A right conundrum, input please

kingstreet

A second charge is secured on the property and is repayable on sale, or it normally starts to attract interest from a pre-set point.

It's expressed as a percentage of the value of the property at the outset and is repaid at the same percentage of the value at the time of repayment.

So, if the property value increases, the amount to repay also increases, while a drop in the property value sees a proportionate reduction in the amount to be repaid.

If the value has dropped, I'd want to repay 25% of the current value, less at least the 25% discount.

£150k x 25% = £37,500 at purchase.

£135k x 25% = £33,750 - £8,438 = £25,312 at current value.

moneymattersav

TrickyDicky, yes, I will definitely try.
ValHaller : Sorry, I might not have been clear enough originally
getmore4less,kingstreet : On paper the builder is not obliged to offer a discount. I guess they need the money so an offer is on the table. But the condition of the discount is that the discount is applied on the original price, not the current market value.

I guess I can ask for the discount to be applied on the amount outstanding on the current market value, but they might just say no.
I can then maybe try to 'threaten' them by saying I will pay the bank and reduce the mortgage rather than paying them an extra £3k
I guess this thought process is where my question orignated from, whether I would be lose/gain/at par by paying the amount to the bank as against the builder(who just will be happy to take any money off me )

Cheers.

kingstreet

If they want cash off you now, it's them who have the thinking to do.

You appear to have the upper hand at the moment...

ValHaller

moneymattersav wrote: »

I can then maybe try to 'threaten' them by saying I will pay the bank and reduce the mortgage rather than paying them an extra £3k

Don't 'threaten' it is better to 'offer'! (Glass half empty, glass half full)

I suggest offering in writing £24000 to be paid within 28 days of their acceptance of your offer if you can get your funds lined up to meet that. They will probably want to squeeze a bit more from you but 28 days might have them interested

getmore4less

moneymattersav wrote: »

I can then maybe try to 'threaten' them by saying I will pay the bank and reduce the mortgage rather than paying them an extra £3k

Cheers.

What you with you mortgage will be of no interest to them.

moneymattersav

Thank you all.
I will try to get the discount on current value.
There are 3 potential responses from the builder.

1. Yes, we accept your offer. WOW
2. No, we can't do that. :-(
3. Well, not that low, but we propose a 25 + x % discount on original value, etc.

1 & 3, I might proceed with.

2, now what ? :-s

sammyjammy

If its 2 i would walk away, like its been said you hold all the cards. If you were to sell now they would only get 25% of that so you have nothing to lose by fighting for that or less. If they had not contacted you then you would have been happy with the status quo. They appear desperate - take advantage - they would!

bigadaj

The one bit of information that's missing is current value surely as this will determine your best response. Their offered discount probably nearly matches the reduction in house value, if I were the OP and minded to pay off the second charge I'd be tempted to offer the, 50% initially. The value of the loan may be on their book at a high value but their offer to settle lower would indicate that they want or probably need the money now, putting the OP ina strong negotiating position

getmore4less

What's the realistic current value of the property.

I asume you are resonsible for all selling costs so they get 25% gross not net.

Once you have the true discount you can then think about what might happen to the value over the remaining term to determine if this is a good deal or not.

kingstreet

See post #7. £135,000.