Will we lose our house?

allbarone

We are halfway through a 5-year deal on our first home (H2B), we had to use a sub-prime lender at the time as I had an old default and a CCJ on my file (3.9% which i know is considered a good deal right now!). I've recently found out that my partner has run up smallish (£1k) credit card debts and left them unpaid, so now likely has 2 or 3 defaults on his record, whereas my record is now completely clean. In 2.5 years time when we need to find a new deal, will we have to go sub-prime again? We'd ideally like to pay off our H2B so will need to up our borrowing, although our combined income has gone up considerably.

I'm absolutely petrified that subprime rates + extra borrowing are going to make this unfeasible and we'll lose our home. I literally cannot sleep worrying about it.

kingstreet

If mortgage rates are high and property prices aren't increasing why pay off the HTB loan? You may jump out of 1.75% into 4%+. Get advice before you embark on any plan like this. As to the rates which will apply? It will depend on the overall loan to value, the date and size of the defaults and their satisfaction.

amnblog

Has your partner left these credit cards unpaid, and now caught up and cleared them. Or have the card accounts been left unpaid and gone to default, there is a difference. If the former, very manageable, and much easier in 2025, than the latter.

It might help you sleep if your partner cleared these card accounts and cut up the cards. 

Kingstreet is correct with regard to the HTB loan. Why take a 2%+ hike in rates by buying out the H2B loan if the property value is not moving up.

allbarone

Amnblog; The cards are unpaid unfortunately, although he has apparently contacted the companies and they are frozen - we will be paying them off next week. We haven't checked his credit file but can almost guarantee they will have defaulted as it's been a while - in my mind, expect the worst and if they're not defaulted then that's a bonus...

Kingstreet; Interesting what you say about the H2B, I haven't thought it through properly. As it stands, the house price will have risen approx 20% but of course not sure what that will look like in 2.5 years time. As I said the debt is just under £1k, relatively low in the grand scheme of things but I know sometimes the default itself is all that matters. LTV not sure - will depend on the figures at the time guess. When we bought we were 5% cash + 20% HTB. We will get some advice on it.

RelievedSheff

Even if you could not find another mortgage which is extremely unlikely, you would not lose your home. You would just drop onto the lenders standard variable rate which will mean higher monthly repayments. Assuming you could afford the repayments then you would not lose your home.

allbarone

RelievedSheff said:

Even if you could not find another mortgage which is extremely unlikely, you would not lose your home. You would just drop onto the lenders standard variable rate which will mean higher monthly repayments. Assuming you could afford the repayments then you would not lose your home.

Thank you that's reassuring. Once this debt has been settled, I think I will feel a bit calmer about the situation.

ACG

It really depends. If you have 2.5 years clear and are at around 75% LTV you might be looking at either normal rates or near normal rates. 

I think a lot comes down to what the market is like at the time. 3 years ago, we were placing cases like yours with high street lenders, but at the moment I think you would struggle. 

allbarone

ACG said:

It really depends. If you have 2.5 years clear and are at around 75% LTV you might be looking at either normal rates or near normal rates. 

I think a lot comes down to what the market is like at the time. 3 years ago, we were placing cases like yours with high street lenders, but at the moment I think you would struggle. 

Thanks ACG. Reassuring to know that in normal climate high street lenders would take us.

I think the best we can do is get the debt paid and settled, and hope when the time comes that rates will have dropped to a more palatable level.