In need of ideas to reduce mortgage payment?

biz82

My property is worth 155k with 120k outstanding. The term is 10.5 years. The term is at its maximum due to the joint owners age. It is a repayment mortgage with the current rate ending in March 2013. A £3600 early repayment charge. I want to avoid selling the property if I can. The joint owner has their own property and isn't in a position to contribute towards this one. They only agreed to be named on the mortgage to use their income and allow me to keep it.

I have caused this situation because I trusted Santanders advice. I split from my partner and after looking at the options and speaking with Santander, agreed to buy their share of the property. I went through a transfer of equity application under the impression that once completed I would be able to change to interest only. I was told that initially the mortgage would need to stay as repayment until the transfer of equity was complete and then it could be changed to interest only.

Today the transfer of equity completed and I was told that Santander won't change my mortgage as they now only consider interest only mortgages as new lending applications. I am now stuck with £1200 payments. If I was able to change to interest only until the current rate ends it would solve my problems because the payment would reduce to £450.

Aside from trying to sell which raises many more concerns I don't know what to do. I was going to rent out the second bedroom but this alone won't help that much. I only need to reduce the payments for about a year at which time I will have graduated and my income should cover the higher payments. Then in March I should be able to remortgage in my sole name. Are Santander right in what they are saying now? I was told that all I needed to do was provide evidence that the capital can be paid back at the end of the term. Thanks in advance for any help!

somethingcorporate

You could consider writing to Santander again perhaps providing some income and expenditure details suggesting that unless they can revert to IO that you will end up defaulting.

Whilst the SVR repayment may only be £450 now it is (a very) small risk that in 12 months time it could be (considerably) higher.

Muscle750

Hang on abit here the so called "joint owner" is either having a laugh or more stupid than they realise, if you are struggling surely its in the joint owners interest to help as their name is on the mortgage and if its repoed at anytime they are gonna be chased as well as you for any shortfall in the meanwhile your paying a mortgage that they will benefit from when the house is sold. And onto Santandar ive had experience with them and they are nothing short of useless in their advice and information.
Your only option i think is to re mortgage elsewhere if you can however interest free is ok but you pay an awfull lot out and acheive nothing.

Thrugelmir

biz82 wrote: »

They only agreed to be named on the mortgage to use their income and allow me to keep it.

Santander would not accept this view. The mortgage advance would have been made on the basis of both applicants incomes.

If the underwriter had known of your plans then the application would have been rejected.

biz82

The joint party was also under the impression that the mortgage would become interest only. As I said they are unable to contribute towards it and although I'm aware that they are jointly responsible for this mortgage, this is the agreement we made and the payments are my sole responsibility. An income/expenditure was completed on application. It was very tight and I had to make a lump sum payment to the balance to get it accepted.

As I stated before I/we thought I would be paying £450 per month. I could afford to pay a maximum of £700 but I'm unable to either increase the term or reduce the mortgage balance.

I feel pretty stupid right now. I've had nothing but bad experiences with Santander in the past and shouldn't have put my trust in what I gathered was the process for getting my mortgage onto interest only.

I guess I need to seriously look at selling the property.

somethingcorporate

Or ask the person that is jointly responsible on the mortgage to contribute?

Just because you may have a "gentlemans" agreement they are not liable Santander have a real one that proves otherwise!

beecher2

I'd rent out the second room - how much could you possibly get? Get over to Debt Free Wannabee to see how you can budget in order to afford more than £700 you presently think you can afford.

anselld

So you have gone through transfer of equity 100% into your own name?
Does this not mean you are now the only person on the mortgage?
In which case the previous joint owners age is no longer relevant so you could request the repayment term to be extended.

Yorkie1

beecher2 wrote: »

I'd rent out the second room - how much could you possibly get? Get over to Debt Free Wannabee to see how you can budget in order to afford more than £700 you presently think you can afford.

As above - you need to up your income and reduce your outgoings if you are going to keep rather than sell up.

biz82

The mortgage is still in joint names. My ex was removed and another added. The mortgage term had to be reduced because of the new applicants age. If I had known that the payments would have to stay at £1200 I would never have gone through the TOE process and sold instead. I want to avoid selling because I've invested so much time and money into improving the property. I also have no interest in moving elsewhere any-time soon.

I think that I could achieve £350 per month inclusive of bills. I guess I could then see if it is at all possible to borrow another £200 or so from the joint owner. I already live quite frugally, this just means I'm going to have to live off beans on toast for the next year or so. I believe that all my bills are as low as possible the only one left to reduce is changing my mobile to pay as you go when my contract ends in February. However it will be a massive struggle to keep on top of the bills. This has come as a complete shock as I didn't foresee being in this situation whatsoever.

I still can't believe that Santander won't allow me to change to interest only. I can understand that a lender would see having a capital balance to repay as a greater risk than if it was been paid towards each month on repayment. However what are the valid reasons for new interest only applications other than wanting to have either lower monthly payments, or for it to be more flexible so that you don't struggle to keep on top of things especially when you will be able to repay the balance at the end of the term.

The way lenders and underwriters look at lending applications is greatly flawed. In my case I would have been re-mortgaging to a different lender in just over a years time.

Wh05apk

Abbey will only allow interest only upto 75% above that, which you are, the whole mortgage will need to be repayment.

I think your only options are to get the other party to help you out short term, take in a lodger, or increase your income, which doesn't sound realistic if you are studying?