Re-Mortgage and move with prob -ve equity & a DMP

westie666

Folks,
My wife and I are in a DMP, and would like to know a couple of things:
1) What would happen if we sold our house for less than the outstanding mortgage (ie we still owe the bank money)?
- TBH me may break even, but erring on the negative side...
- We have ~78k secured and ~8/9k unsecured
- Property est. £85k (although house next door sold for £80k as quick sale)
2) Are Soliciter fees paid before the mortgage company?
3) How easy is it to get a mortgage while on a DMP?

Thanks
W666:)

kingstreet

A remortgage, moving your mortgage from one lender to another while remaining in the same property, is not going to be possible because of the lack of equity and the credit situation.

If moving, if the secured debt is higher than the agreed price, you'll need to reach agreement with the lender how to deal with the negative equity. If you don't do this, they will not allow the sale to complete.

If the sale price clears the secured lending, you'll continue to make payments to the unsecured portion, but the rate will increase to around 12% (NR Together?).

Solicitor's fees are paid at the same time. If there's not enough to cover the redemption and the solicitor's costs, you'll be asked to make up the difference.

A mortgage while on a DMP will be almost impossible. The payment arrangement and adverse credit entries likely to be visible will more than likely make an application at this time unacceptable.

westie666

Thanks Kingstreet

So, lets say I sell the house for £83k, and I clear the secured amount ($~78k) and have £5k 'left over. Does this go to the mortgage company for the unsecured, or can I use it to pay the soliciter?
Yes the mortgage is a NR Together mortgage. Does the unsecure term change (ie from 21 years to 5 or 10 years)

So once we sell the house, we need to rent is the fundamental idea?

Now here is a curve ball, what about if I came into some money after the sale of the house, I clear of the DMP, have ~10% LTV money available, whats the thoughts on getting a mortgage from that?

Thanks
W666

kingstreet

westie666 wrote: »

Thanks Kingstreet

So, lets say I sell the house for £83k, and I clear the secured amount ($~78k) and have £5k 'left over. Does this go to the mortgage company for the unsecured, or can I use it to pay the soliciter?
Yes the mortgage is a NR Together mortgage. Does the unsecure term change (ie from 21 years to 5 or 10 years)

So once we sell the house, we need to rent is the fundamental idea?

Now here is a curve ball, what about if I came into some money after the sale of the house, I clear of the DMP, have ~10% LTV money available, whats the thoughts on getting a mortgage from that?

You can leave the whole unsecured loan "in situ" and the rate goes up. The term won't change, unless you decide to change it yourself. Then, any surplus funds can be used to pay the solicitor's fees. Make sure you make the solicitor aware you don't want to repay the unsecured loan, if that's the route you decide on.

I'd say renting is your best option, once sold.

I'd say the time before you can get a new mortgage and the size of your deposit are inversely proportional.

ie 10% deposit = wait for a couple of years, maybe more, after DMP ends for adverse credit information to fall back in time.

25%+ deposit = shorter wait before you can get new mortgage.

I'm not guaranteeing you a mortgage after two years, or less, I'm just illustrating the point with an example. A bigger deposit is going to mean a shorter "rehabilitation" period before a lender will take you on.

westie666

kingstreet wrote: »

I'm not guaranteeing you a mortgage after two years, or less, I'm just illustrating the point with an example.

Yep, fully funderstand that point.
This helps out a lot, better get the paint out, and get the house on the market asap:)

W666

Thrugelmir

Is moving property a necessity?

While it may seem attractive sticking it out may make more financial sense.

Whilst you may clear the DMP. You have a very expensive unsecured loan to service. That will also continue to impact your ability to obtain credit .

westie666

Hi Thruglemir
Moving is starting to become very necessary.
We have a 3 year old and a 1 year old show horned into a single bedroom (6ftx10) and were in the big bedroom (10x10) There is also no storage in the house. We have hived a lot of items and possessions to the mother and father-in-laws house, so space is very tight!

What kind of rate are we talking about for the unsecured loan? currently paying ~4%APR @about £50 p/m

W666