Remortgage or Sell Up!

bintie22

Hi

I have a difficult question, I'd be really grateful for some opinions!

My partner and I are coming to the end of our fixed rate mortgage, and our monthly payments look set to rise from £620 per month to £880 per month on a property worth £150k (mortgage outstanding £130k).

I gave up work 2 years ago to look after our baby, and my partner managed to pay the mortgage / bills out of his own income (although he doesn't earn sufficient to take out mortgage on his own). I have just started my own business from home, which is doing very well - but i'm unable to prove my income yet.

We contacted a 'whole of market' Broker, and because we do not have a perfect credit rating, on the self-cert sub-prime market, we have been quoted a fixed rate of 9.2%. I feel like selling up! We can manage the payments of £880 per month (just), but not if I have a bad month at work. Should you keep your property at any cost? I've thought about selling and putting the equity into a high interest account, working for a year so I get some proven accounts and then try and get back on the ladder in 18 months - is this a mad idea?

I'd be really grateful for your opinion!

Bintie22 x

homer_j_3

if you can sell at right amount and can rent for cheaper then do that. Are you able to do a part time job whilst building your business up?

Ultimately if you feel you cannot afford comfortably then you should consider the fact that you may need to sell but I would look at all angles.

ncooper1974

Why not consider going interest only for a few years till you are able to prove your income, and then you can remortage again at a lower rate?

bintie22

I forgot to mention, we're already on interest only! Ouch!

simonts

Thats pretty harsh, I am on single income and similar mortgage figure and about to go out and try and get a remortgage.

You offer is high..out of interest how does it compare to if you stick with existing lender and go onto their %+base rate? my existing mortgage was subprime but even going out of the fixed period would still as the rate stands today be 7.2%

mitchaa

Mortgage should always be priority number 1. Other things should go before your mortgage does.

You step off the ladder, you may never ever get back on it.

Dont listen to the scaremongers saying sell your house, prices are going to crash. Keep hold of your house, its a long term investment.

Get rid of the fancy car, sky tv, broadband, health insurance etc etc before you even think about getting rid of your house.

Mortgage should be paid before any loans/credit cards/finance/bills. Its priority number 1.

In my opinion anyway

dunstonh

Mortgage should always be priority number 1. Other things should go before your mortgage does.

Correct.

You step off the ladder, you may never ever get back on it.

If you get pushed off the ladder you may never get back on again. Better to step off for a short time before you are pushed. Then you can clear debts, get on top of things and then make a fresh start.

The earnings to house price ratio has been falling in recent months and is back to around 1990 levels. It is a bit of a myth that house prices have gone up more than they ever have compared to earnings.

Dont listen to the scaremongers saying sell your house, prices are going to crash. Keep hold of your house, its a long term investment.

You shouldnt treat the house you live in as an investment.

Get rid of the fancy car, sky tv, broadband, health insurance etc etc before you even think about getting rid of your house.

100% agree.

Mortgage should be paid before any loans/credit cards/finance/bills. Its priority number 1.

agree again.

bintie22

Hi guys, thanks for the feedback. Unfortunately, can't get rid of fancy car, sky, gym membership as never had it in the first place! As mentioned we were on one income due to parenthood, so we thinned everything out a cpl of years ago, we've had 2 nights out this year as well so not much to thin out there either!

I think what it boils down to is i want to make sure we're in control and that if we have to get rid of the house, it's on our terms - i don't want to get into mortgage arrears, never have had them and never do want to get into that situation, hence step off before we get pushed off.

I feel suprisingly cool about the situation at the moment, i guess it's because we still have choices!

Really do appreciate your opinions though.

(Simonts our rate will revert to 2.35 above Libor as we're with GMAC),think currently works out at 8.15%

geniejj

Sell

If your paying interest only anyway all you are doing is servicing the banks asset at the mo. You might as well rent and let someone else take the strain and you can repair your credit.

House prices arent going up anytime soon, but make sure you keep at least 5% deposit tucked away from the proceeds.

May be handy to have cashflow with a new business as well.

Leon_W

I think the realistic thing to ask yourself in a situation like this is could you rent the property you are in (or equivalent) for less than it is costing you per month in interest payments (not any capital repayments).

I would say that £880 would get you quite a good renter and you would also benefit by the interest payable on any equity you stashed in the bank.

The cold answer is probably sell but you may have an emotional attachment to your house which is hard to put a figure on.

Regards

sarkin

SELL

Bank the equity and if your husband looses his job you will have help paying the rent, there will be no help to pay a mortgage.