How to remortgage but house value dropped?

abisnail75

If anyone can give me any advice I'd be really grateful.

I bought a flat brand new off the developer nearly 3 years ago and I need to remortage. At the time I took a deal where the developer paid 5% of the price which was £156k and I paid just under £149k. The mortgage I got was for £130k (120k mortgage plus 10k unsecured loan with Northern Rock) to which I added the fees and I've been paying interest only for the past couple of years as I knew that I'd need the breathing space to get myself on my feet.

Unfortunately property prices for flats round here have dropped like stones as they have now built thousands of them. They are now recovering as the area is receiving some investment but I think the maximum I could probably get for mine at the moment is £140k.

This puts me in a really difficult position as I need to remortgage in mid-December when my deal runs out and although my salary has increased by a couple of thousand over the last couple of years, I'm currently paying the standard variable rate (cheaper to do this for a short period than switch) and am managing fine, I know it's costing me a fortune and I'm not sure how I can get around the loan to value issue.

Can anyone recommend a way for me to get out of this horrible situation. I just feel I'm being ripped off and have also lost £10k of savings into the bargain too. Sometimes I think I should have rented instead!!

Thanks!

Lipstick_2

Why not ask your current lender for a new deal?

NR will go up to 125% on their together products.

dunstonh

I just feel I'm being ripped off and have also lost £10k of savings into the bargain too. Sometimes I think I should have rented instead!!

The property was never worth what you bought it for. The developers overpriced them and gave you some of that back so you could call it a deposit. Its a known scam which most are aware of but some lenders choose to ignore.

It's a risk you take when you enter into such a high risk transaction. Unfortunately, you also got caught out by one of the scams and were ripped off as you suspected.

You now need to hope that things like the first drop in property fund values since 1992 are not an indication of the drop in prices spreading. Or that todays budget announcements on CGT don't increase the rate that landlords are already selling up making your position worse, not better.

Dan_Collins_2

Lipstick wrote: »

Why not ask your current lender for a new deal?

NR will go up to 125% on their together products.

Good point and positive! NR offer a good review although the fees can be high, they dont charge a higher lending fee either. You dont need together if you have equity but pay the 10k loan part off if you leave NR or they will hike the rate up!

You still have 10k of equity so at 93ish % LTV you could remortgage.

MarkyMarkD

Only 93% LTV if the OP can afford to pay off the unsecured, which he probably can't.

Apart from NR, other lenders (including A&L and Birmingham Midshires IIRC) offer up to 125% mortgages; Abbey have recently joined this market too but their prices were very unattractive last time I looked.

poppy10_2

DunstonH is right, you've been pwned mate, sorry

MortgageMamma

Yes I agree, many lenders will not lend on new build flats or even houses in some cases at such a high loan to value with a builders incentive. the builders artificially inflate the property price in the first place. In your shoes if possible I would loook at taking in a lodger to bring in extra cash, and use this money to make overpayments on the mortgage to reduce the balance. Make sure you switch to repayment as soon as you can as well. even if it means extending the term.

Sorry you are in this position, you are the third victim of builders "incentives" I'v come across this month

Griptool

abisnail75 wrote: »

If anyone can give me any advice I'd be really grateful.
Thanks!

Go for a 125% mortgage, some lenders are even giving away a free spade so you dig yourself even deeper into the !!!!!!

Be realistic about the value of your flat check the land registry figures for recent sales, its possible you're in negative equity already.
Please avoid extending your borrowing at all costs and consider the prospect that the value of your flat may fall significantly - Check the cost of renting a similar flat against the cost of your mortgage and decide if you wish to perceiver. Getting out now may be the best decision you'll ever make;)

abisnail75 wrote: »

I've been paying interest only
Sometimes I think I should have rented instead!!

Erm...You are renting... from the bank