Can't increase above 40% SO mortgage - next plans

AliceBanned

Hi

I have made initial enquiries through a broker. My fixed rate morgage comes to an end in August. I own 40% of a SO properly, current full value around £180k but has been rising 10% for two years. I bought my share for £62k and the outstanding mortgage is £51k.

I have been refused further borrowing for staircasing today. I have around £10k debt as below and this is a major factor. Salary £31k and I have been in the same job for 7 years.

I have been trying to pay off the debt but some of this has been incurred due to me overstretching myself a bit on the purchase. I am not sure what to do next. My disposable income is low but it will increase when the fixed rate ends. I am paying £470 pm total in rent and service charge, to the HA which owns the other 60%.

It is disappointing but I know that if I tackle more of the debt I can probably borrow more. However prices are rising and with 40% equity I am wondering whether I am in danger of being priced out of the area in a few years. It will take me a few years to repay the debt.

I could come out of the market altogether and rent for a while, (before purchasing in a less desirable area, less desirable property 100% might be feasible). Could rent though for £500pm including council tax (current outgoings £1100 pm including rent, mortgage, council tax and bills). It is a depressing prospect as I am 47 and wonder whether that will put me in danger of being too old to get a mortgage later.

I will probably sell my car but will only get about £1200 for it, and perhaps sell my pushbike for about £350, and then just have a good stab at the debts. i have recently managed to get better deals on one balance transfer card and my current account..

Would appreciate some advice please..bit scared of making the wrong decision. I love my home but I have not much of a life due to low disposable income, and need to sort out the debts!

AliceBanned

PS I had about 5 £100 payday loans towards the end of last year - through a credit union at low interest. I have never defaulted on any of the debts or the payday loans, and all bills are up to date with no late payments. The broker thinks the debts are the reason I can't borrow more, though the lenders are factoring in the rent as an expenditure, when it would automatically reduce with me purchasing a bigger share. It seems a bit unfair as I am stuck in a rent trap even though I have paid a deposit and own some of the property!

andyfromotley

Hi Alice,

well in all fairness it sounds like your situation is ok tbh. You have a SO of a house you love. (giving this up sounds crackers to me) A decent salary and you are getting your debt under control.

I understand that you have low disposable income but this will pass. Once the debt goes you will be much better off. i know it seems like a long haul but it will go if you stick with it!

Have you considered a second part time job. This can make a huge difference to your income and of course it is ALL spare for debt repayment!

AliceBanned

Thanks Andy. It's hard struggling to make ends meet - I've been doing this since I moved in over 18 months ago. It gets to you after a while. I can't afford to go on holiday or socialise, or buy any clothes. Not if I want to make headway with the debts.


I have been thinking about maybe getting a Saturday job in a pub or something, as it will be sociable and bring me out of myself too.


It would be nice to have lenders look on me more favourably. I feel I'm working hard for very little in return. It's hard living alone too, financially. My salary has only recently been that good - I started on £24k in London 7 years ago..it's not great for my age, skills and qualifications so gets a bit demoralising. I worked extremely hard to get good appraisals and did way more than some people around me at work. Not all, but some seem to make progress and not be able to get basic things right. Then this news from the broker is really demoralising as I feel I'm trying hard but things just don't work.


I will still plug away at it but I am fighting depression and constantly trying to make things better, then just feel I get slapped in the face.

AliceBanned

Thanks for the words of encouragement anyway. It just hit me quite hard getting the rejection from all lenders. I know it's not personal lol but guess I'm under a lot of stress and working so hard at things, and then this.

andyfromotley

I am sure it seems like a slog!

But remember if the climb is this hard the view from the top must be fantastic!

ExpertAdvice

Hi Alicebanned, please clear your inbox.

AliceBanned

Hadn't noticed that! Have emptied it now. Thanks.

AliceBanned

I have just spoken to an estate agent - they had put marketing brochures in our letterboxes in the block today - the reason being a flat in the block went up for sale on Sunday, and had 7 viewings on Monday evening, and was sold at the full asking price of £190k by Wednesday. That flat was top floor with a loft but he said that wouldn't affect the value - it is just storage space. I am on the first floor. He said the demand greater for first and top floor and buyers are waiting.


My share value would be £76k and my remaining mortgage £51300 now. So I have a bit more equity. Good to know but frustrating that I can't buy a greater share instead of paying £400 rent pm! I think prices are rising fast in this area and it means I get more and more priced out of the other share. So I will have to pull out all the stops and try to pay off debts.


I have not had a valuation done and I gave an estimate of 70k to the mortgage broker I spoke to. I am sure I must somehow be able to add to my mortgage, even if so £30k. I can't understand it and will try elsewhere in July as my fixed term comes to an end in August. I think I should be able to borrow more this year, surely?!

AliceBanned

PS estate agent also said I did well to get in this block! It was much easier at the time and SO was not in demand like the others anyway. I don't think the SO aspect will be an obstacle at all. More apartments have been built a few hundred yards away and this seems to have increased demand rather than reduced it.


So this is why I am in such a dilemma - I know they are special flats in a special area, so much more pleasant to live in and very spacious. Just my income and outgoings are horrendous for now and it's making me wonder whether it is worth it. It probably is but it seem to be affecting me quite badly.

Trillain

Hi AliceBanned,
I have no great advice on how to deal with your debts, but instead offer a different perspective.
I have an SO property, I don't see the amount I pay as rent as being thrown away, I'm just paying it to the housing association instead of the bank in for the form of interest charges on a larger mortgage.
Presumable you would still need to pay service charges for living in a flat, if you deduct that from your rent is it roughly equivalent to the extra interest charges on the 90% mortgage you would need?
I have always focussed on reducing the mortgage by overpaying, I am five years in now and thinking about staircasing to 100%. Which despite the movements in the market I should be able to get an moortgage with an LTV of 60%, without a further deposit.
So if I were you I would focus on paying the debt down, then overpaying the mortgage, then staircasing.
Also you sound pretty unhappy in your job, have you though about updating your CV and having a look for something better?