Zero help from Mortgage Company as in arrears - Credit Rating Issue

MissMiddleEarner

Hi All, 

I trust you are well. Needing some guidance please, this is my first post so please be gentle! 

I own my property outright worth say £425k. I own a second property worth around £700k with a BTL mortgage of £110k left. Never missed a payment, always worked hard and paid my way. I have no credit cards, no loans, no dependents, excellent credit rating. Until recently. 

Historically my mum bought the second property as a pension for me, only child, had always looked after Mum. Mum was going through nasty divorce from violent coercive ex, house put in my name so he would not get it in divorce. Mum had trouble paying divorce, so we raised a mortgage in my name to pay him off and had agreement in place Mum would pay mortgage. I helped her in her business etc, all good. 

12 years pass, I now have a very demanding job, always worked hard. Had falling out with mum 2 years ago, she was aggressive, violent etc. Went to doctors, cried out for help, no-one would help. Have no other family. Did not speak to mum for while as it was impacting my mental health, love my mum but her ex had coercive control over her, it was awful. 

In May I was told that my mum was diagnosed with Dementia and was going into a care home, obviously undiagnosed for a long time hence the issues. I've made all the necessary arrangements, had to close her business etc. Other 'vulture' friends of hers had been taking advantage, taking rental income etc, had to raise safeguarding and fraud issue, its been hell. 

I digress, (not looking for sympathy btw) Unbeknown to me, Mum had fallen in arrears with the mortgage by 5 months and property neglected, tenant not paying her the rent, etc. I never knew at all as mortgage company dealt with my mum, mum paid the money in to an account purely for mortgage, had worked fine for years. No more detail needed. 

In the last 2 months I have contacted mortgage company, paid some of the arrears, asked to remortgage over a longer term to reduce monthly payments, all sorts. They flatly refuse to help until the arrears (£6k) are fully paid off. Need to spend some money to redecorate the BTL property but cannot get help from my lender until arrears paid. 

Applied for a loan of £10k, credit card, to clear arrears and do quick redecorate of property, all refused due to arrears. Up until this point had years of excellent credit. Did affordability check with lender as asked, I'm in negative every month as rental income is currently zero and they took into account I am paying out on two properties as BTL is currently empty. In reality I have £500 a month free and pay £250 into a Savings A/C even though my salary is not great, I'm sensible or so I thought.

Once property redecorated, garden tided, can be rented again in month which is what I have been trying to achieve. I've spoken to an IFA that is saying I should easily get help but due to credit rating taking a hammering this is proving almost impossible. 

I have enough equity and could easily afford the mortgage once the property is rented, I have looked into releasing equity on my own house, I'm so confused and unhappy with the way I am being treated. 

I know it is paramount that I get a tenant in, as I said this will be the case long term, short term, month of tidying up, then let. Speaking to agent next week about letting and also to get a valuation. Need short term help for long term gain. 

There is always the option to sell the BTL property of course and stop the stress but this is a last resort for me, I'm a fighter, the cost of fees, stamp duty, capital gains, etc and then buying another property does not seem cost effective when the debt I owe is £6k. Yes it would free money up but saving in bank rubbish return compared to property. 

What I need help on is a remortgage and I'm just being blindsided at every turn because of this algorithm that credit agencies use, beyond frustrating. Is there anywhere that I can go for help with a remortgage as my current lender just will not help, always tell me to seek independent financial advce. Surely with the current cost of living crisis millions of us must be in arrears, there must be help available somewhere? Know about the Mortgage Charter. 

I would appreciate any advice. Thank you. 

MorningcoffeeIV

It's nothing to do with the CRA algorithm. They don't make lending decisions.

The issue is the arrears. Lenders don't like it as it shows you to be higher risk. There's definitely not 'millions' of people in arrears.

If you're a fighter, then taking action and selling a property might be the wise thing to do, rather than letting yourself go under.  

Otherwise, you sit and hope you can get a tenant and at some point make up the arrears. 

Only you know how realistic that is 

Bluebell1000

I don't know your circumstances but last time I redecorated our rental myself. Can you take a week off work and do enough to make it presentable with a few tins of paint for maybe £100?

 Alternatively you might be able to offer it for rental at a lower price in current condition, given the demand for rentals you may find someone willing to decorate it themselves in return for lower rent. At least that would get an income in, and you could work on reducing the arrears over the next 6 months or so.

Bluebell1000

Also, just to check, if the property is yours, have you been declaring income to HMRC? It sounded like you haven't had much engagement with the house and the accounts, so I thought I should ask in case you may have a tax bill outstanding.

housebuyer143

It's strange a BTL is valued a 0 due to it being empty and needed minor redecoration. BTLs are self funding so you typically don't need an income to have one, just enough projected rent. They almost never take residential mortgages into account when taking out a BTL.
Because of the credit issues you will need to find a lender who will take you on so you will need to find a BTL broker who specialises in poor credit. They do exist and it's likely you will get a mortgage with them but the rate will be eyewatering and then you have the issue as to whether you get enough rent to get £110,000 loan.

How much is it renting for? Have the tenants left now?

BTLs are business loans so do not come under the mortgage charter and are not regulated like residential mortgages are. 

Keep_pedalling

I would be more worried about the potential for IHT on this property on your mother’s death as it sounds like she may still have a beneficial interest in it. 

She was paying the mortgage, but who was receiving the rental income?

MWT

MissMiddleEarner said:

...had to close her business etc. Other 'vulture' friends of hers had been taking advantage, taking rental income etc, had to raise safeguarding and fraud issue, its been hell.

Sounds like you've had a tough time lately.

In trying to see ways through all this there are a couple of points that don't seem to be clear, as it appears that the property that you said was transferred into your name was being operated and rent collected through your mother's business, but with a BTL mortgage in your name only, or in joint names?

It feels like there is a lot of room for things to have been handled incorrectly with CGT consequences at some point and tax consequences possible already...

If the business is now closed, has it settled its tax affairs fully, including the disposal of any interest or liability it held in respect of your 'second property' ?

smipsy

MissMiddleEarner said:

There is always the option to sell the BTL property of course and stop the stress but this is a last resort for me, I'm a fighter, the cost of fees, stamp duty, capital gains, etc and then buying another property

Why do you HAVE to buy another property? Just sell and get on with your life?

ACG

There is usually always an option at such a low LTV. 
Speak to a mortgage broker (not an IFA). I reckon there will be options - whether you will want to pay the rates however is another matter (could be maybe 15%). It would allow you to clear the arrears, give you some money to decorate etc. 

You are probably going to be stuck with very bad rates for 2-3 years, you can probably get something reasonable (but still high) in 2-3 years time for another 2 years and then look to get back on to normal. 

jimjames

MissMiddleEarner said:

There is always the option to sell the BTL property of course and stop the stress but this is a last resort for me, I'm a fighter, the cost of fees, stamp duty, capital gains, etc and then buying another property does not seem cost effective when the debt I owe is £6k. Yes it would free money up but saving in bank rubbish return compared to property. 

Property might have done well in the past but if interest rates stay high for an extended period you might wish that you'd sold and invested the money elsewhere. You won't hit negative equity with that LTV but you could end up with a lot less than the property is worth now along with the hassle of renting.