need advice on what to do next with our 2 mortgages

Rach40

Please can anyone offer us some advice
We are married. I have good credit, my husband is on a DMP and has been for 8 years but credit file shows good credit score.
My husband has a mortgage on his property with Birmingham midshires which are a company for people with bad credit. He has been with them for 10 years. Interest rate is 2.69%. Outstanding mortgage is £103,000. Property is worth about £110,000 but he also has a secured loan on this property of £28,000 (at 9.9%)which puts the house in negative equity. We have recently started renting this property out but we have a problem in that the mortgage company have refused to change our mortgage to a buy to let mortgage But will let us temporarily rent. But what do we do long term?
I have a mortgage on the property we currently live in with Halifax - good interest rate of 1.59%. Our mortgage is £143,000 and our house is worth £225,000 which means we have quite a bit of equity

What is our best option - if we use the equity in my house to pay off the negative equity in my husbands property we will probably have to pay a higher interest rate on the Halifax but we can’t change my husbands mortgage to a buy to let mortgage when he is in negative equity
Should we consider getting a personal loan to clear the £28,000 loan at 9.9% for a better interest rate which would also remove the negative equity from my husbands property & would leave my mortgage at the good interest rate cos of all the equity in that property?
Any suggestions please?

Thrugelmir

Is the mortgage on your husbands property interest only?

How much is owed on the DMP?

Rach40

Yes my husbands mortgage is interest only & he has about £22,000 left on the dmp

Thrugelmir

Doesn't appear to any easy answers. My concern would be that letting the property in itself becomes another millstone around your necks.

Rach40

the rent we are getting covers the payment for the mortgage & secured loan & i don’t think we can sell with it being in negative equity?

Thrugelmir

Rach40 wrote: »

the rent we are getting covers the payment for the mortgage & secured loan & i don’t think we can sell with it being in negative equity?

Have you accounted for tax?

Does the net income generated provide an excess for repairs and maintenance? Not just current but in the future.

MortgageMamma

Do you actually want to be landlords renting this property out? What are the prospects of the property value increasing in time? Is it in good condition in a reasonable area?

Birmingham Midshires are not a lender for people with bad credit, they are pretty good actually.

The questions you need to ask yourself here is, if you sold the property at a loss, would you be able to cover the outstanding debt as the lender will come after your husband for it. Is it worth remortgaging your house for a slightly higher amount to avoid the adverse event with the rented property?

If the rent covers the mortgage and secured loan, you are essentially going to have to cover the repairs and maintenance of the property yourselves. Do you have landlords insurance and home emergency cover to deal with this?

What if your tenants trashed it could you afford to put it right? What about rent arrears and rent voids - can you afford to pay for them?

And finally, I hate saying this but its the elephant in the room. Brexit and the current policitcal/economic situation. If this reduces house prices further (not saying it will) would you regret not selling up now?

Rach40

We would like to keep the property cos we r hoping that by re-jiggling our finances we can actually start paying off my husbands mortgage & create an investment for our children in the future.
We are very lucky with our tenants as we know them personally so we know they won’t be trashing the property or not paying us rent.
We are very lucky to have a bit of surplus money each month so have a small savings account in case repairs are needed.
Thankyou for the advice so far from both of you :0)

AnotherJoe

Rach40 wrote: »

We would like to keep the property cos we r hoping that by re-jiggling our finances we can actually start paying off my husbands mortgage & create an investment for our children in the future.
We are very lucky with our tenants as we know them personally so we know they won’t be trashing the property or not paying us rent.
We are very lucky to have a bit of surplus money each month so have a small savings account in case repairs are needed.
Thankyou for the advice so far from both of you :0)

There are many better and lower risk ways to build up an investment for your children than buy to let. And like others here I'm not convinced that when you do the real maths, that you are even in profit. This is aside the not inconsiderable risks of letting. As I've listed here before the LL of my next door house is in the hole for £10k due to their last tenants.
Just like the oxygen masks on planes, put your own financial mask first before assisting others. Which in your case I suspect means, take on a bigger mortgage on your residence to clear the NE on the other house when you sell it.

[Deleted User]

MortgageMamma wrote: »

Birmingham Midshires are not a lender for people with bad credit, they are pretty good actually.

Just to show my age here. Birmingham Midshires were a separate company to the current BM Solutions we all know and love for their ability to lend to pretty much everyone.

Birmingham midshires were bought by halifax and after a bit of restructuring they turned in to operate as Halifax's subprime lender (kind of like Melton Building Society and MBS Lending at the moment)

When i was a Halifax branch advisor, if something failed credit we would refer them to Birmingham Midshires.