We need need help please guys!

gloryisfleeting

My girlfriend got into a right pickle during our break up, we are now back together. She brought using a sub-prime lender. Borrowing £124,000 over 40 years fixed at 7.45% (ouch). should we sell and rent? any fews welcome!

House value – £165,000
Paying £830.00 pcm in mortgage repayments
Total mortgage including redemption fee £136,477

Debts
Britannia -£3000 (credit card) Agreement to pay £100 pcm
Ntl - £1000 Agreement to pay £100 pcm
British gas - £1000 Agreement to pay £100 pcm
Southern electric - £700 Agreement to pay £50 pcm
Vodafone - £1000 Agreement to pay £50 pcm

Salary – £23,500 and £26,000 Gross

We could rent a similar property for c. £550.00 pcm

Do we sell and rent - repair credit ratings and buy when in a stronger position?
Do we hold off for 3 years when redemption fee disappears?
Obviously selling now incurs big costs – the house was purchased in November – so legal costs, lost stamp duty and new agents and legal face are an aspect.

If we sold for £165,000 – cleared £136,477 and cleared all above debts we would have £19,823 – we would be paying £280.00 pcm less in mortgage / rent. Would we be best to get into rented, not have the mortgage worries and build up savings?

clutton_2

""Would we be best to get into rented, not have the mortgage worries and build up savings""

yes absolutely - you are tied in for 40 !!!!!!! years - outrageous .....

how much are your Early Repayment Penalties and how long do they last ?

can you get type-face in a bigger size ?

gloryisfleeting

Well i am waiting for the redemption fee letter - but the other half was in a pickle and excepted whatever was offered. The loan request was 124K so in affect the difference must be penalties / arrangement fees?

izzybusy23

Honestly I don't think I'd even hesitate on this one. A 40 year mortgage.. that is just plain scary!! How old are you both just out of interest as in when will this mortgage be paid by?

If you do decide to sell you will have to weigh up the fact that you might just not get market value for your property...

gloryisfleeting

i think we will get 160-165K but in 6 months who knows what is would be worth!

We are looking at a lot of costs to move into rented. So if we save £300 per month in rent vs mortgage it would take ages to get back arrangement fees / sol fee / redemptions etc...

just dont know what to do...we are 23 and 24

gloryisfleeting

any other views guys? please we really need some advice and / or pointers / opinions.

BobProperty

gloryisfleeting wrote: »

any other views guys? please we really need some advice and / or pointers / opinions.

Get onto the DebtFreeWannabe board and get yourselves sorted out. You earn nearly £50k between you and you have a £124k mortgage (OK it's not a great deal but it surely is manageable on both your incomes). You will be paying out a fortune in costs, redemption penalties etc. etc. if you sell now, plus, I'd want to know why the house is worth £165k, because, if you paid that for it in November, it might not be worth that now.

Doozergirl

I agree with Bob. You have a big enough income that you should be able to to manage the mortgae and debts. You could post your state of affairs over there and really get to grips with those outstanding debts. The mortgae is a big problem because she's getting royally ripped off, but that is something you can't change.

If the loan is for £124,000 then the redemption fee must be massive if it's over £136,000 to clear it! You have to consider the difference each month between the savings made renting and the actual cost of the redemption penalty if you theoretically spread it over the rest of the tie-in period (simply for comparison)

To me it doesn't look like you're in *that* bad a place if you consider both salaries. The mortgage as a multiple of salaries is fine, it's just a really crap product. If you're prepared to muck in and evntually get yourself a share in the house that is. It depends on whether you see it as her problem or your joint problem - ie. where your relationship is headed now. By the time the mortgage tie in is up you can have the debts cleared, put the house in joint names and hopefully find a much better lender.

gloryisfleeting

Thanks to you both!

I see it as our problem.

I know the income is good, just so messed uo with what is best to do. I guess we can look to stay, improve credit ratings and then apply for a better deal once we have the other debts sorted out? maybe that would be best?

The 136K figure was quoted over the phone, they are writing to us with is. She thinks the arrangement fee was 3K - that would take the loan to 127K to clear so they are asking for 9K redemption fee before oct 2010.

depsite the big loses, and the fact no one can guess the market, the thought was do we just sell take a 9K hit plus 2K for agents and solicitors and go into rented, rebuild credit and saving more for a deposit and get a prime rate mortgage.

Any more pointers?

Doozergirl

Well, if it is £9000 then that's £300 a month over 30 months, presuming you sell quickly, otherwise it's more. Wipes out any benefit of renting, plus you have to pay the EA and solicitor fees for selling, as well as the moving fees and rental fees and deposit!

aztec21

If I were you I'd wait 3 years until the redemption fee disappears.