Negative Equity problems

debtfreeby35?

Hi,

Just a brief one really:

Mortgage currently about £98K left to pay, property worth about £85K at last valuation. Joint mortgage with sister, I have bad credit (recently became debt free, hooray!) - is there anything we can do regarding re-mortgaging?

As I see it there are two issues: the negative equity & my bad credit.

Thoughts?

TrickyDicky101

Have you asked your current lender what customer retention products they offer?

stephenni1971

Why do you have to remortgage?

debtfreeby35?

Current lender is NRAM and they are unable to offer anything in the way of new lending. I wanted to remortgage to get a cheaper monthly payment

kingstreet

Your remortgage options are nil until you have at least 10% equity in the property, I'm afraid.

debtfreeby35?

Thanks Kingstreet, that was pretty much what I expected. I have more questions regarding my mortgage which I shall post in a new thread shortly.

kingstreet

You might as well continue in this one, if it's about this mortgage.

Staying in the same thread helps people to see what's gone before. When people start multiple threads, the continuity is lost and important facts can be missed.

debtfreeby35?

Sure thing.

My mortgage is split into three parts: Repayment, Interest Only and an unsecured loan. I'm going to start overpaying and my question is simply this: which part of the mortgage should I attack first?

Outstanding amounts are:
Repayment: £32754
Interest Only: £56980
Unsecured Loan: £8658

Mortgage payment is £477 a month with £68.10 going towards the unsecured loan per month (200 & 226 to the other parts respectively).

I am leaning towards putting an extra £200 a month to the unsecured loan to reduce that massively before putting the house on the market and selling it at 20K less than we paid for it. In my mind, that way at least when we sell we won't be taking any personal debt away with us.

Devastated at losing out on what people usually say is a sure investment i.e. property.

pinkteapot

debtfreeby35? wrote: »

I am leaning towards putting an extra £200 a month to the unsecured loan to reduce that massively before putting the house on the market and selling it at 20K less than we paid for it. In my mind, that way at least when we sell we won't be taking any personal debt away with us.

Firstly, congratulations on your debt reduction so far (looking at your signature).

If you plan to pay off the whole mortgage when you sell, it doesn't make a difference which part you overpay. If you overpay the loan, you can use the sale proceeds to pay off the other two mortgage parts. If you overpay the mortgage, the sale proceeds will pay off the smaller mortgage and the loan.

You will have to pay off the whole mortgage (interest only and repayment bits) when you sell. If the proceeds after estate agent and solicitor fees don't cover it then you'll have to have savings ready.

NRAM may let you keep the unsecured loan bit as a separate loan afterwards if you need to but speak to them.

ViolaLass

What arw the interest rates on the three parts?

kingstreet

Should be 4.78% on all borrowings.