End of Interest Only Mortgage

Pepsi1000

What are the options? In 5 years time my home mortgage comes to an end. I have a number of buy to let properties that are intended to pay off most of it along with small overpayments between now and then from regular income. My fear is that I may be £150,000-£200,000 short. This will represent approximately 20% of the loan to value at todays prices. I was hoping to remortgage at that point for the lower figure based on the fact that I am younger than my husband and it is his age that is determining the 5 year deadline. However my credit rating is naff for a number of reasons and I am not able to rectify this fully in time. Based on the assumption that my credit rating will be poor and that I will be 20% short of my repayment - what are the options? Will I be able to remortgage? Or will I have to sell? If remortgaging is possible, which companies are the most likely to take a personal approach based on solid information and talking to me, rather than computerised credit scores alone? Thank you.

ACG

What bad credit do you have?
At 20% LTV it would need to be beyond anything i have ever seen to not be able to get a mortgage.

Pepsi1000

That is interesting. Thanks. Maybe there is hope! I had to go overseas when I had high debt levels and to cut a long story short main problem is that I missed payments (post went astray for months) and ended up with a lot of payments that went into default. I am now back and have agreed amounts to pay on them each month and am doing so without a problem and don't foresee a problem going forward, no interest is being requested but I have a tricky balance of whether to use my cash each month to clear the debts on these payments so in 5 years they are clear completely OR pay off my mortgage as much as possible to reduce it. I can't do both. Appreciate your advice. Thanks.

ACG

Is it a debt management plan or did you come up with payment plans afterspeaking to the companies?

Pepsi1000

In each case I have spoken to the company and agreed payments between them and me. No third party advice ever given. I have never been to debt counselling or anything similar. I actually am financially astute but for various reasons got into this mess (mainly to do with a husband who has mental health issues and having to then leave the country to sort things out).

Each company seems happy that I am now paying regularly and debts are reducing. They keep offering reduced rates to settle but I understand that if I do that my credit record will show that the debt was never paid in full so I am trying to resist doing that now (is that the best route?)

1. Do you think that it is better to reduce these debts first (currently £127000) and leave mortgage balance higher (current figure is £439000) so that at point of needing a mortgage extension I just have the mortgage but it will be around 40-50% LTV

or

2. Is it better to focus on minimum payments from other debt (there is no interest being added) and work to reduce mortgage balance to around 20% LTV?

I very much appreciate your advice and if you are a properly registered mortgage broker I would value your contact details.

I am at least looking 5 years ahead - this is not immediate.

Many thanks.

ACG

Which is the best option will depend on how it appears on your credit report.

If it is showing month after month of defaults - then it would probably be better to clear those debts sooner rather than later.

I will send you a PM with my contact details.

Pepsi1000

Many thanks. I have received your message and will be in touch. Very much appreciate your responses.

getmore4less

What does the full asset list look like?

What does the debt situation look like including any debts on the BTL.

If the BTL portfolio is profitable 5 years is a long time for the asset values to change.

Thrugelmir

Having debts under an Arrangement To Pay will score heavily against you. Surprised that lenders have agreed to freezing of interest under a voluntary arrangement. Will make obtaining a new mortgage in 5 years time very difficult.

Appears that you are highly leveraged. So future rises in interest rates won't assist your cause. Potentially totally the reverse. You need to sit down and review the best way of exiting your current situation. Perhaps with asset sales to clear unsecured debt. Thereby giving you an opportunity to rebuild your credit rating. Well before you seek a new mortgage.

Pepsi1000

Thanks everyone for responses. I have just taken the plunge and accessed my credit report which was surprisingly not as bad as I had anticipated. Don't get me wrong - not good - but score was 862 (Experian). With 5 years of reducing debt including paying off defaulted accounts and reducing mortgage balance to around 25% LTV, does it look realistic that I might be able to get a mortgage in around 5 years time? Appreciate all responses.

Thrugelmir

Credit score is irrelevant. What matters is how lenders assess you.

You have 5 years to turn things around. So making the right long term decisions is critical.