Re: Northern Rock Together Mortgage - HELP!

Tuck1705

Hi all, first time poster in need of some help/advise regarding a Northern Rock Together Mortgage.

We took the mortgage out in May '07 in order to buy a 2 bed property valued at £172,000. The mortgage part of arrangement was for £165,000 and we then had a £16,000 loan bolted on top to take total borrowing to £181,000 (borrowed extra as first time buyers to cover furnishings, legal costs etc.).

This was sold to us as an interest only arrangement. As naive first time buyers who had only evert seen housing prices go up we thought the house value would continue to rise thus allowing us to remortgage at some point in the future to pay off loan and go to a repayment mortgage.

Anyway, this didn't happen! The value of the house plummeted within months of us buying it - being a town centre property the value was hit hard and bottomed out around £155,000. Bearing in mind our total borrow of £181,00 this left us in major negative equity.

Obviously NR passed us on to NRAM and we have continued to make payments on an interest only basis for the past 4 and a half years without any real change in the property value.

In order to increase our household income I accepted a new job and we have re-located away from the property. We now live in rented accommodation & have rented the old house out, but then rental income does not cover the interest only mortgage and loan payments. We make up a shortfall of £200 per month, as well as picking up the cost of living in our new place.

We have given the housing market time to come back but it doesn't seem like it will happen any time soon and so are desperately looking for a way out of this mess. Paying £200 to sustain an interest only mortgage on a property we no longer live in and is in negative equity anyway is a soul destroying state of affairs. We just feel as though we have thrown away thousands on a mortgage/property with no value in it and in doing so have seriously damaged any hope we had of having a comfortable financial future.

We are now living month to month with no savings whatsoever. We both have our own debts to pay off as well and have not spend out on holidays/luxuries for years. We both work long hours to try and maximise our incomes but the strain is taking hold.

Can anyone help us? what should we do? We have thought about trying to sell the property and then paying off the negative equity from the sale? This would help to draw a line under things but would leave us with a debut of around £20-25K which would be a hard one to take given the amount we have already paid into the interest only mortgage.

We have also thought about trying to use the 'irresponsible lending' angle to put together a case with one of these PPi companies. We had debts of over £20K when we took out the mortgage in 2007 so not too sure how we were ever approved in the first place (I know we signed the papers though and ultimately our finances are our responsibility).

We have discussed porting the mortgage with NRAM but they require a 5% payment of the value of the new property which we just do not have and are unlikely to ever have given we cannot save anything month to month.

We are both in our early 30's and keen to start a family but just can't ever see when we will be secure enough to do this. The relationship is becoming strained due to these pressures and without a resolution things will only end one way.

Any help would be most gratefully appreciated.

Tuck

holly_hobby

I would suggest you forget about trying to get out of the mortgage responsibility, by absolving yourselves and instead inferring irresponsible lending, as you knew you were entering into a potential negative equity situation when you effected the mortgage, but was happy to do so at that point, thinking that a rising property market would effectively erode the added debt for you.

That sounds v harsh (sorry !) but its really this situation we find ourselves in here, much has been made about the NR business model and the Together mortgage - but I don't think bring a mis-sale (unless how the mge worked etc, was mis-represented to you), will bring much relief in this situation.

With regards to the fundamentals of the Together mortgage (TM) - 95% of the borrowing released was secured on the property, with anything in excess of this effectively running along side, in essence as an unsecured debt (albeit at the same interest rate as the main mortgage).

If you are unable to redeem the unsecured element on redemption i.e anything in excess of the 95% secured element, the idea of the TM was that the unsecured element is left with NR, and in essence transferred to a personal loan. With the payrate loaded from that enjoyed whilst it ran alongside the main mge, to make it now more akin to Personal Loan rates (can't recall the amount of loading, as I marketed this product when it was first introduced by NR in the early 00's), but the loading details should be in your T&Cs.

So, effectively you could repay the secured element (if your sale price achieves this sum, or with added capital), transferring the residue or neg equity aspect, to the "personal lending" basis as discussed above. You may then over time repay this sum to conclude matters.

I am sorry that you find yourselves a victim of the property downturn, but hopefully the above may give you a little bit of hope !!

Hope this helps

Holly

_Andy_

Yet another poster getting themselves into an admittedly unfortunate situation then trying to blame others. Sorry OP but that's a really crappy attitude you've got.

Tuck1705

Holly, thank you very much for your response. Selling the property and transferring the residual debut into a repayment loan could be an option - will just depend on the sale value I guess and at the moment this still does not look to healthy. Maybe if we maintain this situation for another 6 months things may improve with the market. If we could get £165K for it and just be left with the loan debt that would be do able provided the terms of the loan repayments do not jump up (have heard others in similar situations have found their loan repayments rise dramatically when not connected to the mortgage).

Thanks anyway though Holly.

Andy I am not trying to blame anybody - "I know we signed the papers though and ultimately our finances are our responsibility" just trying to understand what options we have to get out of this situation. We would be foolish not to explore every avenue don't you think? As mentioned it is our own naivety that got us into this mess & so the next decision we make I am sure you can appreciate must be an informed one.

Thrugelmir

Unless you can find a way of starting to repay the capital owed. You will remain on a hamster wheel going no where. You mentioned that you have other debts as well. So the situation could very easily overwhelm you if your personal circumstances changed for the worst.

I would suggest contacting the National Debt Line. Advice is free and confidential.

http://www.nationaldebtline.co.uk/

You may have to accept that your credit ratings will be trashed in the process of extracting yourselves from the mire. However with a different mind set going forward with regards to personal finances it is possible to rebuild them.

The_Road_Warrior

Tuck1705 wrote: »

being a town centre property the value was hit hard and bottomed out around £155,000.

Have you had the above £155,000 figure confirmed, or is that guess?

Tuck1705

This was an indication a few months back but we should get an up to date valuation. Cant see it being too different though looking at other prices in street

The_Road_Warrior

Tuck1705 wrote: »

Cant see it being too different though looking at other prices in street

Sold prices or asking prices? Are they selling?

holly_hobby

The repayments will normally jump from those you currently enjoy, as the residue loan (now detached from the mge) left with NR will be termed as a personal loan - and as such (and as per the t&cs for this arrangement) will be charged accordingly.

The difference on any personal loan (regulated under the CCA74), that subsequently becomes unpayable, is that it may be persued for upto 6 yrs from default, where as any unsettled negative equity or related mge debt, may be pursued for upto 12 yrs from the date of default.

So, either way, I do think long term, repaying the secured and instigating the tsf of any residue may be more beneficial than not for lots of reasons.

Spring is on its way - a normally favourable time for house hunting, so you may be lucky !

Remember facing issues head on can only benefit you, its when we starting sticking our heads in the sand that a saveable situation can become a lost cause .. and there is always lots of help here !!

Hope this helps

Holly

poppy10_2

Tuck1705 wrote: »

This was an indication a few months back but we should get an up to date valuation.

Probably worth a bit less than it was a few months ago.

What with the massive negative equity and the £78k additional unsecured loan debt, it seems like BR may be your best option. Little sense in pouring additional money into a bottomless pit each month.

The_Road_Warrior

poppy10 wrote: »

Probably worth a bit less than it was a few months ago.

What with the massive negative equity and the £78k additional unsecured loan debt, it seems like BR may be your best option. Little sense in pouring additional money into a bottomless pit each month.

That was my thinking too, might be best for the OP to post over on the Debt Free Wannabe board.