Mortgage problems on horizon - decisions help needed

GoGirl

Hi all,

I know the first thing you should do if you are going to have difficulty paying your mortgage is to speak with your lender. However, being a first time buyer, I'm lacking some of the basic knowledge that will make that simpler, so please help.

We are able to make payments right now and can do so or the next 6 months but then our only income (my job) is due to end. We took out the mortgage when my partner was earning, he has since become unfit to work so whatever we do, we will most likely be relying on my income alone (usually £18k - 25k). We have been paying our current mortgage for just over three years with no issues until now.

As far as I can tell the possible options are:
1. We continue to pay until we can't anymore (then bankrupt? lose house? homeless?)
2. We contact the mortgage company and ask for leniency until I find another job, but that isn't guaranteed, so will they even consider it?
3. We sell the house now - but then what happens if
a) it sells for less than we owe?
b) it sells for more than we owe?
I think we have no early repayment fee on the mortgage so can we calculate how much we owe? Do we still owe all the interest or just the capital?
4. We find a cheaper house to buy - but will we be able to move the mortgage to another property (and will we need to show our income again) and what happens to the difference in price - does our mortgage just shrink?
5. We remortgage - but again I assume we need to show income, which we can't.

One matter to complicate things is that the current property needs a fairly substantial repair which is going to eat nearly all our savings, so we may struggle to find fees to solicitors etc.

Pretty miserable and desperate about all this. Please help.

MortgageMamma

Hi, before I go into addressing the points above can I just ask why you are looking at worst case scenario? You've got 6 months until your job ends, surely if you try hard you will find another? Getting a job whilst you've got a job is easier than getting a job when you are unemployed.

I'm not judging your partner as I know nothing of your circumstances, but I was once in his position where I was unfit for work long term but I have since recovered. During that time I made what money I could buying and selling antiques and vintage items, I also moderated a few internet forums and some online gaming sites and got paid for that also. I didn't make a full time wage out of it, but the bit I did make really helped keep us afloat. The beauty of that type of work (if you can manage it) is that if you have a variable condition you can "switch off" when you are ill.

MM

GoGirl

I guess I just want to prepare, plus if we were to try and sell, now would be the best time for us.

Worse case scenario is looking likely as jobs round here are very limited and often poorly paid, my current income is not really enough to pay our mortgage at present and my partner can't even earn funds part time / from home (he has tried). Plus we have children in the middle of exams, so moving somewhere better for work is difficult.

MortgageMamma

Oh no, I feel your stress

Is your current mortgage on capital repayment? if so you could try and extend the term to "stretch" it and reduce the minimum monthly repayment?

Have you looked at other moneysaving ideas such as brand dropping, making own cleaning products etc? I had to do that when I was in a bad place financially and I managed to get the usual £140 weekly shop down to about £80, I switched all my gas, electric, cut my tv and broadband package to the bone, used blankets instead of heating etc. It got us through but it wasn't pleasant.

I think the best way forward would be to work out how much in deficit you will be every month if you carry on as you are. Have you tried using the budgetbrain system on this website? I recommend all my clients to use it when drawing up a budget - its really good.

ACG

I am assuming you did not take out anything along the lines of income protection or critical illness with the Mortgage? If you did, then you could look to put in a claim on one of those possible.

In terms of your options:
If you sell up, you get any equity. If there is a shortfall you would have to arrange a payment plan for the differece, if there is no income and that is not done you may end up with a default/CCJ or bankruptcy - which would depend on the amount I suppose. If you can sell the house and come out with a profit then there is nothing to worry about.

With regards to the kids and exams, I suspect it is better they are settled in a new place, even if it is rented rather than knowing bailiffs could be knocking at the door at any minute in order to take back the property. Chances are that would probably be a good 12 months down the line if you can afford the next 6 months but they will know there is a problem and it will be in the backs of their minds.

If you have to sell up then you can rent. Its not like you will be out on the street. You can only get a new mortgage on a new property if you can evidence you can afford it. You may be able to get a lower rate than the lenders standard variable rate if you tie in to a new deal, but if you do not know what your income will be like in 6 months I am not sure that is a wise move as you could end up paying early repayment charges if you do fall in to arrears.

GoGirl

Thanks. We spent years on student incomes / benefits and have been living similarly parsimoniously since hubby had to leave his job. I guess we could save a little if we really tried but most of our big costs are fixed.
With extending out the mortgage by a few years, I guess the bank will want to know why? Can they just call in the mortgage if they decide we can't afford it?

bellaboo86

My ex, who was rubbish with money, got a couple of mortgage holidays in the time we were together. Luckily, it was his house and not joint. Anyway the holiday means you don't have the mortgage to pay for a couple of month. The holiday months are then added to the end of your mortgage term. You could enquire if your mortgage has these.

ACG

No, provinding you keep up the repayments there is nothing they can do.
Even if you fall in to arrears, it is usually 3 months before they start to be a little more forceful, although any arrears will not look great on a credit report.

MortgageMamma

I think at this stage it is wise to plan ahead - perhaps register with local council and housing associations with an explanation of your circumstances and how you see them changing. The sooner you do this bit the better. Private renting is possible but social landlord renting is more stable. Its not unusual for people to have to move every 2-3 years if privately renting.

If you put a statement of affairs on here perhaps we could try and figure out some practical solutions - details needed are mortgage amount, property value, mortgage term remaining, monthly mortgage payment, details of any debts and monthly payments, details of your income including any benefits you may get.

silvercar

GoGirl wrote: »

Hi all,

I know the first thing you should do if you are going to have difficulty paying your mortgage is to speak with your lender. However, being a first time buyer, I'm lacking some of the basic knowledge that will make that simpler, so please help.

We are able to make payments right now and can do so or the next 6 months but then our only income (my job) is due to end. We took out the mortgage when my partner was earning, he has since become unfit to work so whatever we do, we will most likely be relying on my income alone (usually £18k - 25k). We have been paying our current mortgage for just over three years with no issues until now.

As far as I can tell the possible options are:
1. We continue to pay until we can't anymore (then bankrupt? lose house? homeless?)You could ask to move to interest only as a temporary measure
2. We contact the mortgage company and ask for leniency until I find another job, but that isn't guaranteed, so will they even consider it?You can certainly ask for a mortgage holiday for a few months
3. We sell the house now - but then what happens if
a) it sells for less than we owe?You would need the lenders agreement to transfer the amount still owed to an unsecured loan
b) it sells for more than we owe?You keep the difference
I think we have no early repayment fee on the mortgage so can we calculate how much we owe? Do we still owe all the interest or just the capital?The outstanding capital
4. We find a cheaper house to buy - but will we be able to move the mortgage to another property (and will we need to show our income again) and what happens to the difference in price - does our mortgage just shrink?new application, new affordability check. Generally you would get a new mortgage based on the price of the new property/ the amount you have to transfer as a deposit/ what the lender judges you can afford...just as you did first time round
5. We remortgage - but again I assume we need to show income, which we can't.yes. affordability checks.

One matter to complicate things is that the current property needs a fairly substantial repair which is going to eat nearly all our savings, so we may struggle to find fees to solicitors etc.Always difficult to judge whether to do a repair and get a better price or sell cheap and save yourself the cost of the repair.

Pretty miserable and desperate about all this. Please help.

There are always solutions, just a case of finding what suits.