Property Dilemma!

Ltd_Company_advice

Hi Everyone,

I'm trying to see if anyone else can maybe give me some fresh ideas with my problem! Everything I try to do seems to just present a new problem!

Ok so here is the background. I own a 2 Bed ground floor flat. Bought for £140,000 in 2006 it's now worth £120,000 if I'm lucky. Now we are looking to buy a house, I have saved up quite a bit of money for a deposit on the next place which is fine but it's what to do with the flat!

I could sell it but like most people I don't really want to put my hand in my pocket and pay £20,000 to get rid of something! I'm thinking of renting it out as it would quickly be rented but here is the next problem.

The mortgage company have stipulated on the application paperwork that you need to have a rental income of 120% of the interest part of the mortgage which is fine but they also require you to have a LTV of 60% which as you can see above is not going to happen. The mortgage is with NRAM. Does anyone have any experience with them in the rental applications and how likely they are to accept it?

You have to bear in mind when I start this next sentence that I hate this place!! More than you can ever imagine. Just because I can't get out of it.

I have considered just stop paying the mortgage and let them repossess the flat but then figured that would hurt my credit rating as I would default etc and they will still chase me for the excess money as well. It does say that if I rent out without their permission they will seek to repossess the place as well if they find out.

I assume this would mean you would be in breach of your mortgage agreement etc, but could they actually report anything on your credit report because you would still be keeping up with the repayments?!

Any thoughts on wha people would do would be great. And sitting and riding it out is not an option anymore! lol.

joolsybools

Ltd_Company_advice wrote: »

Hi Everyone,

I'm trying to see if anyone else can maybe give me some fresh ideas with my problem! Everything I try to do seems to just present a new problem!

Ok so here is the background. I own a 2 Bed ground floor flat. Bought for £140,000 in 2006 it's now worth £120,000 if I'm lucky. Now we are looking to buy a house, I have saved up quite a bit of money for a deposit on the next place which is fine but it's what to do with the flat!

I could sell it but like most people I don't really want to put my hand in my pocket and pay £20,000 to get rid of something! I'm thinking of renting it out as it would quickly be rented but here is the next problem.

The mortgage company have stipulated on the application paperwork that you need to have a rental income of 120% of the interest part of the mortgage which is fine but they also require you to have a LTV of 60% which as you can see above is not going to happen. The mortgage is with NRAM. Does anyone have any experience with them in the rental applications and how likely they are to accept it?

You have to bear in mind when I start this next sentence that I hate this place!! More than you can ever imagine. Just because I can't get out of it.

I have considered just stop paying the mortgage and let them repossess the flat but then figured that would hurt my credit rating as I would default etc and they will still chase me for the excess money as well. It does say that if I rent out without their permission they will seek to repossess the place as well if they find out.

I assume this would mean you would be in breach of your mortgage agreement etc, but could they actually report anything on your credit report because you would still be keeping up with the repayments?!

Any thoughts on wha people would do would be great. And sitting and riding it out is not an option anymore! lol.

I'm no expert but...

it would be madness to just walk away from the property.

If the bank find out that you are renting it out without their permission and do repo your flat then I would think something will show on your report.

Could you not use the money you have saved to extend the flat (you mentioned it is ground floor). Why do you want to move to a house, do you need more space or some other reason?

ACG

If you walk away from the property - you may get your next mortgage if you get it through in time but you will not get a mortgage after that many years. They may even look to take your new house off you if there is enough equity in it...

How much is outstanding on the flat? Is it an interest only mortgage?

I suppose your on real option is to ask NRAM, if they say no then you have 2 options - sell and sort out a payment play with them for the outstanding amount or rent it out without consent - but that brings its own risks - especially if you get dodgy tenants.

Ltd_Company_advice

Yeah I don't really want to walk away from it because like you say it's madness! Eventually it will be worth enough to sell and make my money back and then just get rid of it.

I would have thought it would have as well. I was wondering whether any motgage company would negotiate with you if they found out you were renting it out rather than just repossessing immediately?

No you can't really extend it. They are purpose built flats. Yeah I need more room. I have 2 kids and my daughter is 2 now and she is having to share a room with us and well 4 people in a 2 bedroom place is a little bit cramped! lol.

The worst thing is if I sat on my !!!!! all day I would probably get a bigger house! lol.

Ltd_Company_advice

ACG wrote: »

If you walk away from the property - you may get your next mortgage if you get it through in time but you will not get a mortgage after that many years. They may even look to take your new house off you if there is enough equity in it...

How much is outstanding on the flat? Is it an interest only mortgage?

I suppose your on real option is to ask NRAM, if they say no then you have 2 options - sell and sort out a payment play with them for the outstanding amount or rent it out without consent - but that brings its own risks - especially if you get dodgy tenants.

Ok so I will forget about walking away. Just thought I would sound the idea out.

Around £140,000, You pay mostly interest for a long time! No it's a repayment mortgage but take ages to start dropping.

I will ring them on Monday and see if they can give me any kind of indication as to how likely NRAM would be to let me let it out.

Cornucopia

If you are prepared to go for a longer-term solution, remortgage now to a more mainstream lender, then after a reasonable period, ask for permission to let.

I am with Intelligent Finance (part of HBOS) and they made no stipulation about LTV when I got permission to let. (Although I was at about 75%, so they may have just accepted that).

Alternatively look into BTL mortgages.

And... you may be able to borrow your earnings multiple across multiple properties - so might be worth working through the figure to see how much you need.

Ltd_Company_advice

I'm moderately happy to keep it because I keep thinking to myself I will jsut keep it and once it has been paid off I will sell it and use the money for part of my pension.

The problem is I won't be able to remortgage with anyone because the LTV isn't enough, It's roughly 120% so no chance of getting a mortgage with anyone else! :-)

joolsybools

Ltd_Company_advice wrote: »

Yeah I don't really want to walk away from it because like you say it's madness! Eventually it will be worth enough to sell and make my money back and then just get rid of it.

I would have thought it would have as well. I was wondering whether any motgage company would negotiate with you if they found out you were renting it out rather than just repossessing immediately?

No you can't really extend it. They are purpose built flats. Yeah I need more room. I have 2 kids and my daughter is 2 now and she is having to share a room with us and well 4 people in a 2 bedroom place is a little bit cramped! lol.

The worst thing is if I sat on my !!!!! all day I would probably get a bigger house! lol.

Ok, so your 2 year old daughter is sleeping in your room...I guess this is the main issue.

How big are your 2 bedrooms, lounge and kitchen? Could you put up a partition wall in one of the rooms to split them up to two smaller rooms? It might mean a re-jig of how the flat is used - depends on the layout. If your daughter is only 2 she won't need much space and it could buy you a few more years of sanity

Just out of interest how much do you have saved? Could you change to an offset mortgage and get paid off quicker?

Finally, do you have lots of clutter? If so maybe having a really good clear out would make it feel less claustrophobic.

Thrugelmir

You'll repay less in the longer term if you use your savings to repay the mortgage.

While your property has fallen in value. So has the bigger property that you wish to purchase. As everything is relative.

There's no easy way of moving up the ladder. Than a disciplined approach to managing your money and paying down the mortgage.

Nor does renting the property give you a guaranteed return. Unless you are prepared to run a business and accept the risk as well as the potential reward. Then maybe not for you.