Mortgage advice needed

bandos2007

Hi

We have arrears of £4500 on a £76k mortgage and are at the stage where we have been asked to either pay extra each month to clear the arrears or add the arrears on to the end of the mortgage. We would struggle to pay more than £20 extra each month which will takes years to clear the arrears, but we do not understand what effect the other option will have on our mortgage.
Any advice would be much appreciated.
Thanks
Steve

kingstreet

You'll have an £80,500 mortgage which you'll repay over the remaining term.

Assuming a 5% interest rate and 20 years remaining, it will take your payments up from (example) £501 per month to £531 per month.

bandos2007

Thanks for that reply.

We are paying £696 including a nominal £1 off the arrears, mortgage runs until 2021, so I guess that would mean quite a high increase in the monthly payment if we add on. Question is are nationwide likely to accept an offer of £20 per month against arrears?

GMS

£20 a month to repay £4500 arrears is not likely to be accepted by Naionwide. It will not clear the arrears before mortgage ends.

Capitalising the arrears would seem the best option, i.e adding the arrears to the loan and paying them off that way. If you cannot afford the repayments then I dont know what your options would be with the lender. Ultimately if you cannot repay the mortgage they could take action to enforce their security.

GMS

Could you extend the term possibly in order to make repayments affordable? Not an ideal solution but could help in the short term until you are able to make a more suitable arrangement.

bandos2007

Thanks for the responses so far.

Extending the term is not feasible, I will be 70 when it finishes. The mortgage is a 5 yr fixed rate repayment at 5.63% (fixed until June 2013) Are there any other options open to us?

dimbo61

what does the mortgage revert to at the end of the fix ? Not BMR by any chance !

bandos2007

Yes it reverts to BMR

bandos2007

It reverts to BMR... is that good? does that make a difference to our options ?

kingstreet

I'm trying to figure out why there are two threads running on the same subject?

If you can't afford the increased payments from capitalising the arrears, you have two choices;-

- sell the property and pay off the mortgage
- make the Nationwide an acceptable offer you can afford.

You can't change from one product to another without paying any early redemption penalty which might be due and you have no chance of remortgaging to another lender with a current arrears situation.