Can our mortgage company keep us ‘trapped’ like this?

eleanorl89

Very basic backstory, I got myself into a lot of debt & am currently dealing with DCA’s & defaults. So my credit rating is shot. 

Me & my husband were in the process of splitting due to this, but have now decided to give it another go. However we want to downsize our property & release equity to clear some debts in his name

Current mortgage £263,000
Selling for £340-£350k approx
Buying for £280-290k approx
Keeping 10% equity in the next property & keeping all other equity 

Debts to clear using equity 
- £21,900 car finance (£500pm)
- £12,000 loan (£300pm)
- £1200 furniture finance (£75pm)
- £900 Shop Direct (£35pm)

So effectively we would be reducing our mortgage, albeit by a very small amount, but we would be reducing our monthly outgoings by a massive amount, making our lives more affordable… in turn making it easier to pay our mortgage

Our mortgage company are saying this is ‘unaffordable’ as obviously my personal circumstances have changed, my Husbands however haven’t. They won’t look at taking me off the mortgage either

Is there any way around this? I feel like they are trapping us at this point, we won’t be borrowing any more money but want to pay off debts to make our lives easier & more affordable. 

We’d look at going into rented accommodation but this isn’t ideal as we also want to avoid the early repayment fee of £9k that they would take from us. 

Any help / advice appreciated
thanks so much

kingstreet

You're asking to increase the loan to value from 77% to 90%; so the response you've had wouldn't be unexpected.

Hoenir

eleanorl89 said:

Our mortgage company are saying this is ‘unaffordable’ as obviously my personal circumstances have changed, my Husbands however haven’t. They won’t look at taking me off the mortgage either

There's the crux of the matter. Financially you are joined at the hip. You cannot simply walk away. Your creditors have considerable legal protection under the Insolvency Acts. Pay a visit to the Debt Free Wannabe board.  You'll receive advice there on how to tackle your financial issues head on in the best manner.  

RAS

eleanorl89 is a DFW resident.

MWT

Short answer to the initial question is yes, they do not have to give you a new mortgage if your current circumstances do not meet their affordability criteria.

They are not 'keeping you trapped', it is the change in your circumstances and the need to pay down the other loans that is doing that unfortunately.

May be worth talking to a good broker to get some idea of what is going to be possible in your current circumstances, but the ERC is obviously an issue and perhaps talking to your current lender about a more modest mortgage for a smaller property might help?

ACG

Could you do something in the middle? 
If we work on the assumption you will have £50k after costs, you could pay off the debts (bar the car) @ £14k and then £35k off the mortgage. 

The LTV should be lower  at around 80-85%, the mortgage would be lower reducing the risk to the lender and your repayments. Your commitments would also be lower reducing your monthly outgoings. Although if your mortgage is with Santander or Co-op/Platform they may view it slightly different. 

Ultimately they do not have allow you to port. But there might still be a way to achieve what you want in a round about way with slightly different numbers, it doesnt necessarily have to be all or nothing. 

eleanorl89

ACG said:

Could you do something in the middle? 
If we work on the assumption you will have £50k after costs, you could pay off the debts (bar the car) @ £14k and then £35k off the mortgage. 

The LTV should be lower  at around 80-85%, the mortgage would be lower reducing the risk to the lender and your repayments. Your commitments would also be lower reducing your monthly outgoings. Although if your mortgage is with Santander or Co-op/Platform they may view it slightly different. 

Ultimately they do not have allow you to port. But there might still be a way to achieve what you want in a round about way with slightly different numbers, it doesnt necessarily have to be all or nothing. 

@acg@@ACG @KING@kingstreet I’ve just realised I’ve put the figures the wrong way round. So car finance is £12,000 & the Loan is £21,900. 

We also need money from the sale to cover estate agent costs, stamp duty & solicitor fees. Also definitely want to pay the car off

How does LTV work? We bought the house at 310k, so is the LTV worked out on that? As it’s only around 15% equity that we have in at that point. So I wonder if they’d let us keep 15% equity in the property & release the rest. Just thinking about that now

So if we bough at 290k, leaving 15% in would be £43,500, giving us £36,500 to work with. Minus stamp duty at £4500, Estate Agency Fees at £2900, Solicitor Fees at £3500 - TOTAL £10,900

That would leave us with £25,600. Could pay off the Loan, furniture & shop direct, but leave the car finance as obviously that’s secured against the car

Would that be a more acceptable situation do you think? The mortgage is with Skipton

No19v87

If your solicitor is charging £3,500, you need to find a new one.

ACG

The LTV is based on the new property purchase price and the loan amount. If you are buying for £280k, a 20% deposit would be £56k making it 80% LTV. 

eleanorl89

No19v87 said:

If your solicitor is charging £3,500, you need to find a new one.

I’ve just estimated this cost for both buying & selling combined

eleanorl89

ACG said:

The LTV is based on the new property purchase price and the loan amount. If you are buying for £280k, a 20% deposit would be £56k making it 80% LTV. 

Yeah I know that, it’s just that someone mentioned we were currently at a 77% LTV ratio on where we are at the moment, but we only had a 45k deposit on it when we purchased for £310k, which makes that approx 15% LTV. So will they work the LTV value on what we purchased with, or look at what we sell it on for as the current LTV ratio - when taking this into consideration for the new property I mean keeping it at a 15% LTV ratio on the new one & hopefully not 77% due to whay we sell for. Hope that makes sense!