,
Me and my partner are desperately in need of some mortgage help and I am wondering if any of you financial genius’s out there can help out with my predicament, which to me looks terminal.
First of all, I will come clean, I am a complete financial idiot. I am one of few stupid/naïve (delete as applicable) people that took out a Northern Rock Together mortgage at 120% (now called NRAM) and unsurprisingly this is where my problem starts…..

The Problem
The problem is our 5 year fixed rate mortgage ends this December and we are eager to change to something/anything that has a fixed rate because with the inevitable rate increases on the horizon our mortgage will no longer be affordable. From what I can see, we are trapped into a mortgage with no way to escape.

The Detail
We have an outstanding mortgage of £146,000 (comprised of £118,000 mortgage and a £27,000 unsecured loan, making up the total of the 120% mortgage). We are currently on a fixed rate of 5.99%, and the current value of our home is at best is £135,000. Obviously not a great situation to be in. This December our 5 year fixed rate deal will end, and transfer to a standard variable rate of 4.79% (at present) which will reduce our payments to £825 (from £922 currently). This clearly will not last for long with interest rates increasing, and if it goes any higher than 5.99% then we will no longer be able to afford our mortgage.The added issue is that we need to move this December, but the only viable properties in the area start at a minimum of £135,000. Clearly this will not change our situation as we will still be on a NRAM mortgage at a variable rate, with impending homelessness on the horizon when the rate rises kick in.

The Options
We may be able to take out a fixed rate mortgage of £118,000 and leave the additional loan (£27,000) with NRAM, but I don’t think this will help as within the T&C’s of the NRAM mortgage it states that if a mortgage is taken out with another company then the loan interest rate will increase from 5.99% to 12.79% almost doubling our repayments from £172.60 to £300. The only other option I can think of, is to apply for a loan elsewhere to cover the 27,000 NRAM loan and then look at changing a mortgage with someone else. Unfortunately then the problem would be that we wouldn’t be able to move come December as we need at least £135,000 to move. I am pretty sure no company will offer us that kind of mortgage as we have no deposit and any percentage of LTV incurred against our home value of £135,000 and we will not be able to afford to move.

Any help someone can offer will be appreciated more than you could ever know. From what I can see we are trapped until the inevitable rate rises take effect and then we will be homless. If anyone can think of a creative solution around this then I will be forever indebted (another 1 to add to my collection).

Thanks for your time,

CA

beecher2

Why do you need to move in December? Could you sell up and rent instead?

Go to the Debt Free Wannabee forums for help with your budget. If you post a Statement of Affairs there, you can get help on where you could cut back on expenditure, and increase income. You might be able to find money to overpay by cancelling Sky, the gym, holidays, and could maybe take in a lodger to help.

smcqis

Whats your combined income? No lender will touch you with your ltv unfortunately

NRAMageddon

Hi there, thanks for your reply.

We have to move for work reasons sadly. Thanks again for the suggestions, but unfortunately in terms of budget we don't really have many overheads outside of loans and the NRAM mortgage. I guess I was just hoping that there may be some magically clever mortgage solution that I haven't thought of. I wish I could understand what went through my head when I agreed to a 120% mortgage. Mental really.

NRAMageddon

Hi Smcqis,

We have a combined monthly income of roughly £2850, but all of that is eaten up by a variety of loans. When we purchased our apartment and first moved in we found many structural problems and it cost us an absolute fortune to put them right (this is a very long story in itself). This has resulted in taking out a massive amount of loans and having about 90% of our monthly income entirely wasted on loan repayments.

Oh the joys of home ownership.

fairylight_2

Hi there,

We can sympathize sooo much. Northern Rock Together mortgage taken 7 years ago. Still stuck with them and can't get out - took 141,000 (20,000 unsecured) now still owe 133,000 on a variable rate. Only paying interest on the mortgage part. Now found that we have massive structural probs with our house (metal frame) which only Northern Rock would lend on. There will be no equity as no-one is going to touch our house now, that the council have announced there could be problems, of course all the council houses are being done free of charge! Both work full time and always have and absolutely stuffed. Northern Rock know exactly what they are doing to people and are forcing hard working, honest people into bankruptcy, literally. Bye the way, there could be an issue soon with Northern Rock giving mortgages in the first place, as a lack of disclosure, that they are not actually a British Bank but one owned by an Icelandic company called Granite, I know legally this is being looked into at the moment. It appears people were not told at the time of taking the mortgages but it is classed as a lack of disclosure as people may not have wanted to go with them for the reason that they were funded from abroad. Only recently found that out - nothing will come of it probably, but the bank as a whole are a bunch of greedy beggars who don't care a monkeys about anyone!

fairylight_2

I will probably get slated for this, but did you go through a broker for your Mortgage or straight to Northern Rock?

beecher2

fairylight wrote: »

Northern Rock know exactly what they are doing to people and are forcing hard working, honest people into bankruptcy, literally.

I'm not sure why it is Northern Rock's fault in particular. It isn't a good position to be in, but people with 125% mortgages presumably used the extra money to pay off debt, or spent it on something else? No-one was forced into a mortgage, surely?

If the OP is really paying £2500 a month in debt repayment, then I think professional advice is required, but getting a new mortgage anywhere is definitely not going to happen.

property.advert

An SOA needs to be done as the solution, if there is one, will have to include the other debts.

This move because of work is just a non starter so forget it. You may have to move, or one of you may have to, but the property won't be sold. No-one is going to touch you and you'll merely crystallise the debt and have to deal with that rather than just ignore. Eventually it should be evaporated away as prices rise.

If you sell you are finished as you'll have loads of debt and have to pay rent. Only a dramatic fall in property prices which never recover would save you.

You've got to ride this one out. It might take a decade but every other option is worse. The only possible way of moving would be to rent your place out and you rent elsewhere. You'll need the figures for that.

NRAMageddon

beecher2 wrote: »

I'm not sure why it is Northern Rock's fault in particular. It isn't a good position to be in, but people with 125% mortgages presumably used the extra money to pay off debt, or spent it on something else? No-one was forced into a mortgage, surely?

If the OP is really paying £2500 a month in debt repayment, then I think professional advice is required, but getting a new mortgage anywhere is definitely not going to happen.

Hi all, some really interesting stuff there. Thanks sincerely for the advice so far everyone.

I do agree to a certain extent with Beecher2 that it isn't necessarily Northern Rocks fault, but in the same breath NR have undoubtedly taken advantage of a lot of naive customers much like myself. Personally speaking I came from a background where my parents have never owned a own house, and have never had a mortgage, so i never reaped the benefits of their advice.

To answer Fairylights question, I went to a Mortgage broker and when applying for the mortgage I stuck loads of stupid debts on top just so I could afford the monthly payments. This, as I know now, is utterly the most stupid, financially disastrous and intellectually embarrassing decision I have ever made. However, my flawed decision has to be understood and judged through the context of my understanding and the housing market at the time. At the time property prices were going up and up and to me who never had the luxury of benefiting from my parents experience, as stupid as it seems (and is seems sooo stupid now typing it out) but it looked like property prices would keep on increasing and I would be left behind in a situation where I would never be able to buy my own home. At this time..... I had never even heard the term negative equity, let alone understood the meaning.

I believe the real failing is the advice I was given by the mortgage broker. At best it was flawed and at worst borderline corrupt. The mortgage broker kindly told me that as I couldn't afford the mortgage with all my debts then I should include my debts onto the mortgage. He helpfully added that after 5 years our property price would have increased erasing all of our debts and then we could move to a lower interest rate. Sounds brilliant eh. Oh the power of hindsight.

Just for the record I do accept that I have made an unforgivably stupid decision and I accept complete responsibility for it. I cringe whenever I explain my situation to somebody because it seems utterly incompressible that someone who is supposedly well educated like myself could make such a bad decision. For me it starts with the mortgage broker, my stupidity was taken full advantage of and I was purposely mislead. Unfortunately for me it looks like being a mistake that will lead me to bankruptcy.

opinions4u

I believe the real failing is the advice I was given by the mortgage broker. At best it was flawed and at worst borderline corrupt. The mortgage broker kindly told me that as I couldn't afford the mortgage with all my debts then I should include my debts onto the mortgage. He helpfully added that after 5 years our property price would have increased erasing all of our debts and then we could move to a lower interest rate. Sounds brilliant eh. Oh the power of hindsight.

While the broker made an assumption that property prices would rise forever, an assumption you accepted, if you're mortgage payments are £922 and you're paying 90% of your net pay in debt, where did all the other debt come from? Reading the paragraph above, it sounds like you've consolidated at the time of taking the mortgage and then borrowed fresh funds since. Heavily.