few questions

mattblue

In a little bit of a pickle at the moment and was wondering if someone could share some advise with me.

My dad and I have a joint mortgage (153k) on the property - would it be possible to split the mortgage 50 / 50 - ie 76500 dad 76500 me.

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Dad is soon to have defaults in his name, as hes had to use payplan, they will remain unsettled......if we sold the house and the defaults still remained unsettled would he get a mortgage in say 18 months time for a new property??

Thanks

mattblue

anyone please?

MarkyMarkD

Two points:

(1) You are jointly and severally liable for the mortgage. So you can't split it 50:50 as you propose - you are both liable for the full amount.

(2) If you are selling up, why can't your Dad clear his debts? Is there no equity in the property? If it's possible to clear the debts it is definitely going to make getting a future mortgage easier for him. Unsettled defaults don't look good to any future lender. Why even get to the default stage if selling the property is an option? Can you not borrow money against the property in the short-term to clear debts rather than defaulting?

I'm just throwing ideas out because at the moment there is insufficient information to give a full response.

mattblue

thanks fro the reply,

the house is worth around £180-£190k - my father has roughly £32k worth of credit cards.

Selling is an option however the selling market in the area has fallen flat on its a**e and to be honest ive not seen many properties sell in the area. I live in vv quiet area - school 100 yards motorway 1 minute...really cant understand why its gone dead.

my dad was/might be going down the route of a debt management plan(payplan), as he does not have the money to cover the credit cards. naturally this will default his credit cards.

now if we get the base figure for the house and cleared dads debts, we would not have any deposit for a new property, (wed look at £140k to £150k house) and end up asking for a 100% mortgage... just really not sure it would work...ages, dad 59 im 29 wages between us is £45k before tax

thanks

mattblue

again anyone able to help please?

thanks

MarkyMarkD

On £45k of income, you can very easily get a £140k-£150k 100% mortgage, bearing in mind that by selling up you'd clear all of the debts. (This is assuming that you would let you Dad have the necessary money to clear the debts as not all the equity is actually his).

You can go beyond 100% up to 125% with at least 3 lenders now (Northern Rock, A&L, Birmingham Midshires).

Personally, this seems like a way better solution than getting into default territory when it's avoidable.

Can you (jointly) keep things going on the credit cards until you sell the house?

homer_j_3

if the house is worth 180-190k - You have 153k mortgage. With the 32k debt your father owes this will give you a total debt of £185k.

A joint income of 45k will mean that you could probably get a 100% mortgage on your current property if it values up at the price you have quoted.

The considerations you need to bear in mind are:

1 You will be securing debt against your property which will would not have been secured otherwise. You are therefore putting your home at risk even further.

2 You will probably be able to put your situation right within 8 weeks this way where as selling could take a lot longer - this could affect your dads credit rating.

3 You will have selling and buying fees with moving property that will need to be considered - (approx, £1500 legals, £2-3k estate agency fees, £1500 stamp duy, £200-600 survey fee on new property, lender arrangement fees)

4 Your fathers age will mean that his normal income will stop in 6 years time so you need to work out whether the debt can be serviced at that point - does your dad have a private pension or will he just get state pension.

5 Selling will get rid of the debt and you will have a smaller mortgage and smaller repayment.

6 Credit cards do not get cancelled so you will need to ensure that these accounts are closed down.

As you can see there are pro's and cons to both buying and selling and there are some important areas that you need to consider. I would stress that you need to look post retirement for your dad and not think short term as you will just be delaying the inevitable otherwise.

How is the joint income split?

MarkyMarkD

Very good points, homer.

I suppose I was ruling out remortgaging up, as it doesn't sort out the original problem very effectively - it doesn't reduce the total debt and raises the risk that it's only a short-term fix.

mattblue

the joint income is split 23k me 22k my dad, im not too worried regards to dad when he retires as he has a very large private pension + ill still be paying into the house after hes retired and also he'll get his state pension, its annoying at the moment (when we need the money) with the private pension as its just sitting there !

We are going to put the house on the market and clear the debts that way -I feel by doing this, it leaves myself and my father both debt free (with excpetion to a mortgage)

Dad in the meantime has to go down the route of a dmp with payplan as basically hes not got the £500 extra that is needed to pay the minimum on his credit cards....

with regards to a new mortgage new house, dad will naturally get defaulted on the cc's by going down the route of dmp.... but will we still be able to get a mortgage based on the incomes ?

the house we would look to purchase would be between £130k and £150k ?

Thanks

mattblue

anyone please ?

Harvey's_Dad

mattblue wrote: »

im not too worried regards to dad when he retires as he has a very large private pension

Hi matt,

What type of private pension does your dad have? Presuming it's a money purchase scheme and he is over 50, he should be able to take the 25% pension commencement lump sum (previously called the tax free lump sum) immediately.