advise needed renting my house out on a DMP

tomneedinghelp

Hi Guys,

This is my first experiance on here so hopefully someone can direct me in the right direction.

Me and my wife are currently living in our mortgaged property worth about £105k, we bought it 5 years ago for £122k. When we took out our mortgage we were advised to take a mortgage out for 95% and borrow the rest on a secured loan (£13K) giving us a better interest rate and also giving us more than needed for the house to spend on furnishings as it was our first house. We now have a very good opportunity to move into my wifes grandads house (who sadly passed away last year) and rent it from her family with the intention to buy in the future.

The complications!!:
We obviously can't sell the house with it being in so much negative equity, however, we want to rent it out, keeping us on the ladder for when we eventually finish our DMP (details further down this post!) Our Mortgage provider (A&L) have said this is not a problem and will not affect our interest rate etc, however they require the £13k secured loan to be paid off in full before they will give us consent-to-let. Our problem is we don't have the £13k and we can't get it from family. I have asked if they can transfere it to the mortgage and they said no. Do I have any other options?? We will not be making money by renting our current home out as it will cover the rent for the new property, therefore pretty much breaking even every month.

Our DMP
We have been on this for about 2 years using Gregory Pennington, all seems ok and the debt is slowly but surely being paid off. We have about 5 years left to pay the remaining £25k off.

Any help here would be appreciated as we are desperate to move into this house and it will not be available in say 6 years when the option would be more financially suitable.

Thanks in Advance

HappyMJ

Your option is as stated. To find £13k and pay them off to get your consent to let. You will (at least you should) be making money on the deal. You need to declare your income and the expenses. The interest on the mortgage is the main expense and is unlikely to be more than the rent so you also need to pay tax on your profit.

Your other option is to sell.

heartbreak_star

Get rid of Pennington, go to one of the free places like PayPlan or CCCS - they don't charge you.

Not much other advice sadly - maybe post an SOA so we can advise savings?

HBS x

tallyhoh

Any chance of the family renting grandads house out to another tenant till you are more financially settled.

I agree with heartbreak, get rid of GP, have you worked out what fees they are charging you? that money should be going towards paying the debts faster.

cat516

It is clear that you have a few debts outstanding. Take a look to see if you have been mis-sold any insurance on any of the agreements - there may even be PPi on the secured loan. If there is you may be able to reclaim this reducing the balance of your secured loan and other debts. The refunds do not always go back to the debt and can sometimes be sent to you. This may be worth looking into.

You really are stuck for other options as it is unlikely that you will be able to take your mortgage elsewhere. I would try to speak to the mortgage provider again & say that you are suffering financial difficulty and are on a debt management plan. Advise them that if the situation does get much worse there may be a possibility that the mortgage payments may not be met. Explain that renting the house out improves your financial situation and therefore they are more likely to get their money back for the mortgage repayments.

In relation to GP. t may not be a waste of money. You pay for a service and some people would rather have the extra help from an organisation that is privately funded and can sometimes provide better facilities that the free services. It is always down to individual preferences whether you choose to pay for the service or take on a free service. EG the NHS exists but people still choose to go for private health care.

tomneedinghelp

Thanks for the post guys. Gregory Pennington are charging me £75 per month from the £500 per month I pay. The total cost will be about £6000 for the full plan. I am pleased with the way they are running it and I hardly get any mail from the creditors at all. I have thought about changing to a free service but decided against it as it is currently running so smoothly..

Tallyhoh, this is an option but to be honest if the £13k gets sorted then we would be no better or worse of per month so its a no brainer. Nicer house with better schools. Nearer to both our workplaces so should cut down on fuel cost etc. Thanks though

Cat516, do you think this is risky. If I was to tell the mortgage company that we are in a debt management plan?? I always wondered this.

Thanks again peeps
x

Grumpelstiltskin

So you are happy staying with Gregory Pennington and paying them £6000?

That's almost half of the money you need to get what you want, surely you can see if you ditched them and went with a debt charity every penny you pay over will go to pay off your debts making the time you can possibly pay off the secured loan come sooner.

BTW the bank will have in all probability looked at your credit report and they can put 2 and 2 together and guess as defaults will show up that you are in a debt management plan.

poppy10_2

tomneedinghelp wrote: »

Thanks for the post guys. Gregory Pennington are charging me £75 per month from the £500 per month I pay. The total cost will be about £6000 for the full plan.

That's crazy, why did you sign up for this? :eek:

tomneedinghelp

I understand its a lot and I was annoyed when I put my payments up, they put the fee up, really frustrating. And yes Grumpelstiltskin, I can see that this is a lot, however, the plan is being run so well, and I get no problems at all. Are the free DMPs any good? can anyone recommend the best. And how would I go about switching? I am a Director for a company and can get a company loan for the 13K to be paid off using dividends, however this is a last resort. Got a meeting with the mortgage company this afternoon as suggested by Cat516, to see if there is any way around this.

loubie_lou

I hear CCCS are the best, but I am with PAyplan and they are good. If you explain to them your situation and act quickly none of your creditors will lose out on any monthly payments.

But 6k is a heck of a lot to pay to this company. Imagine that going straight to your debts. The term of your DMP will go down as well

surrey648

tomneedinghelp wrote: »

Are the free DMPs any good? can anyone recommend the best. And how would I go about switching?

I have been with CCCS since 2007 (!) and they have been fantastic. They have managed to stop the interest on most of my debts and the creditors very quickly became polite and helpful!!

I pay nothing for their service, and could not have picked a better option! I'd give them a call if I were you....the helpline is open from 8am to 8pm Monday to Friday and 9am to 3pm on Saturday. 0800 138 1111. You won't lose anything by speaking to them... everyone I have spoken to there has been very understanding and supportive!

Good luck!!!!