Mortgage with defaults

jones_guitar

Hi, I posted on another area previously. I have seven defaults just being registered totalling £15,000. Not something I'm proud of but I struggled work wise to maintain a job I was happy with. I had to make the decision to put myself first.

I have a flat which is worth £220,000. Only had a mortgage of £39,000! I want to remortgage this onto a new buy to let, and get a new second home at £300,000. It is currently let at £960.

The sums work, however. The defaults are a problem. Any thoughts?

born_again

If they are just being registered, then the odds on a lender agreeing to a mortgage is going to be pretty slim.
Best option is via a broker, as they may know a lender that will take the risk.

Not making a judgement on you here.
TBH. Sell flat, pay debt & get a smaller mortgage on a new property.
You might end financing debt into mortgage to get one, but putting unsecured debts into a secured debt is not the best advice.

jones_guitar

So, my plan is to negotiate with the defaulted debts to partially settle them.

ACG

When were the defaults registered? 

How much do you need in total?
Presumably you need more than £39k? 

jones_guitar

The defaults are new. I want to remortgage all the way to 75percent. I'm guessing 6 months a lender might agree.

ACG

I dont think that makes sense unless there is another reason for it. 
BTL rates are higher, BTL adverse rates are higher still. 

It would probably make more sense going up to maybe 50% LTV on the BTL (possibly even lower than that) and securing more against the residential. 

How much do you want a mortgage? I think the rates available are going to be pushing double digits. You would be better waiting until the defaults are 6-12 months old. There should be options, but it will cost. You are going to need a broker though I think. 

They can also do the sums on where the breaking point is unless you have something against securing against what will be your home. 

jones_guitar

Yes, I want to wait until 6 months old.

I want to release to by a second home at £300,000. So, it needs to be the maximum remortgage.

Do you mean there are lenders who accept fresh defaults?

ACG

There are. But it really depends on the details. 

I think you need to speak to a broker. Even at 6 months rates will be high. 

You could release money from the rental for the deposit and then raise the rest against the new property? It would probably be cheaper - but depends on the rest of your circumstances. 

jones_guitar

Yes, that is what I'm planning...

Hoenir

jones_guitar said:

So, my plan is to negotiate with the defaulted debts to partially settle them.

Again without passing judgement. You are not a customer that mainstream lenders will wish to do business with. While lenders are in competition for new custom. In any walk of walk of life be it personal or business. Defaulters aren't worth the bother. As the risk exposure is greatly elevated. Lending margins aren't as great as is often assumed. 

ACG

Hoenir said:

jones_guitar said:

So, my plan is to negotiate with the defaulted debts to partially settle them.

Again without passing judgement. You are not a customer that mainstream lenders will wish to do business with. While lenders are in competition for new custom. In any walk of walk of life be it personal or business. Defaulters aren't worth the bother. As the risk exposure is greatly elevated. Lending margins aren't as great as is often assumed. 

I think thats a bit harsh. 
We typically put people with adverse into 3 categories
- people where something happened (divorce, illness, job loss etc), 
- youth,
- people whose adverse is spread out over years and all of it is someone elses fault. 

We only take on the first 2. We have seen everything from run of the mill divorce/job loss through to the worst things imaginable such as losing a child. 

Appreciate you probably did not mean the comment as it reads, there are lenders who do think people with adverse are worth the bother (even the bottom group that we as a business do not take on). I only mention this as I think if other people are reading this thread it could put them off even trying.