PLEASE Help Rid Us Of Our Little Ball & Chain!

Sace

Hi all.

I'm looking for your thoughts on a rather sticky mess my husband and I are now in following some rather dodgy (in my opinion) advice our IFA gave us a year ago.

My husband and I have a 100% interest only mortgage - it was all we could get at the time to launch onto the property ladder and was certainly not our preferred choice. We have had the mortgage now for 2.5 years.

Last year we wanted to get rid of our personal debts and inspired by Martin Lewis' :money: lunchtime shows, we eagerly set off to our local IFA. I had it in mind to work hard at paying off the debt as quickly as possible (even if it did mean cutting Sky TV off for a while!!) however our IFA found us a secured loan over 25 years at rock bottom repayments (8.5% on £35,000 plus a staggering £17,500 arrangement fee added to the balance) and suggested the money we were saving was put into a savings account. At the time it seemed sensible and that was what we did.

Due to changes in personal circumstances last year, my husband and I had to use up what little we had saved just 6 months after starting, so now we have nothing in the savings account.

We have since tried to change our mortgage to a repayment mortgage and came across a nasty little road block in the form of a deed of postponement. I now understand this means the secured loan has been added on top of our first mortgage, therefore we have negative equity on the house as it’s not worth what we owe. I swear this process was not explained to us by the IFA and what would ever happen if we wanted to move house/re-mortgage – had it been explained, we would have ran a mile, became credit card tarts and eaten beans for a while.

As I see it, before we can look to move house or re-mortgage we have two rather bad options:

1. We have to wait another 24 years to pay off the loan (meaning we will never own the house on our current interest only mortgage)

2. We wait until our house price rises to cover the mortgage and loan amount (erm, don't think that will happen)

We are prisoners to this loan Company and I am so damn mad about that.

My question is this – if we get two personal unsecured loans to pay off the one secured loan – this in theory will get the secured loan Company out the picture, allowing us to move house/re-mortgage.

Both my husband and I have ‘excellent’ credit ratings according to Equifax and we have never had any issues in meeting monthly payments. We just have this ball and chain tied to us at the moment and need so desperately to get rid of it.

Your thoughts/advice/guidance on what to do next is very much appreciated.

Sace

maninthestreet

£17,500 arrangment fee for additonal £35,000 of secured borrowing!!!
This sounds extortionate to me - how was this fee justified by the IFA? What was the point of borrowing £35,000 if effectively you have to hand half of it to the IFA to trouser?

Sace

I know

There are 3 parties involved here - our local IFA, Enterprise Finance (who I *think* charged us the £17,500 arrangement fee as it is only specified on their headed letter) and Paragon Personal Finance - the loan Company

Little_Miss_Winner

Hiya Sace.

So the £35k is was you *Borrowed*, You pay back at £292 ish a month
@ 8.5% the interest on this figure works out at £39,699.00

Roughly by the time you have paid it all back, and added the £17,500 arrangement fee to it you will have paid iro £92,500 ?????????

That is extortionate!! My figures surely have to be wrong, pls someone correct them asap?????????

Sace

Nope pot'o'gold you are right.

How the hell can we sort this out?? :eek:

I hate money

toonfish

I'd like to see the loan agreement, but at the end of the day what did you think a "secured loan" was?

In addition. if you hadn't taken the loan you would still be saddled with a £35K debt, possibly even more as the repayments would have been much higher.

Look at 125% mortgage deals which may giv eyou enough to repay the loan, and if the £17,500 was som esort of "insurance" which seems likely then you may get some of this refunded

Little_Miss_Winner

Hiya Sace,

Just forgetting about the £35k addditional loan for a mo.

How much was your mortgage for? How much do you pay per month?

Sace

Hiya!

The mortgage is for £155,000 and we pay iro £900 per month.

danjberry

sorry but do you simply wish to switch your mortgage to a repayment mortgage because if so a secured loan should not stop you from doing this. a deed of postponement has to be completed by the secured loan company allowing your current mortgage lender to change this.

if that is all you wish to do and carry on paying your mortgage (on repayment) and secured loan then that should be the only thing that needs to be done.

Sace

Hi

That's correct, we just want to switch mortgage. In theory, yes the secured loan lender should provide our current mortgage lender with the deed of postponement... However The secured loan lender has confirmed in writing that they will do this if the property is worth over £190,000 (the £155,000 mortgage plus the £35,000 loan)

Our house is now worth £165,000 so therefore the secured loan company will not give us the deed of postponement, meaning we are stuck where we are with what we already have for the remainder of the loan term (24 years)...

Unless we can somehow get the secured loan paid off, allowing us to do what we want with the mortgage

I just don't understand how the secured loan company includes our mortgage in this figure as it's with a completly different lender??

Little_Miss_Winner

I just don't understand how the secured loan company includes our mortgage in this figure as it's with a completly different lender??

I think it may be better to ring them and ask them to explain it you, and advise you what your options are?

I have been trawling through their website,
http://www.paragon-finance.co.uk and can't seem to get my head around what you have said above.

Obviously i know all lenders which offer secure loans, state you home is at risk if you do not keep up repayments on your loans. But with regards to your quote above, i cant be of much use

Wheres all our mortgage advisors when we need them:p