I'm stuck: need to remotgage, bad credit

polajoo

Hi,

Hoping anyone can help me out. I've been mortgaging a property with someone else, and it's come to the stage that they want to release the equity and I've got to buy them out.

Problem 1
I can't afford the increased mortgage repayments, as well as my current debt (£30k in unsecured - loans, cards, car), and the only way I can do this is to use the equity to repay all my debt too, resulting in a 98% mortgage.

Problem 2
Wife has an IVA, and we weren't advised to close joint bank accounts when she took out her IVA, so now I'm financially associated to someone with an IVA and creditors won't touch me with a barge pole.

So it turns out most high street lenders won't touch me on a 98% mortgage becuase of this.

Problem 3
Current lender will only remortgage for debt consolidation up to 80% of the property's value, leaving me £10k short and my mortgage partner £10k short. This will still make a dent in my unsecured loans, and will still give mortgage partner some money in the back pocket, but it's not enough.

Problem 4
All the loans are fairly good rates (£17k on 6% APR, for instance) and there's a couple of little silly £300 debts on store cards, and I know they should be avoided by all costs, but there we go. Problem is that because of the wife having an IVA, I'm finding that even my current account provider won't give me a card to transfer debt to.

Position
I've got a decent job, decent salary, and pay all my bills on time. The only trouble I get in to is with the overdraft limit on my current account, but I've been assured these aren't reported on your credit report.

Question
I'm considering all sorts of things to try and sort this out (not in any particular order):

1. Get the 80%, split it down the middle, and grin & bear it
2. Sell house to mortgage partner, go bankrupt, then pay the mortgage as if I was paying rent
3. Sell house to a sell-and-rent-back company, pay 12mo upfront, then go bankrupt
4. Sell house, pay off all debts, then rent privately
5. Sell house, rent privately, store excess cash in The Mattress Bank, then go bankrupt
6. Just go bankrupt and see what happens

Has anyone had any experience or been in a similar situation to this? I can maintain current situation, but mortgage partner wants their equity, and I'm running out of options.

I'm going to give the CCCS a call tomorrow and find out if they've got any opinions on the legal viewpoint of selling the house, mattressing the cash, and throwing the bankruptcy towel in. That seems to be the nicest way out to me, but I don't want to jeopardise anything in the future for anyone.

Thanks in advance to all who have taken the time to read and reply.

silvercar

You can't just sell up, pay your partner off and go bankrupt!

The official receiver will see that you have given one creditor (if partner is even a creditor) preference over others and undo the transaction. ORs have the power to do this.

For the same reason buy-me-quick companies will run a mile if they hear you are going to go bankrupt. The Official Receiver will see them as having taken the equity due to your creditors.

You talk of your wife demaging your credit rating with her IVA; going bankrupt is going to decimate it!

Break the problems down. The first is the partner wanting their equity. Can they force you to sell up? What happens if you tell them they have to wait? Are you bound by some legal agreement to give the equity now? Seems to me that you are not in a position to do so if you want to keep the house.

If you delay giving the partner the equity, can you tackle the debts?

See the debt free wannabe board for the best ways of tackling debt.

polajoo

silvercar wrote: »

You can't just sell up, pay your partner off and go bankrupt!

Thought it was too much of a good idea... :-)

silvercar wrote: »

The official receiver will see that you have given one creditor (if partner is even a creditor) preference over others and undo the transaction. ORs have the power to do this.

Didn't know that. The other partner is my mother - to get ourselves out of a pickle (homeless & hungry) we pooled money, rented a council house, mortgaged it three years on, and now it's just me and my wife living in it. Mom wants her money back (which was always the case, was just a matter of WHEN...).

silvercar wrote: »

For the same reason buy-me-quick companies will run a mile if they hear you are going to go bankrupt. The Official Receiver will see them as having taken the equity due to your creditors.

Again, very interesting. Didn't know that a bankruptcy declaration was studied in that much detail to be honest.

silvercar wrote: »

Break the problems down. The first is the partner wanting their equity. Can they force you to sell up?

Legally, probably not. Morally, yes.

silvercar wrote: »

What happens if you tell them they have to wait? Are you bound by some legal agreement to give the equity now? Seems to me that you are not in a position to do so if you want to keep the house.

Well, that has since happened, and the !!!! has royally hit the fan. The money my mother needs to put in to her retirement property in Spain. Probably a bit too much detail for a public forum, but she's going to use the equity for furnishings and travel and fees and expenditure in relation to getting the property in Spain done. And she wants to get remarried in May, again, with the money from this house.

silvercar wrote: »

If you delay giving the partner the equity, can you tackle the debts?

...kinda. Things aren't too good at the mo, with a four-figure sum leaving my bank account on loan/card repayments alone. I've read the forums til my mouse has gone blue in the face about tackling debt, and I *know* that I need to shift my debts to better solutions. 17.9% cards, 29.9% storecard, etc - trouble is, I can't, because of my credit rating. I'm slowly sinking into the red.

Next few months, it'll be a plummet rather than a sink. Wife is due in seven weeks, and SMP starts in about four weeks. We'll be -£500 each month, which will REALLY hurt.

A friend suggested I remotgage, pay off my debts like a good lickle boy, and go for an interest-only option for a few years to ease the pain.

Where's the best place to get one of those from, with a tainted credit record? Seems the lenders won't talk to you, they'll just score you using their computer thingies.

Thanks for your help on this. Much appreciated.

silvercar

From your original post, I thought this "mortgage partner" was some shady guy who had lent you the deposit money and now wanted a share of your equity. Clearly the fact its your mother brings moral obligations into it. Didn't mean to be harsh.

No reason why you can't phone up your existing lender, explain that your wife is taking maternity leave and you'd like to go interest only for a while. Will that help to clear other debts?

The problem with securing all your debts onto your mortgage is that your home is at risk if you can't keep up the repayments.