Right to Buy... Remortgage... HELP!

Optikal

Hi guys. Long time MSE.com reader, new forumite here!

I was hoping someone could help me with a pickle i'm in.

Okay, so in February 2006 we started our Right To Buy claim and in January 2007 we completed.

However, we went through one of these Right To Buy mortgage sorting companies called Your Right 2 Buy (UK) LTD. In the end we ended up with a mortgage with a company called Oakwood Homeloans PLC.

We have a martgage Fixed @ 7.59% for 3 years HSHL
We pay £416pm
Our outstanding balance is roughly £55,500
Our early repayment fee is £3,351

Now, under Right To Buy we recieved a £21,500 discount on the property. But rules say that if we sell the house within 5 years of buying it, we must pay back a percentage of the discount to the Council. This starts at 100% of the discount in the first year, with deductions of 20% each subsequent year.

But we've now come upon financial hard times and are feeling the squeeze of the renovations we needed to do to the house and need to remortgage. But i'm confused as to what to do seeing as most high street lenders don't seem to want to touch a Council bought property and i don't want to settle for the poor deals the companies who got me my current mortgage will offer.

So, how do i go about a remortgage, who can do good deals for council bought properties, and will a remortgage effect my discount agreement from the council?

Conrad

Lenders such as Prefferred can consider properties still in the pre - emption period.
All such lenders will charge high rates.

You say you've fallen on finanical hardship. This could be a real problem now as lenders have to demonstrate by lending you more it is ethical and puts you in an overall better position. Just giving you an extra lump sum to tied you over is not putting you in a better position as you will owe more and therefore there is greater risk of repossession.

I think you will be unable to borrow more, and to be honest thats a blessing in disguise.

Good luck

Optikal

Thanks for the advice Conrad.

I think 'financial hardship' was the wrong term really. I was hoping to remortgage with the intent of remortgaging to the current saleable value (75-80k) and using the freed up equity to clear off other debt so we're not living on the breadline. We're not struggling per se, but rather coasting the bottom line until we can free up some cash.

Ideally, what we really want to do is to remortgage this house to it's current saleable value on an I/O BTL. Then use the unlocked equity as a deposit on another house. We spoke to a few people from North West Mortgages and one or two other companies and they said they could do it... but we're wary of the rates and fee's they'll charge us on.

My concern is that all charge will fall into the balance without us stuffing our hand in our own pockets, and whether the discount rates on this house will become payable if we went through with any of this.

UK007BullDog

Can you tell us a bit more about your property?

What is the going value realistically in its current state on the street?

Have you got a credit report on yourselves? What does your report say about your finances?

How much rent can you get on the property realistically?

Can you list your debts you want to clear.

Your ages and gross (before tax) income.

A BTL mortgage has fees and you will have to pay those to the lender. The fees the broker charges you can be haggled upon, if not find a different broker.

Optikal

All of your questions answered in order:

2 bedroom Mid-Terrace through Townhouse, Front & back gardens. Backed onto an alley. Set back from road. Only about 60 years old.

Most in dated condition (a lot of old folk selling up) have sold for around £82000. In it's exact state presently, i think £75,000 - 80,000 is realistic.

My last credit report came in at about 560, which isn't very good... BUT... continuous mortgage payments have increased that from 450 which it was when we got the mortgage.

I think £300 - £350pcm realistically. There's a 3 bedroom property, just around the corner that rents for £500 pcm.

London & Scottish loan - £650 approx.
Naughton Finance - £400 approx.
KDS Finance - £250 approx.
CLC Finance - £600 approx.

20 & 23. 27,500pa combined.

poppy10_2

So you have fallen on "financial hard times." And yet you are planning to take on more debt by remortgaging your current property, and then take on even more debt by buying another house using the equity released as a deposit.

Why do you need two houses?

I'm sure this is not what old Maggie milk-snatcher had in mind when she dreamt up this right-to-buy scheme.

Sorry, but when both your houses are eventually repossessed, I hope you are kept waiting on the council housing waiting list for years. :mad:

Optikal

As i said previously, "financial hard times" was the wrong term. Our total debt only comes to around £2000. Currently, we are in the black and coasting along, but just a little too near the bottom line. We're not defaulting or anything, just don't have any money free at the end of each month. We thought that remortgaging would remove that debt and leave us more each month to spend on our family without the burden of our loans on our mind.

As for wanting to BTL... If we sell this house now, we would have to pay the council a tidy sum of £17,500 back as well as the ERC and all of our legal costs. We want to keep the house to rent out until our pre-emption with the council is up, otherwise we'l be making a loss that we simpy can't afford.

And the whole idea came about because we need to move seeing as the family that the council has just moved in next door, are the children of the man who sexually abused my wife as a child. And neither the police, social services (we have children ourselves) or the council will do anything about it.

But yeah Poppy, it MUST be because we're simply greedy! How about thinking before you post, you clown?

furrybloke

I don't think you can rent out either, check the small print

Optikal

Apparently, according to a guy @ North West Mortgages, you can BTL a council bought property but only after you've resided in it for a year from completion. THe problem we have/had is that the print from the council, the RTB broker and the mortgage company is almost non-existant. It's a case of making lots of phone calls and checking.

beecher

I can understand you wanting to leave where you stay for the personal reasons you've outlined, but taking out the equity and taking on another mortgage sounds very risky to me. What happens if house prices fall significantly in your area, and you're left in negative equity? You'd be stuck with this house for even longer and also have to service a second mortgage.

Also, would the rent you receive cover the interest on a £80k mortgage? My brain's too frazzled to work it out atm.

Optikal

I suppose it all depends on the interest rate of an I/O BTL mortgage and whether we could get one @ fixed rate.