Help regarding delinking nram loan

Wren123

Hi all

This is my first post so apologies if it's in the wrong place or doesn't make sense.

We have a nram mortgage 87500 outstanding and a unsecured loan 23500

Our property is valued at 125000 and we have put it on the market and nram have written to us 'advising we can delinking. My first question is - can they go back on this decision once we have an offer on our property? I think the together mortgage has made me paranoid!?

Our plan is to delink and pocket the possible 37500 (we realise it is likely to be less taking in to consideration lower offer and estate agent fees / solicitors but for the sake of an example)
Then pay off all unsecured higher interest credit card debt totalling 9000 leaving us debt free except the 23500. With the remaining say 25000 approx after fees we would pay 5000 off the unsecured loan then rent for 6-12 months whilst over paying the loan by 300 pound a month.
The idea is that we will still hold a substantial deposit of 20000 and also improve our credit rating by clearing the 9000 credit card debt and reduce the unsecured to about 15000. All being well at some point we would apply for a lower rate loan and eventually a new mortgage. Both our credit ratings currently stand at FAIR therefore applying for a new mortgage / loan straight after our house sale may hinder us.

Does anyone know whether we would be any worse off with a mortgage application by choosing to sell our property then rent for 12 months and apply for a mortgage or does it not matter?

I hope this all makes sense and my questions are clear!

Thanks in advance for any replies

Westminster

Just to point out - as you didn't mention it in your post so perhaps haven't factored it in - but I believe the unsecured loan interest rate jumps quite considerably once you 'de-link'.

Depending on when you took your mortgage out, the interest on the delinked part will be SVR (4.79% currently) plus 3%, 5% or 8%

Wren123

Thanks Westminster yes we are aware and will live with it until we can apply for a lower rate our payments will be 280 a month when De linked but because we will have no other higher interest debt we will be able to pay 560 or so a month off the loan. Thanks for the reply

silvercar

Sounds like a well thought out plan of action.

Westminster

Agreed - sounds a sensible plan.

As a quick 'back of a fag packet' calculation, you will also want to factor in at best a 1% estate agency fee + VAT = £1620 and possibly as much as £1000 for the legal fees.

Wren123

Great thanks guys Ithink seemed to work in my head. Our estate agent has offered us a flat rate 1000 plus vat and 480 solicitor plus vat so aware if that

Thrugelmir

If you are not home owners at the time of application then obtaining an unsecured loan at a good rate of interest may be an issue.

The unsecured debt may potentially hinder your mortgage application.

Best to net off debt from savings. Rather than treat the money as being held in separate pots.

Clearing your debts totally and starting afresh with a clean state. Is worth serious consideration.

TrickyDicky101

Well, personally I'd pay off the debt in full and save the £560 pm freed up towards a new deposit.

Why pay interest on a loan if you don't have to?

amnblog

The unsecured loan was never 'secured' on your property, that is the point.

[therefore 'allowing' you to delink is a misnomer]

NR conditioned these loans to rise considerably in interest rate if the main Northern Rock (secured) mortgage were repaid.


The text in your offer would say something like this:


Unsecured borrowing

An unsecured loan of up to £19,500.00 is also available with this mortgage. The interest rate for the unsecured borrowing is the same as that charged for the secured mortgage.

The monthly payment for this unsecured loan is £124.34.

The APR for the unsecured borrowing is 6.5%.
On this basis, your total monthly mortgage payment on a total loan of £195,720.00 will be £985.07.

There are no Early Repayment Charges for this unsecured borrowing. However, if the secured mortgage is transferred to another Northern Rock product or repaid in full, the rate of interest charged for the unsecured loan will increase to 5.00% above the current standard variable rate for mortgages. This would make the interest rate payable 11 .59% based on current interest rates.

This additional feature is not regulated by the Financial Services Authority, but is regulated under the Consumer Credit Act 1974. You will receive a "Pre-contract Information" document with this additional feature, describing the detailed terms on which this feature is available.