NRAM new All Monies Charge

christhomas1966

Hi Everyone

I have 3 buy-to-let, interest only, mortgages with NRAM which I took out between 2004-2006 with Northern Rock as was.

NRAM have been encouraging customers to leave and take mortgages with other lenders for some time now. As two of my properties have very short leases 42 and 40.5 years I thought now would be an ideal time to sell one of my properties and use the profit to extend the leases on the other two and ultimately sell those or re-mortgage.

I have an offer on the property in question, so great news so far.
But I had the shock of my life today when I received via my solicitor the redemption letter from NRAM.
The balance on the property is £162,000 (which I am aware of) but they are requiring this payment plus £21,595!!!

In the redemption letter NRAM state:

"...if the customer wants to pay off one other accounts with us, we have the right to retain our mortgage in respect of that property as security for the total debt owed by the customer....

"As an alternative to help reduce the customers portfolio debt with us, we are willing to consider not Apply our All Monies Charge in full on this occasion provided that they pay the £162,000 and repay an additional £21,595.74"

None of my mortgages with NRAM are in arrears , in fact I overpay by approx. £30 to £100 each month.

A year and a half ago I tried to sell the same property, but the sale fell through, but that time NRAM did not have any extra charges and just wanted the normal redemption value on completion.

There is no indication of how this figure has been worked out nor what they will do with the funds. Will they split it and pay off some of both mortgages, keep it in some sort of holding account? As this is technically a big overpayment could I stop paying off each mortgage for a year?

The letter has come from their Commercial Buy-to-Let department. When I first used Northern Rock I thought Commercial mortgages were for those with 5 properties or more. I do not have a 'commercial' mortgage.

I have written to NRAM today to ask them to clarify this charge.

Has anyone else experience these charges?

Best regards
Chris

Thrugelmir

christhomas1966 wrote: »

I do not have a 'commercial' mortgage.

You have 3 buy to let mortgages and are running a business.

If you are selling one property then why not take the opportunity to remortgage to a new lender.

NRAM have been encouraging customers to leave and take mortgages with other lenders for some time now.

NRAM is running down the closed mortgage lending books of Bradford and Bingley and Northern Rock to repay the monies lent by the Treasury. In doing so is ensuring that UK taxpayers do not pick up the tab.

christhomas1966

Hi Thrugelmir thanks for the post

Sorry if I was not clear in my post. 2 of my properties have short leases so are unmortgageable unless I extend the leases. This why I am selling the other property to release funds to do this and then look to re-mortgage or sell them.

Running a business? Originally with Northern Rock you only dealt with the Commercial team if you had over 5 buy-to-lets i.e. a large portfolio and got preferential rates and I assume other perks and it was a full-time business.

I have no problem with NRam running down their mortgage business, UK taxpayers have bailed them out once already.

My question was if anyone has had the same experience as me, someone who manages their repayments properly but is in effect having an unecessary arbitrary charge on their mortgage redemption statement (when all my properties have good equity).
I would understand the situations if I was in arrears/a bad payer or in negative equity but I am the opposite of this.

All the charge does is make it harder for me to extend the leases and remortgage.

silvercar

You need to find out where the arbitrage charge will go. Worst case is that it is a charge and you don't see a penny of it.

Your other option is to start the paperwork to extend the lease on one or both of the short lease properties, with the payment to extend the lease coming from the buyer. The new longer lease is then completed at the same time as the purchase.

I have seen, in the paperwork for a mortgage, that the security given ie the charge on that property can be used by the bank as security for any other loans you may have with the same company. Seems that is what has happened here, so the bank are not prepared to release the one property without their stake in the others being reduced or removed.

Thrugelmir

christhomas1966 wrote: »

Running a business? Originally with Northern Rock you only dealt with the Commercial team if you had over 5 buy-to-lets i.e. a large portfolio and got preferential rates and I assume other perks and it was a full-time business.

By way of a generic answer. I wouldn't be surprised if NRAM has seen instances disposal of the better properties in a portfolio and been left with the crud. Neither of the lenders were renowned for the let's say the quality of their underwriting and risk management.

As Silvercar has suggested bundle everything up together. Disposal, lease extensions etc. Presented as a costed plan NRAM may listen to you.

christhomas1966

Thanks silvercar

I'll be interested to hear Ram's take on this (and why they did not do the same when I tried to sell the property 1.5 years ago). Maybe the charge is negotiable.

I have looked into the extending of leases on completion but from talking to local estate agents and seeing what's happening to neighbouring properties in the same block those with lease extensions are flying off the estate agents books whereas those with the short leases are sticking. So to maximise my eventual profit I really want to extend the leases first and then look to sell.

Also, I have not mentioned these properties are in S. London and the cost of each lease extensions will be approx. £60k each. I was hoping for the profit of my sale to be £120k roughly to cover this.

Possibly when all this s explained to NRam net week they may look more favourably at the situation. They may have made a mistake?!?

Typhoon2000

What LTV were the original properties bought at and what will the two remain properties LTV be after this sale. With Mortgage Expres ( also part of NRAM) they don't apply the clause if the remain properties are low LTV. Otherwise proceeds from the sale are used to reduce the debt on the remain properties.
I guess this rule is to prevent landlords seliing the property with plenty of equity, keeping the money and leaving the lender with properties with low/ negative equity as security.
If you has the finances your could pay off the property you wish to sell by paying down the property by over payments and one of payments so the mortgage is paid off early. Then you would be free to sell and retain all monies from the sale.

christhomas1966

Thanks Typhoon

The original LTVs on these buy-to-lets were 80%.

The property I am selling now would have a LTV of approximately 55%.
The other two, if they has their leases extended would have LTVs of approx 50%, but currently without the leases and with a favourable cash buyer, if I was lucky an LTV of 65%.

My issue of frustration is that I want to sell the first property to be able to extend the leases on the other two and it seems that NRam's use of the All Monies Clause on this occasion is working against us, as I will probably have to bite the bullet with the £21k charge and it will take me longer to extend the leases on the other two properties.

It would take me quite some time to pay off the mortgage earlier on property no.1. Also as the lease gets events shorter on the other two properties my freeholder:The Dulwich Estate (that's another story...) can ramp up the leasehold extension charges.

AnotherJoe

Is there any way you can get a bridging lon to extend the lease and Thus enable you to sell ?

that must cost substantially less than £21k.

silvercar

I have looked into the extending of leases on completion but from talking to local estate agents and seeing what's happening to neighbouring properties in the same block those with lease extensions are flying off the estate agents books whereas those with the short leases are sticking. So to maximise my eventual profit I really want to extend the leases first and then look to sell.

What you do is start the extension paperwork now, then sell the properties with a long lease, then complete the lease extension with the sale. Almost as good as selling with a long lease provided the buyer is not in a desperate hurry to complete.

Other options are borrowing elsewhere eg secured loan on your residential property.