Stuck on Interest Only but want to move forward?!

Thrugelmir

GoldenEye07 wrote: »

would overpaying for say 6 months help us any do you think?

Work out how much you can afford by really putting your minds to it.

GoldenEye07

yeah thats whats i'm getting at, I'm taking like if we were able to pay maybe a good few hundred extra per month whether that is going to make a good enough difference when putting it on the market...

...should I be looking to get a valuation done asap to see where i'm at?

Thrugelmir

GoldenEye07 wrote: »

yeah thats whats i'm getting at, I'm taking like if we were able to pay maybe a good few hundred extra per month whether that is going to make a good enough difference when putting it on the market...

...should I be looking to get a valuation done asap to see where i'm at?

I would say yes. If you establish precisely what your current position is. Then you can be realistic about your objectives.

Amazing what can be achieved with the right mindset.

GoldenEye07

Yes I think that I need see exactly what the valuation is to find the best solution.

thanks for your time.

GoldenEye07

Ok so I’ve arranged 2 valuations for today and tomorrow (although I’m not very optimistic about these) and also taken advice from a couple of advisors.

The advisors said that I should first contact Standard Life to ask them for “permission to let” which would enable me to go for a new mortgage with my wife as they could then take my existing flat out of the equation – I tried this, but SL said they would only allow me to rent if I switched to a buy to let mortgage and gave them the 10% of 166k, so this doesn’t look like it’s an option.

Several people have said to me to “just rent it out anyway” on the deal we are on and then I could at least move on and rent somewhere new with my wife for a while so we have our own place but I’m not keen on this idea for a couple of reasons
1) The flat mortgage would still be on interest only
2) The legal side of doing this, breaching terms of my mortgage, putting tenants in danger etc…

I assume if we were able to come up with the 10% to move to a buy to let with my current provider we would then be on a repayment mortgage? And are there any other providers doing BTL at 90% LTV??

To summarise, my friend and I have came to some sort of understanding on this, and I see our options as the following:
a) If the valuations are anywhere close to 166k, we try to sell and if we could get around 160k we would be happy to take the “small” hit and walk away and move on with our lives.
b) If the valuations aren’t in the correct ballpark we save hard for next 6 months and get onto a buy to let mortgage either with SL or someone else (see question above) and make this a long term investment.
c) As mentioned in earlier posts, instead of saving to invest we overpay by as much as possible and try to sell again later in the year (again valuations would be critical to this option)

Can anyone advise if all this sounds logical or add anything else?

I would say option b is most likely and most sensible so that at least our money is being invested?

Thanks.

GoldenEye07

Well just called SL again to find out exactly the process and its left me even more worried now….

They said, like before that in order to give permission to let they would be looking for 10% of the value paid back. Just to recap we owe them 166k so my thinking was save the 17k and get the permission to let.

However they then asked for the current value, I got the first valuation done this morning - 150k – so I told them this. The guy then informed me it would 10% of the 150k plus the shortfall to the 166k – so in this case it would be 15k + 16k = 31k as opposed to the 17k I had prepared myself for saving.

I asked how they could use this valuation and he said he was only using it as the most up to date information but they would get a valuer to do a full valuation if I was going to proceed. He said this could be more and make the shortfall less but warned if it was say 145k the shortfall would be greater and this is what their underwriters would stick to….

Feeling pretty cornered at the moment, anyone have any input to this please??

hcb42

He has probably painted the reality of the situation.

You will either have to take the hit or resolve to stay there for a few more years and deal with the financial situation, at least your friend is in agreement on overpaying etc.

Or can you buy the friend out? Not that it helps the repaying the £166K of course, it will still need the deposit and mortgage shortfall.

Assuming you had £31K and could proceed down the letting route, can you raise enough of a monthly rental to cover the full mortgage repayments? I only ask as that is a big mortgage....on a property that is not particularly high priced If you cannot let it for a sensible price to cover your outgoings, then this is a non starter.

Annisele

Unfortunately I agree with hcb42; sounds as though the Standard Life guy has described things accurately.

If SL offer a 90% LTV buy to let product, then the 'V' part of that is the current value - not the original purchase price. So, on a BTL they'll only lend you 90% of the actual current value.

For a BTL that's actually quite high; if you went to a new lender you'd probably not be able to borrow more than 75% of the current value. And the likely rent you'd get would also affect your borrowing capacity - have you had any letting agents give you an approximate figure for that?

I think I'd try to add a 'd' to the options you described in post 16. If possible, either your friend sells his share of the property to you and your wife, or you sell your share to your friend. If you are in negative equity then that might mean the 'seller' is the one who actually hands over cash to the buyer. That won't work if it leaves the people owning the flat unable to get a mortgage on their own incomes, but I think it's worth considering.

GoldenEye07

Just wanted to update those that have been kind enough to offer me advice...

I think its looking likely that we will have to stay put for a while yet and start affecting this 166k debt, its not going to be a quick fix I know, but my mortgage have said I can stay on the interest only but make as many overpayments as I want (up to 10k per day) to the capital. So we are going to look to overpay by as much as we can possibly stretch to every month and try to at least eat into this debt. As the capital decreases some of our monthly interest payement (a tiny amount) will also be paying capital - I favour this rather than switching directly to a repayement mortgage where the paymwents will be fixed at a higher amount. at least this way it keeps the interest part easy to split 3 ways between me, my wife and friend....and only me and my friend chip away at the capital with whatever we can afford a month. (for me this will be around 4-500 per month)

In the meantime hopefully house prices will start to creep the other way and we can hopefully get to a situation where we can move to a better mortgage and get the flat rented out.

Does this sound reasonable?

Thrugelmir

GoldenEye07 wrote: »

Does this sound reasonable?

Personally I would adopt a similar approach. Once the capital balance reduces so will the interest charges. So its like rolling a snowball over time it will grow and grow.