Remortgage when a Charging Order is in place

JPerryQuedgeley

History: Declared bankruptcy in 2011. In 2013 a Charging Order was added by the Official Receiver. I'm now applying for to remortgage, with my bank (I don't want to say who they are). Application process was going well. Upfront, and transparent about financial history and proceeded to pass on on all the relevant details, interviews and documentation. A very thorough affordability assessment was conducted and passed. Offer accepted, but now the bank has changed the goal post.
The original Charging Order (joint) is around £16k.
The house is worth £300k.
The new mortgage is for £145k to cover some accrued unsecured debt.
So, surely that is plenty of Equity to play with and offer risk free lending.
Yet now, the banks underwriters are saying they will not release funds for paying off the Charging Order. Apparently it is considered, "bad debt".
Surely, we would all be better off if I can include this Charging Order (as is apparently standard practice). My current mortgage was formerly with Northern Rock and the current lender has my variable now increasing to 8.89%.
My new mortgage will change my life. Coming in at 4.5% fixed for 5 years.

I seem to be in a catch 22 - can't get the mortgage I want until the charge is paid off, can't afford to pay off the charge until I remortgage.

Anyone got any advice or know a lender that could offer a similar deal and include the payment of the Charging Order in the amount borrowed?

simon_or

When a bank releases cash as part of a remortgage, they have a list of acceptable reasons that the cash can be used for. In this case it appears the bank does not allow released cash to be used to pay off bad debt, so what they have said seems logical.

Unless they told you earlier that they will allow this purpose for the cash released and are now saying otherwise, you can't really blame them.

If you have to change banks, tell the mortgage broker or bank mortgage adviser that you need the cash released to be able to pay off a charging order and I'm sure you'll find a bank that's ok with that.

silvercar

Maybe something to do with the laws of bankruptcy, you can’t favour one creditor over another. So if you prioritise the charging order and don’t pay another creditor that would break the rules. 

TheAble

The new mortgage is for £145k to cover some accrued unsecured debt.

Just be a bit careful as well about turning unsecured debt into secured debt. This can be all too easy and tempting but you're putting your home at risk.

housebuyer143

You can't get a remortgage without paying off the charging order (all of the orders if more than one) because the lenders claim to your property if registered after the charging order will fall below them on the list of repayments.
They must be a 1st charge and therefore they will not lend you the money if this is in doubt unfortunately. 

Have you thought about a product switch at your current lender as the charging order will not impact this normally.

The only way to remove this at the remortgage is to pay it off. Some changes don't need paying but unfortunately they will only come off at sale, not remortgage.

Edi81

housebuyer143 said:

You can't get a remortgage without paying off the charging order (all of the orders if more than one) because the lenders claim to your property if registered after the charging order will fall below them on the list of repayments.
They must be a 1st charge and therefore they will not lend you the money if this is in doubt unfortunately. 

Have you thought about a product switch at your current lender as the charging order will not impact this normally.

The only way to remove this at the remortgage is to pay it off. Some changes don't need paying but unfortunately they will only come off at sale, not remortgage.

Product switch isn’t available as it was originally a northern rock mortgage and the new owner of the debt doesn’t do product switches. 

housebuyer143

Edi81 said:

housebuyer143 said:

You can't get a remortgage without paying off the charging order (all of the orders if more than one) because the lenders claim to your property if registered after the charging order will fall below them on the list of repayments.
They must be a 1st charge and therefore they will not lend you the money if this is in doubt unfortunately. 

Have you thought about a product switch at your current lender as the charging order will not impact this normally.

The only way to remove this at the remortgage is to pay it off. Some changes don't need paying but unfortunately they will only come off at sale, not remortgage.

Product switch isn’t available as it was originally a northern rock mortgage and the new owner of the debt doesn’t do product switches. 

In that case the OP will find the same problem wherever you go. No lender will risk giving you the money and hoping you use it to pay the charging order. They have no way to enforce this and if it's not paid and the house is repossessed in the future, they will only get what is left AFTER all debts (listed above them on the title deeds) are paid first, which could mean they don't get all their money back. 

They haven't really changed the goalposts because the solicitor would only have made them aware of this after downloading the title deeds. 

Maybe the OP can get an unsecured loan for the £16k and then use that to pay the charging order it will be removed and allow you to remortgage I imagine, but do recommend they get professional advice.