We need help!

Rav692000

Hi forum,

So I need some help and advice if possible.

About 8 years ago, we bought our house for roughly £249,000 (1st home as a married couple, but 2nd property for me in total, as I own a shop with my Dad which is currently on rent which is just covering the mortgage on it). We paid £40,000 as a deposit and got the mortgage with GMAC as interest only variable deal.

Needless to say, as the rate went up and up around 2008 onwards, we struggled, but never missed a payment.

As I understand, GMAC either sold all their contracts or were bought out by a company called Paratus AMC who now handles our mortgage account.

As the years passed, we continued paying our mortgage fees to Paratus AMC as interest only.

Since buying this lovely 3 bed house, we have been blessed with 2 beautiful children. My eldest (now 5) suffered from a rare skin disorder, so my wife opted to leave work and stay at home to look after him. Thank goodness, my daughter (now 1) is healthy and well.

It’s amazing how your perception on life changes when you have kids, and I’m sure any parent will tell you, your kids become the reason for paying bills, saving and working in life just so you can provide a better life for them.

Last week, we had an incident where 6 lads were causing trouble in my front garden whilst my kids were asleep, and during an altercation with myself, could have easily got into my house as I was outnumbered. Eventually, the Police came and the culprits were arrested for disturbing the peace. This incident was the icing on the cake as the crime in my area was clearly getting worse and worse since we moved in.

I called an estate agent round for a valuation of my property, and to our delight, was told that they could easily get £350,000 for our house in today’s market. Even at taking a lower offer for £340,000, we would still be happy.

I rang Paratus to ask what our situation was. I was told by them that they were just “managing the old GMAC accounts” and were unable to port the current mortgage to another property. Nor could they change me over to capital payments if required. The fees for coming out of our mortgage were minimal at just under £200 for repaying the rest of what we owed.

We found a great house we wanted for £350,000 in a low crime area, which was about 35 miles away. It’s safe for the kids and has a history of being low on crime.

So we have £90,000 to put down as a deposit ( we put aside about £20,000 for fees, and because of the distance from work, we thought it would be sensible to invest my old banger for a much more economical electric car) and was hoping to get a new mortgage on interest only… which I now know is not possible as no lenders give interest only mortgages.

With me earning £40,000 per year, and my wife staying at home looking after my son until January (where she returns back to work), stuck with a mortgage I have no give or take with… I’m stuck in an area that is not safe for my kids or wife. No mortgage company is giving me a second look because of our financial situation ( I realize I can only borrow 4 or 5 times my salary).

Despite I already have a mortgage, and have a fair amount of equity in it, and the fact that I can’t seem to switch to another lender that will give me an interest only mortgage, where do I stand? I feel kind of helpless at the moment.

I have only included the extra bits above just to explain our full situation, and am not looking for a sympathetic ear. I just need help and advice in plain simple English.

Any advice will be greatly appreciated.

GMS

Put bluntly you won't get interest only and you will fail affordability on your salary alone.


Why not sell and leave the area as you wish and rent for 6 months until the financial situation improves. Then you will be in a chain free position to buy and potentially negotiate the price accordingly?

Annisele

With a £90k deposit (plus fees), and a £40k salary, you want to buy a £350k house - which means you want to borrow 6.5 times salary. As you've discovered that's just not going to be possible.

Even if your lender would allow you to port, you'd technically be porting the rate not the mortgage. Ports do require a whole new mortgage application - so you'd probably still have the problem with your income.

To buy the £350k house, you either need more income or a larger deposit. Presumably you have some benefits, but I doubt they're enough to make up the income deficit - particularly with three dependants. Could you sell the shop, and use the money for more deposit? Or wait until your wife goes back to work? Or have her go back to work earlier? (Although that last one would increase your childcare costs, and that'd be taken into account).

Could you buy a cheaper house in the area you want to live in?

If you just want to move, you could sell your house and move into rented. I think I'd be quite reluctant to do that with young children, but it is possible.

Thrugelmir

Lower your expectations as to a future property.

Pure interest only mortgages are a thing of the past, as at the very least you'll need a repayment plan. So you'll most likely join the 97% of new mortgage applicants who now opt for a repayment mortgage.

You've been in the property 8 years and still owe £209k. In reality you've been saved by the low interest rates over the past 5 years. Without which you most likely would have sunk. If anything you've wasted the window of opportunity. As lenders are now basing new mortgage applications on 6% -7% interest rates.

If you wish to move you'll need to dig deep and make changes to your household budget now. To stand any chance in the future.

dimbo61

If you paid £249K for your home 8 years ago and put down £40K deposit then you owe about £209K and if is now worth £340/350K
You therefore have about £130/140K equity !
Stamp duty is 3% about £250K so £7,500 if you pay one pound over £250K
I would look for a property under £250K
Getting a £125/130K mortgage on £40K income might be possible.
This will be a repayment mortgage.

Dave_Ham

Aside from Dimbo's point which is clearly valid.

Are there any shared ownership alternatives where you are looking at, or a new build development where you could potentially use the help to buy 20%??

Rav692000

Thanks for all the replies guys...

My heart tells me we are in a good position right now, seeing the repayments are only £410 right now PM. So if I sell, and move into rented digs, I'd probably be paying much more just in rent?

New build? sounds like a good idea... don't you have to be a 1st time buyer to get that 5% deposit thing?