Buying out second security dilemma

deedee71

I'll try to explain this clearly, as I really need help deciding what is the best option

My ex has a second security on my home of 1/3 of the value or £36k whichever is GREATER to be paid in 2020.

I bought in 2008 for £108.5k and the house is now valued at £90K. He has offered to take £30K now.

I can extend my current mortgage of £40k with a current rate of BOE + 2% so 2.5%.

I have an offset mortgage and have £10k saved up towards paying the second security off so could only borrow £20,000. This will cost £105 per month.

So, the basic mortgage calculator shows me if I borrow an extra £20k and use the £10k savings the cost will be £10k + £26k + £2k in lost interest over the next 8 years on the £10k - so a total of £38,000.

Am I looking at this wrong? I will be the one taking a gamble on interest rates staying low. Should I just leave things as they are?

I have a low income and I rent out 2 rooms, needing 1 room to supplement my income up to a decent living, and anything I get from the second room goes towards the paying the ex off fund. I've had 3 good years but keeping both rooms filled is proving difficult lately (I don't live in a popular rent a room area - not in a major town or city, or close to hospitals or uni).

I just seem to have it in my head I should save up the £36k but maybe I should be looking at "good debt". Also, I was in the middle of looking into taking on a buy to let mortgage and obviously I can't do that and extend my own mortgage. I have very little pension provision, I'm 41, single (permanently it would seem), and have 21 years of my mortgage to go.

I seem to be facing a lifetime of poverty which I'm trying to minimise and I don't know what is the best path to follow. Any help would be gratefully received.

holly_hobby

Notwithstanding the 2nd charge - you can't effect a buy to let mortgage for a property you are to reside in - so that option is out, unless you have the 2nd charge removed, move out and let the property.

Why not just get off the ladder for a time, sell up, pay him off and go into rented instead.

Holly

deedee71

To clarify, I meant another mortgage not a buy to let on my own home.

If I sold up he would get his money 8 years early and instead of renting out rooms I could only afford to become a lodger myself. My current mortgage is £210, I couldn't rent a whole property for that.

Thank you anyway.

Thrugelmir

At the current time do nothing. While interest rates are low. Its to your benefit.

If you were to put your "house fund" into fixed term ISA's. You could earn significantly more than 2.5% at the current time.

dimbo61

Make him wait and build up your savings in cash ISA,s and regular savers.
Wait until 2020 and see what happens !
He may need to go to court to force you to sell the property or he may just leave you in peace so live your life and build up savings

DVardysShadow

Net Present Value of £k36 paid in 7.5 years time at a discount rate of 2.5% is £k29.9

Effectively, the offer is breakeven. You may be out of pocket if rates go up but less so if the value of the property goes up. If he is making the offer, I imagine he wants the money now for some reason. I would offer £k25

dimbo61

As DVS has said if you can afford to borrow another £15K and use your savings of £10K you could pay off your EX now and not have this 2nd charge on your home.
Your call Good Luck