re-mortgage problems...

BuzzandWoody

bit of a long one, but heres the short version:

1) partner and i of 11 years have split, but we're tied to a 5 year fixed mortgage (yes, i know) which still has until next september to run. i want to leave her with the house and a decent mortgage rate (as opposed the horror story monthly price it is at the moment). so far, so good.

2) our mortgage provider is basically skint, said they can't offer any competitive deals as a result and when i asked to see how much the early canx fees would be said there aren't going to be any - go ring people up.

here is the problem. as you're no doubt aware, lots of prices have gone done, anything from a bit to a lot. a check of zoopla seems to indicate that although we bought the place for around £130,000 (and currently owe around 124,000) the *estimated* value (and this is after i've fleshed out the basic info they have, and i haven't entered everything such as house style, house size, garden size and so on) is about £123,000.

this means re mortgaging with someone else could mean having to put down a sum of around £12,000 if valued at about £123,000 to around 7,000 if still somehow miraculously valued at the original figure.

i don't have that much money lying around in my savings, and i'd be rather wary of taking out a loan over x amount of years just to give her the house then wander off with a bunch of debt - but she definitely can't afford to do it herself as there are children involved, she works part time and i'm the breadwinner (or loser in this case!)

but what happens IF (say) we end up being stuck here until the mortgage term ends, my current provider can't offer any sort of mortgage deal (due to them still being skint) and we can't move to another company because we don't have enough saved to put down (especially if the value of the property stays well below the original £130,000)?

who gets the house then - the original mortgage company? would that count as a default? would that actually be the "best" (using that term loosely here) course of action? could one of those "stop yourself being repossessed" companies actually help in this situation? if so, should be not delay and contact one of those sooner rather than later?

thanks for any advice you can give, i'm a bit lost as to what to do next.

hillcats

So you are currently in negative equity, I trust it is a repayment mortgage? Can you afford to overpay on your monthly amount to reduce the actual capital debt thus increasing your LTV ratio as I don't think you will find ANY lender prepared to take you on at the moment.
When the mortgage term ends...
Do you mean when the special rate ends or at the end of the complete mortgage term? (25 yrs?)
If you mean at the end of the special rate term I'd imagine you will revert onto the lenders SVR (Std Variable Rate) or onto a tracker rate, but you will need to check your original mortgage papers for this info to be sure.

BuzzandWoody

hillcats wrote: »

So you are currently in negative equity, I trust it is a repayment mortgage? Can you afford to overpay on your monthly amount to reduce the actual capital debt thus increasing your LTV ratio as I don't think you will find ANY lender prepared to take you on at the moment.
When the mortgage term ends...
Do you mean when the special rate ends or at the end of the complete mortgage term? (25 yrs?)
If you mean at the end of the special rate term I'd imagine you will revert onto the lenders SVR (Std Variable Rate) or onto a tracker rate, but you will need to check your original mortgage papers for this info to be sure.

sorry yes, repayment mortgage, fixed rate.

and when i say "mortgage term ends", i mean we come to the end of the first five years of our 25 (i think!) year mortgage deal - its just the first 5 years locked into the faintly dreadful 7.09% rate.

not sure what happens after that, but my provider seemed to be suggesting everybody had to clear off regardless though i need to confirm this with them tomorrow.

hillcats

Then after the fixed period you need to know what happens, if you signed into a 25 year mortgage contract then that is what it is, if they want you out then suggest to them they accept a lower value to fully redeem the loan, and thus giving you some decent equity in the property. (I heard of some lenders a while ago doing this...)
I would personally if in your shoes ask if they are really desperate to rid you off their books will they accept 75% of outstanding debt as full settlement and ask them to put in writing and you can then search for a remortgage deal.