DMP & Low Equity - remortgage or sell?

Homeowner1654

Short version:
Fixed-term interest mortgage is coming to an end. Struggling to remortgage due to DMP. Low equity due to Secured Loan & Help to Buy.

Long version:
Bought a new build in Sep 2019 for £120k, which is coming to the end of the 5-year fixed interest rate. Moving onto SVR with current lender means paying an extra £240pm. Help to Buy equity loan was used in the purchase too, so we will start paying £35pm interest on this.

Just 3 months after moving in, my partner has suffered from severe health issues, so we've been reliant on my income alone. (Waiting on outcome of PIP application - probably eligible for this years ago, but getting a proper diagnosis from Hospital/GP has been like pulling teeth...)

As a result, we have ended up racking up debt, and now have a secured loan on the property (terrible idea, as interest was sky-high and has really not helped the situation) and also a DMP.

House value is approx £140-150k but we still owe £129k (£85k mortgage, £16k secured loan, £28k H2B). To remortgage, the amount needed would exceed 85% LTV.

We've pretty much resigned to the idea of selling up, but don't know where to go from there. If the property sells for £140k, that leaves £11k for conveyancing and estate agent fees etc. Ideally we would like to pay off the £6500 DMP but don't know whether it's best trying to save this for a deposit instead.

Options we are considering are:
(1) Remortgage - but this doesn't look possible due to LTV.
(2) Better secured loan - we have been accepted for one which pays off the current secured loan and DMP, while also reducing monthly payments by £190pm. However, the mortgage moving onto SVR and H2B interest repayments will mean an increase of £275pm, so net outgoings will go up by £85pm.
(3) Sell and rent to pay off all debts but conscious that we'll never get back on the property ladder.
(4) Sell and buy another property - but we would have to keep deposit money from the house sale rather than paying off the DMP, so DMP would remain active. Exploring of all options of buying including shared ownership and part exchange, but no idea what would be feasible and what we'd be eligible for.

ACG

1) Can you not switch products with your current lender? 
2) Is that affordable? Would it still be £85 if you do the above? 
3) 
4) At best you have £21k (worst appears to be £11k). Pay solicitors, estate agents, and then solicitors for the new purchase you are probably going to be left with maybe £15-18k at best. You would likely need a 15% deposit minimum so im not sure that would be enough? 

1 and/or 2 sounds like the best option, but only if it is affordble. Obviously more per month, but if you can afford the extra then you keep your home and you remain on the property ladder? 

Brie

Your current lender has to offer you a renewal.  At a higher interest rate but it would be something.  So hang on to that thought.  You won't be selling the house in the next 2 months so don't think about it too much for the moment.

Who is the DMP with?  Are they charging you for their service?  So many of them get you to pay them £200 a month (or whatever) but only £150 (or something) goes to your creditors. Check if that's the case and if so move your DMP to a non fee paying or DIY it.  StepChange and NationalDebtline do them for free I believe.  Citizen's advice and CMA can help you DIY.  Start looking into this now but deal with it after the mortgage renews so you know where you're at with that.  

And the PIP application....You say your partner should have been eligible for this years ago.  When did they first apply and has it been a continuous process.  If so when it does get sorted it will go back to when the forms were first requested so it may be enough to sort the DMP and sort out a bit more.  Are you getting assistance with the applications from CA?  They are so good at knowing how to get the right sort of answers to the questions so that they are more likely to be successful than an average individual.  Should the application fail go back to them to get it all reassessed.  Ensure there's no sugar coating on what the individual can and cannot do and get them to put the wording that the assessors need to hear.  

Finally go on to the debt free board and look for the statement of accounts (SOA).  Fill this out in great detail using all your bills, bank statements etc so there's a really clear picture of what your income is and what you're spending that on.  Whomever did your DMP set up should have done something like this to see what you can afford for payments.  You can post it back on the debt free board for helpful comments on how to fix your budget to try to live within your means.  It may be hard decisions like cutting your DMP payments, perhaps significantly while you await the PIP to be sorted.  But I would suggest you struggle through until the mortgage renewal has happened and then you can start mucking about with things more.

Best of luck with it all and I hope the PIP is sorted asap for you both.

Homeowner1654

ACG said:

1) Can you not switch products with your current lender? 
2) Is that affordable? Would it still be £85 if you do the above? 
3) 
4) At best you have £21k (worst appears to be £11k). Pay solicitors, estate agents, and then solicitors for the new purchase you are probably going to be left with maybe £15-18k at best. You would likely need a 15% deposit minimum so im not sure that would be enough? 

1 and/or 2 sounds like the best option, but only if it is affordble. Obviously more per month, but if you can afford the extra then you keep your home and you remain on the property ladder? 

(1) No product switch option unfortunately, as there were some arrears from Dec 2022 that were only paid off fully in March 2024.

(2) Not ideal as every month is already a duck's bottom with my salary being the only income.

(4) No, doesn't seem likely that selling would free up the 15% deposit either, so there would probably have to be a period of renting in between anyway while we save up for it.

This is why we were considering shared ownership, as we would only need a 15% deposit on the mortgage share. If we go for 25% mortgage/75% rent, we will still need around £7,500 to deposit. Some allow as little as 10% mortgage share so could maybe get away with £3000 deposit for a £200k property. There's a bit of a wait however, so again would require a period of renting in between, but if that's the best option, then so be it I guess.

Homeowner1654

Brie said:

Your current lender has to offer you a renewal.  At a higher interest rate but it would be something.  So hang on to that thought.  You won't be selling the house in the next 2 months so don't think about it too much for the moment.

Who is the DMP with?  Are they charging you for their service?  So many of them get you to pay them £200 a month (or whatever) but only £150 (or something) goes to your creditors. Check if that's the case and if so move your DMP to a non fee paying or DIY it.  StepChange and NationalDebtline do them for free I believe.  Citizen's advice and CMA can help you DIY.  Start looking into this now but deal with it after the mortgage renews so you know where you're at with that.  

And the PIP application....You say your partner should have been eligible for this years ago.  When did they first apply and has it been a continuous process.  If so when it does get sorted it will go back to when the forms were first requested so it may be enough to sort the DMP and sort out a bit more.  Are you getting assistance with the applications from CA?  They are so good at knowing how to get the right sort of answers to the questions so that they are more likely to be successful than an average individual.  Should the application fail go back to them to get it all reassessed.  Ensure there's no sugar coating on what the individual can and cannot do and get them to put the wording that the assessors need to hear.  

Finally go on to the debt free board and look for the statement of accounts (SOA).  Fill this out in great detail using all your bills, bank statements etc so there's a really clear picture of what your income is and what you're spending that on.  Whomever did your DMP set up should have done something like this to see what you can afford for payments.  You can post it back on the debt free board for helpful comments on how to fix your budget to try to live within your means.  It may be hard decisions like cutting your DMP payments, perhaps significantly while you await the PIP to be sorted.  But I would suggest you struggle through until the mortgage renewal has happened and then you can start mucking about with things more.

Best of luck with it all and I hope the PIP is sorted asap for you both.

Sorry bit of an overlap there between your comment and my reply to ACG. Current lender won't offer a product transfer due to arrears that were still being paid off until March this year, so until that's been 12 months clear they won't offer one.

DMP is with Stepchange so no charges there.

As for PIP, she originally applied last year but was rejected. She changed GP since then and they've been really helpful and managed to unearth some medical records that the previous (useless) GP didn't have. More tests have been carried out so she's got a lot more evidence this time around. Think we should be okay with the application this time as we've learned exactly how to fill out the forms and 'play the game' (as ridiculous as it sounds, it's what you have to do in the broken PIP system...).

I'll definitely check out the SOA. With Stepchange, we can review the budget as/when we please and the monthly DMP payments are adjusted accordingly.

ACG

Who is the lender? How long do the arrears need to be cleared for before they offer you a product? They cant just say they will never allow you to switch I dont think. 
Presumably you have tried logging on and seeing if you can switch products? 

Shared ownership.... I dont know where I stand on that. I dont do them as it does not fit comfortably with me paying an inflated price and paying rent and usually service charges too... But adverse and shared ownership, your options will be further limited (potentially higher rates or a larger deposit - but I dont know, although I do a lot of adverse, I do not do shared ownership). 

Homeowner1654

ACG said:

Who is the lender? How long do the arrears need to be cleared for before they offer you a product? They cant just say they will never allow you to switch I dont think. 
Presumably you have tried logging on and seeing if you can switch products? 

Shared ownership.... I dont know where I stand on that. I dont do them as it does not fit comfortably with me paying an inflated price and paying rent and usually service charges too... But adverse and shared ownership, your options will be further limited (potentially higher rates or a larger deposit - but I dont know, although I do a lot of adverse, I do not do shared ownership). 

Yes they've said 12 months without arrears, so limp through until next March/April might be an option and try to get a product transfer then. As I mentioned, means we'll be paying £85pm extra until then (if we go for the new secured loan to pay off the current one and DMP) and hopefully the variable rate doesn't lead to much more interest in the meantime. Their SVR is just over 10% currently.