How can I change a secured loan to an unsecured one?

morwenna21

I am in a position where I purchased a house for £82,500 in 2005. In 2007 a £20,000 loan was secured against the property. The situation is that I am umeployed atm and my husband is self employed. The business turnover has been steadily decreasing for over a year now. In the beginning we were able to keep our heads above water, but now we are falling behind with bills. We are up to date on our mortgage payments and our secured loan payments as we have made every effort to prioritise them, I am in a position where I need to either sell the house or just give it back to the mortgage company to clear one outgoing. Unfortunately I have a £68,000 mortgage outstanding and the loan has £18,000 left. The house is borderline negative equity, as it is worth between £70,000-£76,000, depending on agent. Basically there is no equity to cover the loan. So how can I change it to an unsecured loan with the same company so I can free the house? I have bad credit, so could not get an unsecured loan with anyone else I do not think. I am already on a DMP. Cannot go bankrupt really as hubby is director of a ltd company. Although house is solely in my name. The secured loan is a joint situation. Please help!

_Andy_

You would need to ring them but it's extremely likely it will be a straight decline.

morwenna21

So how would they recover their money if the house was repossessed then? They would not get any money from he sale of the house. They would have to make it unsecured surely, as they have no security on the property anyway now.

Confused.....

_Andy_

They don't 'have' to at all. give them a ring on Monday to discuss your options, if any

morwenna21

So can I ask Andy what you would do if you were in my position? Is bankruptcy the only option to clear it all and start again? Or is there something I have not thought of. Bankruptcy would mean my husband losing his business. Trying to avoid it if I can.

piglet74

Have you considered / asked your lender if they offer the assisted sale scheme?

I have just sold my house thru this and I had around 60k of negative equity.

I have a thread in the mortgage free wannabe section, feel free to read it.

Like yourself I had both a mortgage and a secured loan and could no longer afford to pay them so I had to do something. When you don't own a house any longer, the money that was previously owed becomes unsecured.

DCFC79

I was thinking why if the turnover has decreased isn't the se OH looking at ft work or why isn't the OP working, i accept both might be hard to achieve but much better to try.

bouncydog1

As far as I am aware the only way you can unsecure the loan is to pay it off and the charge over the property is released.

If you cannot repay the loan then the Company have the right to go to Court to get an order to sell. The matter is likely to be complicated unless both loans are with the same Co. The mortgage is likley to be a first charge which has priority to any sale proceeds I believe. In the event that the sale of the property does not raise enough to pay off the mortgage and secured loan, the lenders can come after you for the shortfall.

I am not sure for how many years but I do believe it is for several years because the debt is a mortgage. My advice to you would be to seek proper legal advice and for both you and your OH to look for jobs to help up your income.