We are in a terrible situation. Bought our house six years ago at height of market and got 100% interest only Mortgage of 99000.
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House now valued at 91000 but stuck on same mortgage. Have 10000 saved but still seems no options to remortgage so we are effectively still renting the house. Any suggestions?
Additional Information
Thanks for your suggestions. We knew it was risky getting 100% but it was only to get on the ladder as we had no deposit and no way of saving for one as we were renting for a few years first. The problem was the bottom fell out the market about 6 months after we got it making remortgage impossible. We are with Accord mortgages and they are totally unhelpful and won't give us a preferential rate even if we pay a lump sum and have never missed payments. Also their rate never tracked the base rate - in fact they put it up by 0.5% to 5.4% about a month after so even overpaying is difficult. Thanks for advice though. Will keep you updated.
Answers (2)
Hi soren79 and welcome to the forum.
This is indeed a difficult situation with no magic fix I am afraid. However, it does show the danger of 100% mortgages in a recessive and falling market. Of course you are not alone in this and there must be thousands who share your dilemma.
I don't actually see the value in remortgaging at this moment in time and while the immediate advice is to 'wait a while' to hope that house prices pick up, I suspect that is unlikely to happen for some time although historically it always happens in the longer term.
Have you spoken to your mortgage lender about turning the mortgage into repayment, or if that is not possible financially have you asked if you can 'overpay' each month to bring the capital balance down slowly but surely. At least then you know you are going in the right direction. You could also ask if you could redeem some of the capital from your savings but I would retain the bulk of it. Perhaps by getting the lender to accept a one off capital balance and agreeing some monthly overpayment, you may just start to see some light here. And remember even if the house had retained its value, you would still have sero equity in the deal, hence my point about 100% advances being totally insensible.
I would be interested to know if your lender agreed to any of the above as these are just ideas and exactly what I would request if I was in your situation. And it's probably easier to overpay now while interest rates are low.
Good advice from Snoopy.
The only other thing that might be possible is to transfer that mortgage to a new property. Not all lenders do this, but it might be worth a chat
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Thanks for your suggestions. We knew it was risky getting 100% but it was only to get on the ladder as we had no deposit and no way of saving for one as we were renting for a few years first. The problem was the bottom fell out the market about 6 months after we got it making remortgage impossible. We are with Accord mortgages and they are totally unhelpful and won't give us a preferential rate even if we pay a lump sum and have never missed payments. Also their rate never tracked the base rate - in fact they put it up by 0.5% to 5.4% about a month after so even overpaying is difficult. Thanks for advice though. Will keep you updated.
You're not alone, there are an awful lot of people in the same situation. I don't know much at all about Accord, but I do wish you luck.
You could make a capital repayment which would reduce the amount of interest due each month as Snoopy says, but then of course you won't have access to that money if you were to need it.
The only thing in your favour is that the rates aren't increasing!
Hi again soren79 and thank you for that. That's the problem of going with a centralised lender like Accord, they don't have much in the 'customer care' department unlike mainstream high street lenders who would probably explore these options. With a high rate it seems like a double whammy ! I was wondering if making an approach to the FSA and see if they could intervene or comment on the rate charged and agree a reduction to permit even a small amount of overpaying.
FSA info :
http://www.fsa.gov.uk/consumerinformation/if_things_go_wrong