buying/selling/debt/mortgage headache

roundthebend_3

Hi

We've got about £30k of debt. That's £12k unsecured loan, £9k 0% credit card balance, £2k overdraft, and £7k 0% loan from parents.

The repayments are high and we're seeing our debt climb rather than fall.

However, we have £65k equity in our house (mortgage is £120k and we've had an offer of £185k).

Our plan was to use the equity to clear our debt, then put down a deposit on a smaller, more affordable house. Seems like a perfect plan until you involve financial institutions!

Our current lender will charge us a redemption penalty of £3500. If we take out a new mortgage with them then we will only be charged a penalty on the difference.

So, we tried to go through the application process today. But, because I've only been in my current job for 4 months and I'm about to start a new (permanent) job they weren't happy. They say the issue is because my new job is on a 6 month probationary period.

This is the irritating thing - we took this mortgage when I was self-employed and we self-certified. Our financial trouble has come about because the business I ran was a flop and therefore we never did earn what we anticipated. My current job pays the same as what I earned through the business, my new job pays 50% more than that. So, clearly we will be in a better financial position. Yet, the lender isn't prepared to lend.

In our favour:

we will have zero debt payments to make, compared to about £500 per month currently.

[LIST=2]our new mortgage would be about £100 per month lower[/list]
[LIST=3]we would be putting down a deposit of about £20k (17% approx)[/list]
[LIST=4]we'll have a contingency fund of around £10k left over for security[/list]
[LIST=5]my income will be 50% higher than it is currently[/list]


The easy solution to this is for my new employer to not put me on a probationary period. I'm told that it is meaningless anyway because any employer can sack someone in the first 12 months if they aren't up to the job.

Another option is to pay the redemption penalties and find another lender, but the problems may be the same.

Or, we could stay in our current situation until I've racked up 6 months employment, by which time we'll have bailifs knocking on the door and our credit rating will prevent us getting a mortgage.

Or, we can give up hope of buying a house and rent instead.

Advice desperately required.

Thanks folks.

Ian_W

Or you could postpone [rather than "give up hope of"] buying a new property for 6 months, live in rented for that time, sort your debts and still have a reasonable deposit for a house having completed your probationary period at work.

If your current lender won't lend in the circs - and just from reading threads on here quite a few seem iffy if a probationary period is involved - the likelihood is you'll lose your early redemption penalty. Some will refund but I think this is usually limited to 6 months or so, you could try and find out off them if they'll part refund if you buy and use their mortgage with a break between the transactions.

Also you might want to discuss this with a mortgage broker - see if they can come up with some suggestions. Generally on MSE it's recommended that you look for whole of market, not tied or a panel and fees free [paid by a commission from the lender]. At least it may give you other options but the one above looks favourite to me.

BoL.

roundthebend_3

Thanks, Ian.

I still haven't got the paperwork for my new job, so there's a chance that it won't mention probationary periods.

Failing that I think we could use another lender and absorb the redemption sting, or rent and absorb the redemption plus the dead money sting.

I'll be speaking to a broker (or two) today to see if there are good deals out there for our circumstances.