Advice needed on NRAM mortgage

Freemantel

I want sell or rent my flat but am not sure on the best course of action to take. I have a NRAM mortgage with £54,500 secured and £16,000 unsecured. My flat has been valued by an estate agent at £65,000. This means if I sell at the £65k there is a shortfall of £5500 which NR would double the APR on meaning I would be paying well over the odds for this sort of loan. NR have said that they would allow me to let the property out as long as the rental income would cover the mortgage. This would be an option until the housing market grows to a point that I can sell the property. The problem with this is that I would expect to get around £350-£375 rental income every month and the mortgage is £404. NR have said they would consider changing me to an interest-only mortgage as long as I had paperwork to prove I had some form of vehicle in place to pay the mortgage. This would then mean the mortgage payments would reduce and the rental income should cover it. My plan would be to put the vehicle in place to show NR I had it for them to allow me to let the flat out but I want to retain the money in it when I sell the flat at a later date. Is this possible and if it is should I be looking at ISAs, Pensions or Endowments? I think the pension option would be the best but am not sure.

Any help or advice would be great, thanks in advance

opinions4u

A repayment mortgage would cost about the same as an interest only mortgage with a suitable repaymnent vehicle.

There is nothing in the housing market that suggests prices will rise to any degree over the next few years. Banks continue to reduce the size of their balance sheets. Wholesale funding has gone from the markets and is a flawed business model anyway. Employment prospects are bleak and growth in our main export markets is close to zero.

I'd sell up and pay as much off that loan as you can.

Don't keep a property for the sake of avoiding an extra few per cent on an unsecured loan.

Thrugelmir

Freemantel wrote: »

I want sell or rent my flat but am not sure on the best course of action to take.

Is it possible for you to stay put for a while and continue to repay the debt? While not ideal. Financially it may be the most cost effective in the longer term.

Freemantel

Thanks for the replies. I realise that an IO mortgage with a repayment vehicle will cost around the same each month as a repayment mortgage, I just need to get the monthly mortgage payment lower so I can prove to NR that the rental income will cover it. I don't think the rental income will need to also cover the repayment vehicle payment but I could be wrong. I thought if I did this and set up a pension plan as the repayment vehicle I could maybe move the money in the pension elsewhere when I sell the property.
The most cost effective way would be to stay put but my new wife and I live in a 1 bed flat and are looking to start a family so really need somewhere bigger. We have a £20k deposit for a new house but really don't want to have to use any of it to pay the shortfall in debt on the NR mortgage because then the LTV on the new mortgage won't be enough. The house we are looking at is £136,000. We both work full time and have a combined income of £62k. We have £26k of debt (excluding the mortgage) and think this will go against us when we apply for a new mortgage so want to be able to put as much of a deposit down as possible to help us get accepted.

Thrugelmir

Use your savings to clear your debt. There is little point having money in different pots. As it doesn't change your overall financial position.

With a combined income of £62k. Then should be possible to aggressively overpay your mortgage.

Suggest you review your outgoings and make a determined effort to save money. As moving house should be easily achievable if you put your minds to it.

dtr1001

Hmm, noted your optimism about creation of a repayment vehicle but NR seem to want a fair lump of equity to go with this. I've been with NR for six years and for the last three years been paying interest only owing to my partners business failing. Last month they wrote to us saying we must return to repayment, (probably prompted by my partners bankruptcy in September) and when I discussed this with them they said that the problem was that I didn't have a repayment vehicle, I said to them yes I do, I have my pension lump sum at age 65, (mortgage ends when I'm 69) and they said thats sounds like something we can deal with so send the paperwork in. I did this and then they called saying the pension lump sum was fine but I needed 25% equity to move onto a pension mortgage - the house is NE by around £25k. I haven't a clue what to do now. I'm on a DAS (Scotland) so cannot raise anything towards the repayment.