📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

5yr Fixed ending in May... House Value decreased... BIG TIME

Hello all,

So 5 years ago after a 9 month long battle we finally found our house, and paid £177,500 for it (which in hind site, was well over, but the market had rocketed between us selling our flat and buying our house, so had no choice) because of the increase costs we choose a interest only mortgage (£160,000, with £17,500 deposit)

so 5 years later and the fixed rate is coming to and end, and our house is worth about £150,000. Due to redundancies and personal circumstances we have not had the opportunity yet to go back onto full repayment and so our mortgage stands at £160,000.

My worry now is that when the fix rate ends that the company (accord mortgages) will want to value the property in order to sell us a new product.

We are looking (or hoping should i say) to move in a couple years and so don't want to lock into anything we are going to have to pay to get out of. Also our finances are in a much better position now and we are in a position to do full repayment. So i am thinking a variable rate would be a good next move, but don't know if we are credit worthy enough

also what happens at the end of the 5yr fixed do we automatically go onto another product and if so will they value the property or credit score us.

We have been working hard over the last couple years to "fix" our credit rating and have made some huge improvements but its still not 100%
oh p.s we have never defaulted on a mortgage payment ever (this is the one bill we made sure got paid) even when we were out of work.

Any help would be appreciated as i am not very knowledgeable on this stuff

Thank you in advance

Amy
«13

Comments

  • sterlingstash
    sterlingstash Posts: 175 Forumite
    edited 6 March 2012 at 12:16PM
    Check your mortgage docs. It is likely you will go onto the Accord SVR (a nasty 5.99%) after the fixed term ends (no credit check or revaluation, this is automatic). Unless you can get some serious saving done, then you might be stuck on this until you can clear your negative equity, then get 10% equity and patch up your credit file.
  • Amiz87
    Amiz87 Posts: 22 Forumite
    5.99% nasty.....Im on 5.5 at the moment so how much extra is that gonna cost me a month?

    in your opinion is this our only option, would moving to a new lender be out of the question?
  • Then the increased payments will probably not be too much of a shock then, try running it through a mortgage calculator. But 6% is pretty high compared to the rates currently on offer. However to get any of those you will probably be looking at 90% LTV to move lender. So you will be looking at upping your equity by about £25k (the first £10k to cover the negative equity). Time to get saving!!
  • Amiz87
    Amiz87 Posts: 22 Forumite
    so in reality we dont have a choice

    Saving 25k would take us years and years. so looks like were staying put then :(
  • That is my take on it, yes. You certainly aren't the only ones in this position though. Others may be along to offer some better advice but I would say save like mad and once you've got an emergency fund sorted and paid off any more expensive debts, then start to pay down the mortgage to clear the negative equity and build up your equity.
    With a bit of luck, house prices will edge up a bit which will help get your equity up a bit quicker.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Amiz87 wrote: »
    5.99% nasty.....Im on 5.5 at the moment so how much extra is that gonna cost me a month?
    Will be around an extra £65 a month.
    in your opinion is this our only option, would moving to a new lender be out of the question?
    I agree with sterlingstash. No lender will lend you more than the value of the home. So at the very, very least you need to pay off the negative equity.
    Amiz87 wrote: »
    We are looking (or hoping should i say) to move in a couple years and so don't want to lock into anything we are going to have to pay to get out of
    You will not be allowed to sell this house unless you can repay the mortgage company in full having done so. So again you will need to repay the negative equity, as well as save up enough money to pay estate agents / solicitors / etc before you can move.


    Not much help to you in hindsight, but my advice to others reading this is that the OP went wrong when they chose the interest-only mortgage to keep their costs down. This, to me, suggests that they couldn't afford this property.
  • Sammie_UK1
    Sammie_UK1 Posts: 67 Forumite
    With a bit of luck, house prices will edge up a bit

    Sorry, but this made me laugh!!:rotfl:

    It'll take more than luck for house prices to increase (excluding London) in the current economic climate... Rising unemployment, Eurozone crisis to name but a few of the influencing factors..

    It's falling market out there ladies and gents and QE and dampening of the BoE can only do so much for so long..

    Thats my opinion anyway.. :)...
  • Sammie_UK1
    Sammie_UK1 Posts: 67 Forumite
    Amiz87 wrote: »
    So 5 years ago after a 9 month long battle we finally found our house

    A word of warning to other OPS: This is what happens when you buy at the peak of a property boom! What goes up in value, must come down. When the property bubble bursts, this is the situation you will find urselves in!

    Make sure you can afford the repayments should the worst case scenario happen..

    Hope for the best, plan for the worst!
  • MissMoneypenny
    MissMoneypenny Posts: 5,324 Forumite
    edited 6 March 2012 at 2:52PM
    Sammie_UK1 wrote: »
    Sorry, but this made me laugh!!:rotfl:

    It'll take more than luck for house prices to increase (excluding London) in the current economic climate... Rising unemployment, Eurozone crisis to name but a few of the influencing factors..

    It's falling market out there ladies and gents and QE and dampening of the BoE can only do so much for so long..

    Thats my opinion anyway.. :)...

    I'm not sure why your are excluding London. London always gets caught in a housing bust too and it might be worse this time with all the welfare reforms. Local news are already featuring people who will have to move because their rent benefit will be dropping this year and then next year, the benefit caps will start, plus DLA goes in April.

    OP, saving up is the only way to go. Can you take in a lodger to help your savings??

    "You can receive up to £4,250 a year tax-free (£2,125 if letting jointly) by letting furnished rooms in your home. This is known as the Rent a Room scheme."
    http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804
    RENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
    Read the sticky on the House Buying, Renting & Selling board.


  • We are in the same position.

    We bought at the height of the property boom five years ago with a two-year discounted tracker mortgage. The falling interest rates meant that our monthly repayments went from £1200 in the first month down to £600 per month a year later! Once we were put onto the SVR after two years our mortgage repayments went up to £870 per month where they have stayed for the last three years.

    I am unable to re-mortgage as we are in negative equity and I have been living in fear of an interest rate rise. We are with Birmingham Midshires. Does anyone know if we will be affected by the Halifax SVR rise?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.3K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.8K Spending & Discounts
  • 244.3K Work, Benefits & Business
  • 599.5K Mortgages, Homes & Bills
  • 177.1K Life & Family
  • 257.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.