Freeing up equity in property to clear debts urgently?

Ds3

Hi

Hoping for a bit of advice here. Over the last few years I've built up a considerable amount of debt, approx £20k, which has reached a bit of a head this month as my outgoings are more than my incomings which isn't good as I'm starting to incur bank charges!

I'm lucky enough to own two properties, and have one on the market as we speak from which I hope to achieve approx £50k equity once the mortgage is paid off.

Problem is, it's going to be a minimum of 3 months before I get my hands on the equity at which point I'll clear all my debts, but I need some hard cash urgently, ie within the next couple of weeks.

Due to my current debts I don't think I'll be able to get an unsecured loan. I already applied with Tesco who approved me for up to £15k on the phone but then was declined the next day by their back office - I'm waiting for a letter frorm them to explain why and will get a copy of my credit report. Also, a secured loan is going to take ages to get sorted due to all the paperwork.

So can anyone offer some advice on how I can free up some cash from my property that's on the market as quickly as possible to ease the pressure over the next couple of months while it sells? Ideally I'd like to get the full £20k so I can just clear everything and be done with it, but if I get get £5k to start off with it's be a good start!

Thanks in advance :beer:

CCCS_Alan

Hi Ds3

Can you switch to interest only mortgage until the property is sold or even ask for a payment holiday from your mortgage? This may be possible if you have kept up your payments.
Trying to get loans secured or unsecured is only increasing the amount of money you owe at the end of the day.
If you can’t meet the minimum repayments for your unsecured creditors after you have paid out your priority expenditures (mortgage, counc tax, utilities etc) pay the creditors what you have left over. Even if it’s only a £1 token payments pay that to them. At the end of the day they can’t make you pay what you don’t have.
If you post your SOA up people will be able to provide you with plenty of ideas in areas you may be able to save on.
Once your property has been sold as well you could offer Full and Final settlement on your unsecured debts. You can write to your creditors offering 1/3 to 2/3 of the outstanding balance as a lump sum payment to clear your debts and register the debt as satisfied in full on your credit report on payment of the amount.

Hope this is helpful

CCCS_Alan

Ds3

Hi Alan,

Thanks for the reply. I can and will be taking a payment holiday on the property that's up for sale next month, but that isn't currently the issue as I have rental income that covers that mortgage. The rental income will cease next month at the same time as the payment holiday starts, so that house is completely neutral in incomings / outgoings.

The issue right now is credit card / loan payments that are chewing up all my monthly income. My thoughts were if I got another loan to pay these off right now, it would reduce my monthly outgoings till the property is sold then I can clear everything in full anyway. Assuming I use all of the loan just for paying off other debts and will be clearing it in full within 6 months max it won't really be increasing my overall debt?

Once the other property is sold I will have more than enough cash to settle all my debts in full so I don't think I need to agree partial settlements with my creditors, and I want to avoid any impact on my credit rating if at all possible. I just need to get hold of some cash asap to bring me back within my overdraft and get me through the next few weeks!

Needcash_3

Hi

Can you speak to your bank and ask them for help during this time? Isn't there something called 'bridging finance' that can be provided for something like this?

Ds3

I've spoken to my bank already (First Direct) and whilst they've been very helpful in the past, that seems to have run out now. They won't offer me any help in any form which I found somewhat disappointing when taking in to account the amount of equity I have tied up in property!

I'll google 'bridging finance' and see what comes up, thanks.

Needcash_3

Here's a link .... however before you jump in, I'd try and get some advice from some experts on here .... I have no idea as to whether 'bridging loans' are a good idea or not ..... and what will you do if your house doesn't sell quickly enough etc ... etc..... I'd do some research if I where you before jumping in. Maybe ask around on the mortgage free wannabe/ loan boards?

http://www.bestbridgingloans.co.uk/

Let me know how you get on.

NC

tyllwyd

I looked at bridging loans once, and they were prohibitively expensive.

I'm a bit confused - are you talking about getting a secured loan on the property that's being sold, or the one you are living in? I would have thought taking out a loan on the property that's on the market could potentially cause complications when it comes to sell, at a time when you want things to go through as smoothly as possible, especially if you don't get as much cash as you hope from the sale.

Do you have two mortgages - could you go interest free on both?

Ds3

Yes the secured loan would be against the property that's on the market at the moment. I don't think it would cause any problems with the sale as I'd still be leaving £30-40k equity in a £200k property so even if I have to accept a low offer it'd still cover the debt against the property. Obviously I need to make sure whichever way I access the money there are no early settlement restrictions etc.

The mortgages aren't the problem - the one on my residential property is already interest only and I'll be taking a 3 month payment break from the property for sale next month.

Thanks again everyone