Remortgage advice

Essex22011

Hiya

After some advice on behalf of FIL/MIL. Unfortuantly they had an endowment mortgage that was supposed pay off the mortgage this year but has left them 40k short.

Their house is worth around 170k, they currently have a interest free mortgage with Santander at 4.14%- seems pretty high to me.

Think the problem is they had a charge against the house and several CCJs around 6 years ago and are now on a debt management plan with 7k left to pay. They have a joint income of 65k a year,I think the way forward is to pay off their debt management plan and then remortgage.
Does anyone have any advice? Will they struggle to remortgage due to bad credit ratings, if so which lender would be the way forward?

I'm going to get them to see a mortgage advisor but just wondering if anyone had some advice
Thanks!

Dave_Ham

Firstly, they are either tied in with Santander (and therefore will have early repayment charges) or on 4.74%

The rate is higher than average for their loan to value, but very reasonable considering they have defaulted on multiple credit agreements and are part of a DMP

It would be impossible to tell what their options may be, but if this is rate driven I would say forget it.

I suggest you get their Experian, Equifax and Call Credit reports and put them in front of a decent broker.

Go nowhere near the highstreet for this case, until you/they have received formal advice...

Good luck

Crashandburn

I'm going to make the assumption that the mortgage left is just the£40k shortfall? If so, then on a debt this size then the rate isn't the most important part as they would be paying circa £50pm extra than the market leading rate and to pay 4.14% when you have CCJs and a DMP isn't bad.

My focus would be to use the allowance you have on the mortgage to overpay by up to 10% per annum.

With a monthly income net of £3k+ a month, I would get rid of the DMP ASAP as well as set up overpayments on the mortgage. Worth them getting quotes as to how much it will cost of a full repayment mortgage over their remaining term.

The remortgage shouldn't be the main focus but overpayments. They have the option of renewing their deal with the current lender once the current rate expires which will still be possibly more favourable than introducing a new lender due to their credit history

Essex22011

Thanks for your advice. Yes they are tied in until November. They seem to think they cannot make overpayments on this mortgage?

Dave_Ham

It is highly likely to be 10%, although in terms of their ongoing credit score; the sooner they come out of their DMP, the sooner they will have access to the market again.

All the best

Crashandburn

Dave_Ham wrote: »

I suggest you get their Experian, Equifax and Call Credit reports

Might want to do this and try and check when the CCJs drop off.

If you were to stay with santander. they profile the clients before deciding what rates to offer them on retentions so worthwhile planning this in advance too.

Wh05apk

Pay off the 10% permitted, then wait till the tie finishes and pay the rest off, approach Abbey, and they will likely offer a "retention" deal for them, they can then either overpay to clear the mortgage, or switch to a repayment. With the adverse credit, and small size of the mortgage, it would not be easy, and probably not cost effective for them to change lender.

Thrugelmir

Pay off the DMP then tackle the mortgage

If they've taken "advantage" of the DMP by repaying the debts slowly Then this may come back to haunt them.

With a recent DMP then mainstream lenders may not be interested in remortgaging.