Sell house to ALMOST pay off mortgage on a DMP?

Scammie

Hi all, before I speak to my mortgage lender I’m hoping someone might be able to advise me here and I can’t find any similar posts . I’m in aDMP with my husband for the last three years with eight to go. We owe 80k. 

Our son is going to uni and our income means he is ineligible for the max student loan. He has a child trust fund that he is using but it won’t be enough after a year or so even when he’s working during the holidays.  

We want to sell our house and downsize which we think would allow us to pay off our mortgage. This would obviously reduce our payments and allow us to help him plus pay a bit more on the DMP. 

Problem is that we are tied into the mortgage for another three years and will have a penalty to pay it off in full before that,although it is portable. So I wondering whether we would be able to move house, pay off all the mortgage bar about £10 thus retaining a mortgage and avoiding the penalty. 

Of course massive issue is that they will still subject us to a credit check/affordability check and this will obviously reveal our debt. I am worried they will turn us down and maybe this would impact on our existing mortgage with them? Has any one any experience if this ? Would really appreciate any advice! Thank you 

AnnieB2018

Mortgage penalty is based on the amount you pay off, usually 10% of the outstanding mortgage amount can be relayed penalty free each year….then you pay the penalty for each extra pound you overpay. So no, there is no way to pay off a fixed deal mortgage without paying the early repayment fee.

Scammie

Thanks but that’s not my question,sorry if it wasn’t clear. I know I will have to pay the early repayment fee if I settle early. What I’m asking is whether anyone knows if the bank would allow me to pay 90% or so and then port the remainder to a new house. I am worried that even with a small mortgage of maybe 10-15k that they will not allow us to stay with them due ti the credit check 

Scammie

Also just realised I wrote ‘pay off mortgage bar £10.’ I meant £10k

madaboutspots

Several lenders have a minimum mortgage amount. Might be worth having a simple search online at lenders. I remember seeing around £22k to £25k. So obviously this may not be the solution you’re looking for.

This doesn’t need answering publicly but can you honestly say you’ve changed whatever brought you to a DMP? If you haven’t you might find yourselves trying to downsize again in time. That would be a terrible position to find yourselves in and have limited options. 

I don’t know the answer to your question but I would suggest you contact an independent mortgage advisor and see what they say. Selling your home AND finding the right one to make all this happen would be a long road and you could loose more money if things fall through along the way.

Is it feasible to consider staying put, paying the DMP and let your child go to Uni, live with the debt and then once your DMP is completed you could consider selling and downsizing to pay your son’s debt off without the extra hassle you might have now? 

To me it appears a bit like you’re trying to rush your DMP to clear it as much as wanting to help your son with Uni. If that’s the case it would suggest that perhaps underlying issues for getting into debt remain. 

I’m not judging - just hoping to make you think very carefully about what seems quite a risky strategy. 

The things we find the hardest to learn in life are usually the lessons we find most rewarding. You could feel some relief from ridding yourselves if your DMP but I suspect if you stuck with it - as much of a seemingly endless slog as that would be - would stay with you for a much longer time and give your self worth a more significant boost.

It’s not easy paying back debts. Mostly the short gratifications we got from spending are so quickly forgotten and we find paying amounts back a much longer task and infinitely less rewarding. Could it be that this just seems the best way out because your motivation has hit a wall? If so - maybe look for ways to boost your morale and keep going. You’ve put in so much work already. Maybe stop and pat yourselves on the back more often.  

theoretica

Another thing to potentially consider if your son is going to university is using his room to help your cash flow - I don't know if you are in an area it would be easy to rent out to a lodger or AirBnB style visitors.