Mortgage help - At end of my tether

Bollard

I hope you helpful forumites can help me with this depressing dilemma I face.

I am currently 43 years old and find myself in a very frustrating financial position.

Let me explain. Through two periods of unemployment, I have managed to rack up a lot of credit card debt. I did the usual ignore it and hope that it will go away, until reading this forum prompted me to start a debt management plan.

This I started in Nov 2011. I pay £924 per/month and the arrears as at the beginning of this month is circa £59k. All of the credit cards apart from two Barclaycard ones (who charge a negligible 3% p.a) have stopped charging interest and the accounts are what I think is called default mode. As it stands the debt will be cleared by Jan 2019.

I have a mortgage of £217k, where I only pay the interest, which amounts to a payment of approx £490 a month.

I earn 44k a year and my partner holding down three adminstration jobs takes home roughly 13k.

I HAVE saved for a rainy day, but unfortunately they are in pensions. I have two, my main pension from where I worked for 20 years, has a transfer value of £430k and an AVC pension which I took out when I was 21 is now valued at £80k.

I was very fortunate to buy a property in a run down area of London 15 years ago, which is now worth in the region of £950k to £1m.

But I find myself despite this seemingly healthy financial position struggling to make ends meet at the end of every month. We don't run a car and live exceedingly frugally.

In an ideal world I would simply cash out my additional pension and clear my credit card debt and right there my financial woes would be lessened.

I have been in work for three years now and finally though that this security would mean that I could borrow an extra £40k from my mortgage provider. The plan with the £40k if I got it, was to ask the relevant credit card companies what they would take to settle the accounts. This seems to be in the region of 2/3rds of the £60k owed. Meaning that the £40k would be enough to to clear all the credit card debts and see my outgoings reduced by the £924 a month I pay to the Debt Management Plan.

I went to the Nationwide to borrow the extra £40k over say 20-25 years, but despite the fact that it would significantly reduce my monthly outgoings, so in terms of affordibility there was no problem, the rigid 3.8 multiple that they worked on a joint mortgage and one dependant, ruled them out from any lending.

This is extremely frustrating. I understand that banking is a business, but this seemed like a transaction that made sense from both parties. I have a huge amount of collateral in the case of future problems, while the Nationwide would keep me as a customer AND make extra money on the additional £40k. It really is frustrating that the government allows these financial institutions to borrow for next to nothing and then they cannot pass it on, due to such rigid thinking.

As I said I am at the end of my tether and starting to slump into the depression that blighted me through my 20's.

Any advice on what I can do to help alleviate this stress will be gratefully received and I appreciate your patience for reading this lengthy thread.

Cheers
Mark

John1993_2

From what you've written one solution is to sell your property, use the equity to pay off your debts entirely, and then buy something for less money.

Finding ways to borrow extra against it is not going to make your life any easier, but freeing up what is quite a windfall would.

If you are going to insist on living in a £1m property, with debts that you are struggling to service, then I think that you are going to have the best part of another decade of not having much fun.

I'm not sure what sort of thing you have for £1m, but even half of that will still get you a very nice two bedroom penthouse flat near Canary Wharf, as long as you don't want one of the more prestigious developments. It'll also get you a nice three bedroom property in a nice part of the Isle of Dogs, near Victoria Park, near the Olympic Stadium etc.

Edited to add, you are rich, so I'm a bit surprised that a lender will happily knock £20,000 off your debts to them. Do they know your full financial situation?

GMS

Have a chat with a broker.

Not one for the high street banks this.

I assume you are on a great rate with the Nationwide mortgage?

May be possible to borrow to repay the debt management plan and reduce monthly outgoings.

Good luck

Cornucopia

I agree with both of the above. Selling must be an option with that kind of property value. If not, there will be a niche lender somewhere who will happily give you the extra funds on the basis of such a solid LTV.

Have you considered just selling up and retiring? (Joke).

edit: Google for free mortgage brokers. They will at least give you an idea of do-ability without costing you anything.

Also, have you considered Let-to-Buy? You can raise capital on your present home and let it out (which for that kind of property will be for a substantial amount). Some lenders do not consider/require your personal income on this kind of loan. You then buy something outright with the capital raised, and have a nice additional income each month.

Road_Hog

Mortgage broker. They can usually help in this sort of case, and avoid you having to pay high rates.

I've been there (not in the debt thing), helped me out when the high st lenders were playing silly buggers.

ACG

I dont want this to come across rude but i tend to say whats on my mind, i dont really believe in buttering things up...

How on earth you ended up on a payment plan with all of these assets is beyond me. Sit down with a professional (mortgage/financial advisor) look at releasing/selling some of the money to sort out your issues.

Selling the one property alone would probably allow you to clear your debts, and have a healthy sum in the bank and still keep your pensions.

Thrugelmir

Bollard wrote: »

But I find myself despite this seemingly healthy financial position struggling to make ends meet at the end of every month.

Stop kidding yourself. Your only liquid asset is the property. Sell it and sort your financial affairs. As you appear to have had no control over your personal finances at all. You've had a stroke of luck which means you'll walk away with something. Many people aren't as fortunate as yourselves.

Dave_Ham

With this much equity, there will always be a solution.

The better the broker, likely the better terms you will achieve.

Incidentally, there is no way with a Debt Management Plan you would have passed Nationwide's credit score let alone the affordability.

Good luck