Downsizing - question on secured loan

Rosey321

Hi all - first post here, hope you can help advise:

We have got into a bit of financial difficulty of late and thought that it would be a good idea to downsize to free up a bit of equity. Ideally, we would want to use the equity to totally pay off our credit cards with a higher APR and transfer our secured loan over. However, the worry of course is that as second charge, the secured loan company (Firstplus) will want to reduce the balance of their loan with the proceeds instead.

Our basic finance details are as follows:

Mortgage 166.5k (originally based on a 185k purchase price minus 10% deposit), hoping to sell for 197k and therefore there should be 30k equity roughly at our disposal. We have a secured loan for 65k and credit card debts of 15k.

Our new property is going to cost 167k which effectively could mean that the first charge mortgage stays roughly the same.
My worry is that Firstplus gave us the loan last year(which in their words was borderline) based on their valuation of the house being valued at 195k.

My main question therefore is: Will Firstplus see that the value of the first charge mortgage is effectively staying the same and just transfer across or will the fact that the house value has dropped from the 195k stated above to the purchase price of the new house have a dramatic impact????

I know either way that we will be able to clear some debt - I would just rather it be the 24% credit cards instead of the 9.9% secured loan. Reducing the secured loan would only reduce the monthly outgoings by half of what clearing the cards would.

We are going for some financial advice from the estate agent so I don't know if any suggestions will be made (not sure if deposit required on new house yet - offer only accepted today!)

We have also tried to see if we can swallow the credit card debt by raising our secured loan figure but to no avail. We even got turned down by Beneficial Finance when they tried to offer a 'reasonable' APR of 36.9% - apparently we rated 6/7 on the credit score system!! Not that I'm too sad about that - but it shows how bad things have got which has made us look for our last resort which is digging into our equity.


Hope that there is some advice out there. I'm still sure of turning things round (hope you don't think dellusional!). We have a fairly steady income - things just snowballed from a problem year a couple of years back and we probably made the big mistake of consolidating as loan companies were prepared to throw loans at us. Wise at the time - what wasn't so wise is that we didn't cut up the cards! We will now that it has come to this!!!!!

Anyway, thanks in advance if there can be any great words of wisdom.

chivers1977

I guess you could use the option that we have gone for due to First Plus. We have also downsized. This might end up the same position though so may not be any good.

Northern Rock together offer a mtg which is 95% LTV secured and a further £30k unsecured.

Just thinking this through though, you would need to use 30k odd towards FP and your equity also towards them so the only benefit to you on this would be to have 30k on a mtg rate ie around 6% rather than 67 on 9%. You can also stretch the term with them to 35 yrs depending on your age. Could you put main mtg onto interest only and then use the extra towards your CCs? One of the advisers on here can put your figures into the intermediary site of NR and let you know whether this might make a diff to your outgoings.

chivers1977

Also I believe that that they will know that the property value has decreased and therefore would not be happy to be 2nd charge for such a large amount. What about using £15k to reduce FP and the other £15k to your CCs. They might be happier with that????

Nothing to stop you calling them and asking. They are not going to withdraw your loan with them just for asking !!!!!