Unusual mortgage problem

irena58

Hello,
Last year my husband and I took out a £120,000 tracker mortgage through HSBC which represented around 16% loan to value. Solely based upon my husband high salary we took the mortgage over a five year term bringing our payments to £2,130 per month.

Unfortunately, last October my husband lost his job and neither of us have been able to find work since. We experience difficulties in the job market as we both were working for the nuclear industry and as a result of the disaster with the Fukushima Nuclear Power Plant in Japan many projects in this area were closed or suspended, which makes the search for jobs unusually difficult.

One year has passed since we took the mortgage and it is now reduced to around £101,000. To cover our monthly payments we are selling our investments which, unfortunately, are quickly drying up. We have also reduced our family spending to a necessary minimum.

We have spoken to HSBC in numerous occasions to warn them that as we currently do not have any income, soon (in two months) we shall not be able to cover our mortgage payments. We have asked them if there is any way they could amend the mortgage terms and reduce the monthly payments to say around £500 a month. This way and thanks to the investment we have left we would be able to keep the mortgage payments for a longer period (around 8 months) during which time we are hoping to find jobs. Having gone through our income and outgoings, HSBC are taking the view that currently we have sufficient funds to be able to pay the mortgage. Whilst we have any savings they would not negotiate with us any change of mortgage terms as we do not have an income.

Our problem is not a common one; whilst we have savings but no income and high monthly payments conventional advice may not work for us - we are not considered a family with debt and financial problems. This situation will continue for two more months; after that, I suppose, when we have exhausted the savings the bank will start chasing us and establish a bad credit record.

Please, can anyone advise us of what can we do avoid going in debt.
Thanks in anticipation

whitewing

I have nothing to offer you but good wishes and a bump to the thread! I hope someone can come up with some ideas. It's interesting.

Is there any scope for either of you to go self-employed at something?

Do you have any children?

getmore4less

Sell.

Move and rent the place, live somewhere cheaper(or with family), £750k place should rent for good money

Take in lodgers.

Hindsight,

You made no risk assesment(or a poor one) for loss of income

you should in most cases look at making te minimum payments and having overpayment flexability, not setting up high payments because you can.

Taking out a 5year loan was a big mistake, probably should have looked a much longer term and offset, this would have covered your loss of income risk by saving up a pot to cover future payments.

Also you should have tacked the problem immediately in Oct or before as soon as there were signs of job issues.

whitewing

I know you're not in debt at the moment. Have a read of this: https://forums.moneysavingexpert.com/discussion/107280

Then you could try going on the Debt-free wannabe board and posting up an SOA (statement of affairs). They are well used to cutting costs, and also used to dealing with big changes in family circumstances. You may get some advice there but it will help enormously if they can see exactly what's coming in/going out.

shop-to-drop

Have you not thought about selling and downsizing? Seems the obvious answer as you could be mortgage free.

GlynD

Having just come through this I would advise downsizing. It's a bit of a blow I know but you have to bite the bullet on it. House prices are on the rise again so you shouldn't get the shock I did but remember - it's the same across the market and the value does seem to get better when you move to a smaller house.

kingstreet

I'm finding it difficult to see HSBC's point of view on these cases which are appearing daily. We have a couple with a genuine problem where conversion to interest-only for a limited period would probably be as much as HSBC needs to do at this time.

The payments would be in line with the borrower's needs and with equity of at least seven times the loan amount, the bank's security is pretty much guaranteed.

I agree with the points about the election to such a short term and I'm sure if the borrower had gone near anyone willing and capable of providing advice, they would not have done what HSBC has probably simply agreed to on an execution-only basis. Longer contractual term and high voluntary overpayments would have been my preferred choice too.

It seems perverse that a bank prefers to take its borrowers into arrears before it will do anything to deal with a situation which its own policy aggravates.

Bigsmak

shop-to-drop wrote: »

Have you not thought about selling and downsizing? Seems the obvious answer as you could be mortgage free.

I agree with this post.

Banks can be, ..... difficult.... to deal with and don't always act in the best interests of their customers.

I would seriously consider this option. You can buy a fantastic place and still have money left over.

I know this is not what you wanted to hear, but you also didn't want to be out of work and unable to find new employment. Needs must as it were.

Good luck and keep us informed with your situation.

getmore4less

One thing was this a remortgage of an existing debt or a mortgage on a mortgage free property?

Thrugelmir

kingstreet wrote: »

It seems perverse that a bank prefers to take its borrowers into arrears before it will do anything to deal with a situation which its own policy aggravates.

For borrowers it is the easy option to stretch matters out. In majority of cases will merely delay the envitable. Rather than making the tough difficult decisions now.

ViolaLass

Would it be an option to change the length of the loan and get it over 10 years instead of the four left, for example?