NRAM Together Mortgage - Fight or Flight?

Thifttaker

I hoping some smart forumites could be able to offer their advice to my current situation, I'll be a brief but detailed as I can.

Together Mortgage:-
Total: £118,500
Mortgage: £101,500
Secured Loan: £17,000
Rate: 4.78%
Mortgage Monthly Charge: £470

Flat value: £93K-£100K
Lease: 68 years
Service Monthly Charge: £160

The mortgage is currently interest only and the reason for the huge % negative equity is due to a large unforeseen service charge bill coming for the Free holders which would have put me into bankruptcy but NRAM agreed to add it to the mortgage rather than let that happen.

I'm looking for advice on what I should be working towards as this flat doesn't suit our needs (it's a small 1 bed away from work and family). It is currently being rented out at £500pm

Option 1.
Move to repayment mortgage (£628pm)
Save towards purchasing the lease (approximately £7K)
Sell property
Deal with unsecured part of mortgage at 12.78%

Option 2.
Move to repayment mortgage (£628pm)
Try and sell property
Deal with unsecured part of mortgage at 12.78%

Option 3
Move to repayment mortgage (£628pm)
Make £800 over payments a month
Build up equity and keep renting it out

We want to get rid of it as soon as possible as it's just a drain on us. We seem to get a bill every 6 months asking for more work to be done. However I don't want to do make a decision such as selling without looking at the alternatives.

Any advice any one can offer would be appreciated?

Thrugelmir

If you can afford to make overpayments on the secured loan element asap. Rather than make the mortgage repayment. At some point you'll need to address the negative equity and reverting to a rate that's over 12% isn't very palatable.


At £500 monthly rental the flat is never going to pay it's way. So selling it does seem the best option.

Thifttaker

Thank you for the advice.

That's what I was thinking - Try and pay off the loan as that's the risk as we are trying to sell asap.

The lease is a concern but then I guess only if we plan to be there a while. We have a note from the freeholder on the price of extending and the estate agent has advised just to take it off the list price.

silvercar

Thifttaker wrote: »

Thank you for the advice.

That's what I was thinking - Try and pay off the load as that's the risk as we are trying to sell asap.

The lease is a concern but then I guess only if we plan to be there a while. We have a note from the freeholder on the price of extending and the estate agent has advised just to take it off the list price.

Normally you would sell and extend the lease at the same time and use some of the proceeds of the sale to pay for the lease extension. That is generally judged to give you a better overall price than selling with a short lease. But you can't do that because you need to clear the mortgage (secured part) from the proceeds of the sale.

Thifttaker

silvercar wrote: »

Normally you would sell and extend the lease at the same time and use some of the proceeds of the sale to pay for the lease extension. That is generally judged to give you a better overall price than selling with a short lease. But you can't do that because you need to clear the mortgage (secured part) from the proceeds of the sale.

That is the predicament we are in. Factor in trying to sell whilst keeping a tenant happy and we aren't in a great position. Either way we stand to lose a lot of money, it's just sitting down and working out what makes sense over how long.

Sell now - take the hit and see if NRAM will take a one off payment for the final cost. (approx £15K-£20K)

or

Sell later - buy the lease and try and get more from it having built up a bit of equity (£10K-£15K + £8K lease extension)

or

Don't sell - take the monthly deficit (£300pm), extend the lease when we can, hope that house prices recover and hope no more "surprise service charges" come along.

I appreciate this isn't as bad as some people on the forum but it's still not great reading.