# Mortgage concerns



## Knight Rider (Jun 17, 2008)

Hi, not sure if i'm posting for advice here or just confirmation of my fears :lol:

I was posting on something earlier, and I thought I'd ask for advice here. 

We bought our current house at possibly the peak of the boom give or take, but we put a fair bit down (around 40k) and were going along merrily for some years. Over the past 4 years I have not listened to mainstream media advice or that of FA's and MA's and looked into things myself, a lot of that coming from reading on here.

I've been looking more positively at things of late and have been trying some damage limitation for the future for us, but thats not been going to plan and I'm wondering if there is anything else I can do, or put in place, or whether its a case of sitting it out and seeing if I collapse.

My main area of concern is that we currently pay a mortgage of approx £700 per month, £150 of this is capital, approx £550 interest. This is on a tracker.

If some of the predictions of future interest rates come true, which I fear they will, I am no mathematician, but can work out that I would be paying in interest more than my wife and I currently earn :doublesho:lol:

Obviously this could not be met, although I would do everything I possibly could to make those payments.

Has anyone here ever been in that position? and what happens if the worst case happens? Do you get a letter off the bank and you move out?

PS Before anyone has a pop at me for having a mortgage I can't afford, I only live in a 2 bed semi with my wife, at the time I was on training wages of 18k set to go up on a yearly basis and the wife approx the same, years later, I am now earning less due to some unfortunate circumstances which I am trying to resolve and obviously current climate. This has never been too much of an issue as we do not want everything new etc, but I'm trying to feel my way forward here, so just looking to see if anyone is in the same situation?

If you have got through that rambling there and understand what I am trying to say, I salute you :lol: as I'm typing this as quick as I can in a break time :lol:

Cheers :thumb:


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## S63 (Jan 5, 2007)

Like you I am no expert on this subject but there are certain facts to consider. With the world markets in turmoil it is impossible for any expert to accurately predict future developements. What is sure is that mortgage rates will never get any lower and at sometime will increase, I borrowed in a time of 15% interest rates! so todays rates seem a steal. If your current budget won't allow for an increase in the borrowing rate you will need to reconsider your situation, repossesion is not something either you are the lender will want to happen, speak to your lender and listen to their options, you won't be alone in this situation, the recession is here for some considerable time and sadly will affect many.


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## empsburna (Apr 5, 2006)

Are you upside down on the mortgage (owe more than the house is worth?)


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## mba (Jun 17, 2006)

What sort of rate are you on at present? Whats your current LTV?


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## WHIZZER (Oct 25, 2005)

How much do you owe and whats the rate your own ? what term - could you not switch for say a year period to an interest only mortgage and try and save some captial in the meantime with a view of switching back in say 12months time ? 

talk to your mortgage company most will try and help you


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## kh904 (Dec 18, 2006)

What % deposit did you put down?

What % of your combined wages goes to pay the mortgage each month?

If the base rate goes up to say 4% can you absorb it? 

The problem is people have got use to cheap credit, and 0.5% is historically very very low. IIRC the average base rates are around 5/6%??? 
The interest rates will not instantly rise to those levels soon, but plan for it to do so - imo it's inevitable!

IMO if it's just you & your wife & you have a 2 bedroom house, maybe consider renting a room out to someone you know? 

If you drive to work, maybe organise a drive pool with some collegues - this is what my dad does. He picks up a couple of collegues drives to work & drops them off home afterwards - each paying for eg. £10 each a week! It costs them less to get to work (instead of public transport) & my dad recovers most if not all & some more of his travelling costs - win-win for everyone!

Or if everyone can agree & put up with it, move back to one of your parents & rent out the whole house, topping up the mortgage if the rent doesn't cover it, up hopefully your income will improve sometime in the future & you can move back in.

The thing you can do instantly is stop spending on non-essentials - go back to basics - mortgage, home cooked meals, no holidays or treats etc etc. Do it now & save the money before you are forced to.

Look very very carefully at your outgoings! See what you can stop totally or reduce especially lthings like phone bills, going out getting p*ssed, meals out etc. 
I know this will effect your quality of life, but it depends on your priorities! 

I can't belive the proportion of interest you pay each month on the mortgage!!! I know that reduces & the capital repayments increase over time but it just shows how much money the banks make!!!!
I'm still looking to buy my own place, got around 40% deposit & still worry whether i can afford the monthly payments & other outgoings!!!!

Good luck & let us know how you are getting on!


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## Bero (Mar 9, 2008)

OP - you are liable for the mortgage, the bank will not let you off with it. If you sell your house for £80k and the outstanding mortgage is £100k you WILL be liable for the remaining £20k.



S63 said:


> I borrowed in a time of 15% interest rates! so todays rates seem a steal.


On the flip side houses cost a lot less (even relative to average pay of the time) - as interest rates dropped house prices rose as people could afford a larger mortgage, it would be interesting to see the % of salary that goes towards house payments then and now to see it there is a big difference.


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## robertdon777 (Nov 3, 2005)

Try to get on a fixed rate if you are worried about rates going up. One of the big banks is doing a 5 year fixed at 3.99%

I fixed mine a while back (before the rates went really low) at 5.69%

Some might say it was daft to do so, but i look at it as thats still a cheap rate for a mortgage and I know where I stand for a 10 year period. The fixed rates still ain't that much better today.

Nationwide did a 25 year fixed rate at about 6% but it sold out within a month (only did so many deals) so it just shows that there is a market for a good fixed rate long term deal.

Talk to your lender about changing to a fixed rate deal, even if they have a charge for doing so, they can usually add it to the mortgage if cash is tight (specially around xmas). That way you will have a least a few years piece of mind with fixed payments.


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## robertdon777 (Nov 3, 2005)

Bero said:


> On the flip side houses cost a lot less (even relative to average pay of the time) - as interest rates dropped house prices rose as people could afford a larger mortgage, it would be interesting to see the % of salary that goes towards house payments then and now to see it there is a big difference.


Yeah too true, I can remember my old man buying a new car that cost half the price of the house he had just purchased. Then a year later buying a house that was 5 times the price of the last, all on one wage with 2 kids and a wife. He did the same job as I do and we have two wages, not new cars and still live in a much smaller house:doublesho


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## Knight Rider (Jun 17, 2008)

Hi guys, much appreciated :thumb:



Midlands Detailing said:


> Are you upside down on the mortgage (owe more than the house is worth?)


No, at least not the last time we checked, the house was valued at 200k, (could be inflated valuation of course, I trust no-one now! :lol: ) and we owe approximately 148k, but have the last few months capital repayments to go in.

We did lose a fair whack when a company we were saving with went bust! 



mba said:


> What sort of rate are you on at present? Whats your current LTV?


I need to check on rates mate



WHIZZER said:


> How much do you owe and whats the rate your own ? what term - could you not switch for say a year period to an interest only mortgage and try and save some captial in the meantime with a view of switching back in say 12months time ?
> 
> talk to your mortgage company most will try and help you


Thanks, will talk to them if need be when the time comes. Again, I will need to check on the interest rate, I *think* its about 1.6% does that seem right?



kh904 said:


> What % deposit did you put down?
> 
> What % of your combined wages goes to pay the mortgage each month?
> 
> ...


Hi mate, deposit put down on this house I can't remember fully, as we sold our old house to get this, around 40k I should imagine. There seems to be a few quid equity in it I believe, but depends on the current situation.

Thanks for the pointers, I am doing most if not all at current, after lots of changes over the last few years. percentage of income we spend is approximately 30% all in. I think I worked out we could absorb and change things to accommodate a rise to 5%

We hardly ever go out, I do get drinks in and we have people round on weekend nights, works out at 50p per can  We don't use contract mobiles, only PAYG which is about £5 every 3 months (no mates lol) phone and internet are with talk talk, altogether no more that £24 per month. The only indulgence we have I suppose is Sky, family pack at £20 per month for UK Gold as we are in quite a bit.

I did have 2 cars, but have just sorn'd the E39 off the road, canceled insurance (and got to phone about that for the new law) so driving a pug diesel now, 50mpg and an estate to become useful in whatever trade I pursue.

Thanks for the input guys

:thumb:


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## robertdon777 (Nov 3, 2005)

Your LTV (approx 75%) should qualify you for some of the better rate fixed rates. A fixed rate repayment mortgage on 148K at a rate of 3.99% will be somewhere in the region of 800 a month (25 years) or 880 (20 years)

Might be worth a punt, 100 quid a month for security/knowledge it won't rise for the next 5 years.

You are in a better postion than many people out there that mortgaged themselves up to the eyeballs!


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## Knight Rider (Jun 17, 2008)

robertdon777 said:


> Your LTV (approx 75%) should qualify you for some of the better rate fixed rates. A fixed rate repayment mortgage on 148K at a rate of 3.99% will be somewhere in the region of 800 a month (25 years) or 880 (20 years)
> 
> Might be worth a punt, 100 quid a month for security/knowledge it won't rise for the next 5 years.
> 
> You are in a better postion than many people out there that mortgaged themselves up to the eyeballs!


Cheers mate, that there is the sort of advice I'm looking to take in, and help me understand more.
I would take the 20 years, as I only have 18 now, so would be a fair whack more per month, but it would be manageable. However, will really need to look at all options.

We tried to be as prudent as possible over the last few years, there was one time when we changed mortgage companies that we had to pay off a loan before they would accept us which was 12k and added on to the mortgage which annoyed me, as I had a plan to clear that, but adding it on (many years ago now) meant paying it off over the mortgage term. Will never make that mistake again!!!!
Thanks


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## robertdon777 (Nov 3, 2005)

How do you think so many normal people suddenly purchased 50K Range Rovers 7-9 years ago.

It wasn't with cash from their pockets, Mr Mortgage was added too, now the reality of that extra on the mortgage is hitting home now the house prices have come down/stayed the same over the past 6 years.


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## Bero (Mar 9, 2008)

KR - you're not in too bad a situation at all. Your house is worth more than you owe which is great. But it's good you're planning for the future just now!

In order of preference i would: -

*
To do now/before any interest rate rise*
1) look to increase your income
2) Fix the rate of your mortgage for 5 years

*If rates have risen and you can't afford the payments*
1) look to increase your income
2) decrease your outgoings
3) If you think things will improve in 24-36months temporally switch to interest only.
4) if you think things will improve in 12-24 months consider remortgaging (say to £158k) and use the £10k cash you release to make up any shortfall - obviously you'd have to be disciplined and not blow it! :thumb:



Knight Rider said:


> We did lose a fair whack when a company we were saving with went bust!


What company was it? Is there no protection from it?


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## A210 AMG (Nov 8, 2008)

I would go and see a financial advisor, many are free and athough the banks and building society ones will want to offer their products its a good place to start.

I've always had fixed rates, I like to know what I'm paying and happy with that. You should as already mentioned be able to get something around the 4% mark. If you fix this for say 3 years it gives you piece of mind at least that bill is constant.

You can if your lucky enough to pay more on some accounts either yearly or each month and even £25 a month can shave yrs off the total.

From what you have said check what you early redemption penulty is, it maybe that you have to pay XX % to move within so many years. You need to work this out as I moved deals from 6.89% to 3.99% and paying the redemption I broke even in 9 month on the cheaper rate then had 3yrs 3 months I was saving...

You can also check deals on line, this is a good one to help

http://www.charcol.co.uk/?gclid=CNevupHprqwCFYEZ4QodrCB0GQ

Also not long ago I sat down and listed ALL our out goings and then started ring round companies..

Sky I git 50% off for 6 month by saying I was thinking of leaving
02 mobile change of sim (same useage) £5 saved each phone * 2
Car insrance on teo cars shop round play them off against each other £200 saved
Home insurance compared and save £10 month

so on and so on...

Its worth doing and you will be able to find ways of saving even more.

Best thing I did was buy I house when I was young and keep doing them up and moving, make me smile when you see little terrace houses and a new X5 or big car outside... for me I would rather the house be nice 

good luck


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## Knight Rider (Jun 17, 2008)

Bero said:


> KR - you're not in too bad a situation at all. Your house is worth more than you owe which is great. But it's good you're planning for the future just now!
> 
> *What company was it? Is there no protection from it?*


We went to CAB and got about 30% back IIRC



A210 AMG said:


> I would go and see a financial advisor, many are free and athough the banks and building society ones will want to offer their products its a good place to start.
> 
> I've always had fixed rates, I like to know what I'm paying and happy with that. You should as already mentioned be able to get something around the 4% mark. If you fix this for say 3 years it gives you piece of mind at least that bill is constant.
> 
> ...


Cheers again guys, looks like I have been doing as much as I can at the moment.

I know what you mean about the 60k houses with the 50k car parked outside! Didn't want to go down that route :lol:

Luckily my wife has always been the same as me, pay all the bills, what you have left decide what to do then.

Think I may see a Financial Advisor. The Banks one as there are a few insurances that go out each month, life insurance etc that I would like to know more about, if they will actually work etc.

Thanks guys, all a great help.


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## Bero (Mar 9, 2008)

Forgot the final option!


Bero said:


> In order of preference i would: -
> 
> *
> To do now/before any interest rate rise*
> ...





Knight Rider said:


> Think I may see a Financial Advisor. The Banks one.......


Always remember they work for the bank and get paid for selling their products and services. :thumb:


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## Knight Rider (Jun 17, 2008)

Thanks Bero, 
I did wonder if anyone would mention selling......obviously not a route I would like tp go down , purely due to the fact we love the house. However, if needs must then we would. The trouble is, by the time I know if needs must, it may be too late to sell up! catch 22, and rather not go that way just yet anyway....purely want to get myself and my wife prepared as much as possible, so that if it all goes pete tong, at least I have tried.

And re the bank, yes, I know what you mean there, I would be looking just to use their knowledge to help me understand what all these insurances are I have on DD more than anything and see if theres a way I can get rid/consolidate insurances.

Thanks :thumb:


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## jonjay (Feb 28, 2008)

I am at work so cannot really give an in depth reply. However in simple terms it is very unlikely that interest rates will rise quickly. If you take into account that we and the whole of Europe is desperately struggling for growth they cannot simply hike interest rates up. This is where is get complex but the short and fast if our interest rates go up by 0.5% they have effectively doubles the rate of borrowing which will kill of industries. It has to be a gradual process in our current climate. They were saying at the start of the year that interest rates are going to go up and to fix now but they haven't moved. Until we see growth then they will more likely start creeping up.

Sent from my GT-I9100 using Tapatalk


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## kings.. (Aug 28, 2007)

http://www.thisismoney.co.uk/money/news/article-1607881/Interest-rates-News-predictions.html

Rates aren't going to go up any time soon."Today (8 November) they indicate the first rise to be in March or April 2014" Increasing rates will further hinder the economic recovery, every credit card, mortgage, hp agreement will increase; this will increase insolvency and bankruptcy which will create further debt. therefore in the next few years rates will be very slow to increase, if they do the incremental increases will be small in an effort to off set inflation.

Although it is worth noting, an economist can only tell you what's happened in the past not the future.


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## RedUntilDead (Feb 10, 2009)

Like you I worried about the rates increasing drastically so switched to a fixed rate repayment deal so I know what is going out over the term.
Ours is with the RBS, fee free, 2 yr fixed at 2.75 (if I remember correctly). We then over pay £100 a month to reduce the loan:thumb:


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## tommyzooom (Aug 15, 2009)

I would take specialist advice about giving up a tracker mortgate, You'll never get another one.Over here in Ireland the banks are losing money on every tracker loan, as it is linked to the ECB interest rate,(roughly 0.5% iirc). They are giving out cash deals and writing off part of the loan to get you off these trackers, onto a variable rate, where they can then jack up the rate in a couple of years time at will.
If yours is 1.6%, to switch to one fixed at 3.99% is quite a jump, Rates are unlikely to go up to that level anytime soon


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## DiscoDriver (Oct 27, 2009)

Depending on what you and your wife's combined annual income is you may have trouble remortgaging - at £148k outstanding balance, realistically you will need a combined income of over £37.5k (so 4x this is c. the o/s mortgage). Do you and your wife have plans to have children? If so, you could be in for a period of lower household income whilst your wife is on maternity. Of course, the flip side of having kids is you can kiss good bye to your social life and thus related spending :thumb:


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## Huw (Feb 16, 2007)

If you decide to go for a fixed rate, I would not look at anything less than a five year deal. If you go for a two or three year deal you could be looking to re-mortgage again just as rates start to go up. If you have spare income each month are you able to make an over payment on the capital side of things, without incurring a penalty?

Also if looking around at trying to reduce other monthly outgoings, check what deals are available via cashback sites. Always look for the best deal first, and then the cashback is a bonus. There is no point in have a £50 cashback on a deal that will cost you £150 more than the best deal.


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