Help wanted

NewGirl

Hi all

I am in a bit of a situation and was hoping some of you might be able to give me some friendly advice. If you manage to make it to the end of my post then thank you

Apologies if this is not the right section of the forum!

A few years ago I bought a property with a deposit booster. It is some sort of shared equity type thing provided by the builders. I don't pay rent on this portion, however, when I sell I have to pay them the 25% loan back based on the 'current value'. Now I don't know how they calculate this - maybe it is their idea of what the value is. They were very vague at the time and I was naive.

The property was bought for £110,000 but based on my research it is probably only worth around £90,000 now.

I really want to sell soon and buy elsewhere.

Now the tricky bit. I moved away from the area for another job and a friend is staying in the property - I cannot officially rent the property due to the loan.

My fixed rate ends at the end of the year and I had thought about trying to pay down some of the loan and signing up for a 4 yr fixed deal at 2%. However, I don't think I will be able to as they will know I don't live in the area and cannot be living there. Repayment of the builder loan would be required in order to get a landlord mortgage which I cannot afford and would not have a high enough LTV for this anyway.

I know this is not right of me to do this but I had to move and I was not in a position to repay the loan and change my mortgage and I cannot afford to sell... I didn't have the savings that would let me sell

My other financial info:
Loan: £6,000 outstanding (4.6%)
Mortgage: £74,000
Loan from builder: 25%
Savings: £8,000 (5% for first £2,000 and then 1.5%)

I guess my question is how I should proceed:

Is signing up to a new fixed rate definitely out of the window?
Do I use the savings to pay down the mortgage and save like mad so that I can overpay when the fix ends and I go onto the 4% svr. I can overpay 10% without penalty during my fixed period
Do I hold onto the savings in case I do end up in a position to sell as I'll need it to repay the difference in the mortgage, and also for a new deposit.
Or I could just pay off the loan and use the extra money each month to overpay my mortgage.

I'm sorry if this makes no sense.

I have definitely learned my lesson about house buying

libf

The builders can't make up a value, you will pay them 25% of the sale price, which will be a guided by an appraisal before you sell.

So if you have a £74k mortgage on a £90k property then you have £16k in equity, 25% of which will go to the builder. That leaves you with £12k minus EA and solicitors fees, so let's say £10k.

Is £18k about enough for a deposit and fees on a property where you now want to live?

There are early repayment charges on fixes, so if you're wanting to sell then it's probably not the best idea. Maybe a tracker for a short period with the current lender if you want to avoid SVR at the moment?

NewGirl

Hi libf

Thanks for your reply. I don't quite understand your calculations though, I think I am in negative equity really.

If I sell for £90,000 then:
Sale price £90,000
Minus 25% to builder £22,500
Minus mortgage £74,000
So I would need £6,500 plus fees to afford to sell, is that right?