negative equity and interest only secured loan

skint98

hi I've never posted on here before but wondered if anyone has had a similar experience and could share any advice. We bought our house 7 years ago with a 95% mortgage and unsecured loan to make it up to 100% from northern rock (not a great idea I admit) then very stupidly got another secured loan from northern rock to make home improvements. Looking back I have no idea how we managed to get so much money from them as the house has never been worth what we owe on it but we were stupid enough to take it and are certainly paying the price now. Since then the house is now in approx. £30,000 negative equity and due to unforeseen circumstances our income has dropped significantly and we can now only afford to pay interest only. The main worry is that we only have 4years left on the secured loan and still owe £27,000. I spoke to NRAM who have said that it would cost another £500 a month to go to repayment which we can't afford and I am unable to increase the term to pay it back as that would mean taking out a new loan and they only deal with existing loans. Due to our income we could probably only afford approx. £150 a month more than we are currently paying. Does anyone know if any other providers would give us a secured loan to pay off nram with the house being in negative equity or are we heading for a disaster come the end of the loan term? Thanks for reading and hopefully someone will be able to give us some advice.

ACG

Secured loans you would struggle to get anything above 85-90% ltv, and at 90% the rates/fees are not too great (15-20%). They would also have to be on repayment.

I would like to say there are alternatives but i think you are going to struggle to get out of this if NRAM are not prepared to come to some sort of agreement.

skint98

Thanks for your reply. The mortgage itself is ok as was taken over a long period with still over 25years left so plenty time to worry about making repayments later down the line. Its the extra secured loan. It was for 30k over 10yrs. Not long into it our circumstances changed so its all now interest only. Would i be able to keep the interest only mortgage with nram & get a secured loan from elsewhere to pay the other secured loan of 27k before it runs out in 4yrs or would no one touch us because of the negative equity?

ACG

You wouldnt be able to get a secured loan i dont think (i only say think as i have done less than 10 secured loans in my life, im not an expert).

Effectively there is nothing to secure it against as the house is in negative equity. You may be able to get just a normal loan - the likes of tesco, sainsburys always seem to be pretty competitive on price although i have no idea what their criteria would be. But im not sure they would do the amount you need - it would also be on repayment.

silvercar

Would i be able to keep the interest only mortgage with nram & get a secured loan from elsewhere to pay the other secured loan of 27k

In theory only.

In practice, you are paying only interest and no-one is going to take you on that basis. Better to carry on paying interest only and think what you will do in 4 years time.

Also think what NRAM will do. You have no money to repay, they would not get their money back if they repossessed, so they have limited options.

I don't know if anyone has been in similar circumstances and can predict NRAMs actions, but I can't see what they can do that doesn't cause them losses. The worst thing they can do is repossess or force you to a situation where you walk away from house and loan as that leaves them with a shortfall - unless that is a desirable outcome in terms of removing you from their books.

Thrugelmir

It's difficult to say what NRAM's policy will be in 4 years time. So better to focus on what you can do to aid your cause when it comes to negotiation. You could at least show good intent by using the £150 to start to reduce the secured loan debt. Maybe seem a smalll token, however a step in the right direction.

Also suggest you pay a visit to the Debt Free Wannabe board. Plenty of support and advice on there as to how to manage financially on very little.

skint98

Thanks to you all for the advice. I think paying the extra £150 a month (or as much as I can afford) may be the best option at the moment and hope that as time goes on I will be able to negotiate with NRAM to increase the term on the secured loan. I doubt we would get a loan from anyone else for the amount we require. Thanks for taking the time to reply.