Is there any way out of our financial nightmare?!?

Question

This is a long one so bare with me!

About 3 years ago now my partner and I bought a flat. We were first time buyers and had no savings but were desperate to get on the property ladder so we decided to get a 'Together Mortgage' with Northern Rock. This meant we got a mortgage and an unsecured loan at the same rate of interest so we were able to pay a deposit and also clear some of our credit card debts.

We were happy with the deal at the time and quite confident that house prices would continue to rise (which they did for a while) so that when we came to sell, we would be able to pay off the mortgage and the loan and hopefully have some equity as well.

Unfortunately, my partner had a bit of a problem with personal debt and despite having paid off his credit cards with the unsecured loan when we bought the flat; he continued to use them until he got into a situation where he was struggling to meet the minimum payments each month. As you can imagine this caused a great deal of stress.

We decided the best option was for him to contact a financial management company and enter into a payment plan. It’s not an IVA. They explained that he would not be able to obtain any credit whilst he was in the plan which was fair enough, and they negotiated with his creditors so his interest rates were frozen enabling him to pay back the debts much quicker. He'll be debt free in 18 months. What they failed to mention to us though, was that this agreement means that he has defaults on his credit file. We didn't know this until he's been in the payment plan for over a year.

This was at Christmas when we attempted to get another mortgage. Our fixed rate deal with Northern Rock was coming to an end and they wanted ridiculous amounts of money for us to go onto another fixed rate deal.

However, as we had a 115% mortgage and my partner has a bad credit rating, we tried everything, even putting the mortgage in my name, but we couldn't get another mortgage.

So we stayed with Northern rock on their variable rate mortgage and although we are paying an extra £150 per month, touch wood, it hasn't gone up this year.

My question is though, how on earth do we get out of this situation? We are nearly 25 now and I don't want to be stuck in a one bedroom flat forever. I want us to move forward in our lives but I don't see how we can with our huge mortgage and my partners bad credit rating?

Answer 1

I believe that you will have to be patient and tell yourselves that, in time, it will improve. Your aspirations, which are admirable, will have to take a back seat. You can't make bad decisions and then not have to deal with the consequences. A lot of people are worse off than you, and you are only 25 which is still young property wise.

I don't think you will be stuck in your one bedroomed flat forever. The market will recover, you will be able to sell, you will have paid off some of your mortgage. But it will take time. Regarding your partner's credit record. I think the situation would be the same in any event. The credit rating people would take the same view no matter what scheme he entered. From what you say it is better that he can't get credit as he would probably drag you down again. Sorry if that sounds cruel. It just the way I see it.

Answer 2

firstly your not alone, there are many others in this situation.

1 can you move back to one your parents or friends home, and then rent the flat to help with the repayments?

2 if you have the room, look for a boarder.

3 both work an extra job on the weekends, or ask for a pay rise.

4 stop pay tv or any other luxury until you have the credit sorted

hope these sugestions help...  

Answer 3

Look on Yell.com for insolvency practitioners. NOT debt advisory services or IVA factories but a qualified IP. Telephone a few, many offer a free initial consultation and a good one will talk you through your options.

IVA's have a really bad press at the mo because of the recent change in legislation which allows pretty much any numpty to set themselves up as an advisor and then rip you off but a proper IVA is actually a valid and useful insolvency procedure. A tip to watch out for - a decent insolvency practitioner will include a flat fee for an IVA, a Nominee's fee and a Supervisor's fee. They will not take a percentage of your contributions. Get good advice!

Answer 4

Speak to your/ his mum/dad/grand parents/friends and find some one to go 50/50 on a mortgage with you. Decide a suitable pay of for them, I.e. they can either help pay the mortgage and have a percentage of the capital gains or they can just put their name on and after 5 years you pay the x amount when you sell the property. There must be something in it for them.

Bankrupt your partner. Free up his income for you to live on and throw your money into the mortgage. He will be released after 12 months and it will be of his file in 6 years.

Then if you want to move, rent your current property out, change to a buy to let mortgage, and if the market carries on the way it is, you should be able to get 2/3 bedrooms for last years 1 bedroom price.  

Answer 5

The Citizens Advice Bureau will be able to give you exactly the information and advice you need. They meet this situation all the time.

They may be able to improve some of the arrangements you have made, or stall the creditors somehow.  They really are the best place to start as they have all the experience.

Answer 6

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Answer 7

diffucult to answer.

Answer 8

Hi there,

I have the same situation, except mine was 125% together mortgage with northern rock.

I am in negative equity and am currently going through a company which can apparently wipe off the unsecured element of the loan as there is new legislation in place which means that if a company made any errors at all on the credit agreement originally, then under the consumer credit act the debt is void.

They charge 450 quid, but if when they get the credit agreement in from the lender and there are no errors on it they refund 400 of it.

If you are interested go on creditissuesltd.co.uk, I am doing it as its worth a shot!

You wont have any other option if you are in negative equity as the highest mortgage you can get is 95% at the moment.

Believe me I know, Im a mortgage broker!

Answer 9

First thing is you and your partner need to manage your money.Common sense really - stop spending money ! save up.

You need to acknowledge that at the moment you do not earn enough money to live the lifestyle you currently are living, let alone to improve your live style and get a larger property.

Something needs to change - can you and your partner get  better paid jobs ? can you both get an extra job ?

Their is no easy answer unless you are going to inherit money you will have to work for it.

Your not alone - its a tough world , but you must take responsibility for for debts.

Answer 10

Firstly cut up his cards until the eighteen months has been over and done with that should then get him a clear debt record or at least his creditors will see that he has been acting in a proper manner re his debts by paying them back... and you never know by that time this little flurry on the world markets will be a thing of the past and your negative mortgage will become positive one and you will have learned a valuable lesson.

Advice for others is do your own negotiating with your debtors as it is cheaper.  

Answer 11

You situation is typical of many people who took out the together mortgage or other 125% loans. Everyone assumed property prices would continue to increase, therefore lenders were happy to lend more than the value of the home. Since the onset of the credit crunch, lenders have got rid of their most riskiest mortgages. These include the loans of over 100% and sub-prime (bad credit mortgages).

At the moment, until you can get your mortgage down to at least 95% of the property value, you will not be able to find a new deal.

However, more and more mortgage deals are slowly coming back onto the market, so a lender may offer a 100% mortgage again in the future. Plus base rate is predicted to be cut in the coming months which should reduce the Standard Variable Rate, which you are currently paying.

Answer 12

fist of sell the flat, hope you get the money you payed for.

if you do than pay the credit card of. AND CUT IT IN HALF.

Next get a new partner, he is very clearly not ready finical and will drag you down with him

AND NEVER EVER TAKE THE BAD CRADIT ON FROM YOUR PARTNER, HE WILL BE LAUGHING ALL THE WAY TO THE BANK.

HE IS IN THE CLEAR AND YOU HAVE TO PAY FORE IT.

Bite the bullet dump him and than move forward from there.

Good luck.