Secured Loan & BR

[vad921]

Hi all,

Firstly, I have to say that without this site and the help within it, I would be seriously stressed and not know which way to turn. Thank you for that.

We have a mortgage of around £168k. The mortgage provider has the value of the house at around £210k; based on market trends etc. However, we know that similar houses, around where we live, go for around £175k max £180k. We have a secured loan with First plus which was £75k + £20k PPI on take up. The interest rate on the First Plus loan was 10.4%, when we took it out (2.5 years ago), and is 12.9% now.I understand First Plus never lower interest rates. In fact, despite two reductions in the BofE base rates F+ actually put our rates up. This extra cost per month (something like £150) + increases to energy bills (tripled), fuel, and the general increase in the cost of living, has meant my wife and I are having serious financial issues. Sorry, I'm rambling a bit!

The question is, if there is £15k-£20k equity but we owe First Plus say £70k and we go BR, is there a chance that F+, rather than force the sale and get little back, would negotiate and perhaps agree to a lower loan that we could afford?

We are just seeing if there was a way of keeping our house.

Theoretically, we could actually borrow more from the mortgage provider, as they value the property at £210k, use it to pay off a couple of credit cards which would leave absolutely no equity in the house for First Plus. Financially, it would not help a great deal but it may encourage F+ to negotiate a lower figure if they know there is no equity in the house?????

Any help/advice would be really appreciated.

[mum of 4]

Firstplus would be aware that you are in negative equity which is pretty much what the borrowing is based on.

Lending up to 125% of the value of your property automatically puts you into negative equity, most mortgage lenders only lend approx 85%.

Also if you took the PPI then you dont just owe the 75k but you owe all the amount as the PPI is a cash loan added onto the original amount therefore you will now owe 95k. Cancelling the PPI won't work either as the cancellation small print tells you if you cancel after 30 days and in the first year you only get back a quarter of money borrowed and even less in later years.

If you do go bankrupt then they will get the equity remaining after the mortgage company has had theit share and then can chase for any shortfall. I would talk to their customer management team and discuss options to settle but don't hold your breath.

[MelanieGiles]

First of all First Plus would have to agree to you increasing your prime mortgage which they are unlikely to do if they are already in negative equity - especially if your intention is to use the money raised to pay off more unsecured debt.

You could approach them to see if they would be prepared to negotiate a settlement, but my gut feeling says that the amount you could offer would be too low.

In bankruptcy proceedings any shortfall to the secured lenders becomes a claim captured by the bankruptcy, so this might be your best option to have a fresh start.

[Adam Davies]

Hi
With the downturn in house prices First Plus must have a very 'risky' secured loan book
Regards

[Reviva UK]

Hi there vad921

I know that you say that you want to keep the house but you also need to consider that you owe £168k + £75k + £20k on a house that is worth perhaps £185 - £190k

re the mortgage I can't see that you could remortgage and release any funds even without the first plus charge. however with the first plus charge I think your options are :-

1. IVA for unsecured debts - there is unlikely to be any equity in 4 years time for the equiy clause.

2. bankruptcy for unsecured debts - remain in house as it is in serious negative equity.

3. bankruptcy and hand back the house and have a fresh start.

eitherway you need to really understand that there is no posibility of you moving house until th house has equity - i.e. it is worth over £263. So to move you would also need deposit for new house so in reality the house would ned to be woth £300k for you to have any chance of moving. Your guess is as good as anyone elses as to when this would be in current condition.

How much are your unsecured debts and what is your disposable income like to service these unsecured debts?

[vad921]

First of all First Plus would have to agree to you increasing your prime mortgage which they are unlikely to do if they are already in negative equity - especially if your intention is to use the money raised to pay off more unsecured debt.

You could approach them to see if they would be prepared to negotiate a settlement, but my gut feeling says that the amount you could offer would be too low.

In bankruptcy proceedings any shortfall to the secured lenders becomes a claim captured by the bankruptcy, so this might be your best option to have a fresh start.

Hi Melanie,

This is what i thought but last year we consolidated (again!) but this time with our mortgage provider and we borrowed £30k to pay off a credit card and loan. Hence our mortgage now being about £168k We told them about our First Plus Loan but they weren't interested. in fact, you can't hide anything like that from your mortgage provider anyway! So, they weren't interested and we heard nothing from First Plus so I assumed it had nothing to do with them or that they weren't bothered about it. This is why I'm fairly confident that we could borrow upto 90% of the value of the house from our mortgage provider. I remember the guy saying more or less that at the time.

[vad921]

Hi there vad921

I know that you say that you want to keep the house but you also need to consider that you owe £168k + £75k + £20k on a house that is worth perhaps £185 - £190k

re the mortgage I can't see that you could remortgage and release any funds even without the first plus charge. however with the first plus charge I think your options are :-

1. IVA for unsecured debts - there is unlikely to be any equity in 4 years time for the equiy clause.

2. bankruptcy for unsecured debts - remain in house as it is in serious negative equity.

3. bankruptcy and hand back the house and have a fresh start.

eitherway you need to really understand that there is no posibility of you moving house until th house has equity - i.e. it is worth over £263. So to move you would also need deposit for new house so in reality the house would ned to be woth £300k for you to have any chance of moving. Your guess is as good as anyone elses as to when this would be in current condition.

How much are your unsecured debts and what is your disposable income like to service these unsecured debts?

It is a struggle. My wife and I both have overdrafts of £3.5k and the only way I can keep my head above water is through my travel expenses and then not really. I have no disposal income at all so I can't buy anything. I can't use my cards as I am above the liimit on both so I can't pay the minimum and the use the extra anymore like I used to. My wife is in a similar boat. Unsecured debt collectively (including car loans) is in excess of £60k and thats on top of the secured loan! More than half of my salary goes on the First Plus loan and more than half of my wifes salary goes on the mortgage. My car a cards are another £800 and my wife is also in a similar position. We can't cope. With expenses we probably bring in, collectively, about £4k p.m. Incidentally, I just tried to reschedule my car loan and the finance company said the underwriter said no!!

[Reviva UK]

Hi vad921

lots of things going on here so you need to carefully seperate outgoings into life necessities, secured payments and unsecured credit.

then you need to dig out the information about the car loans ( i.e. are they on HP or is it simply a loan to buy a car with, when they started, what the monthly payments are, what is outstanding and what the value of the car is now)
then I really recomend that you have a meeting / telephone call with one of the experts here on the forum. That way you will get a thorough response and have the oportunity to ask the more personal question re house etc.

You have made the difficult 1st step by seeking advice but I would really encourage you to take 1 more step and spend an hour or so with someone.

Hope it helps

[vad921]

Hi vad921

lots of things going on here so you need to carefully seperate outgoings into life necessities, secured payments and unsecured credit.

then you need to dig out the information about the car loans ( i.e. are they on HP or is it simply a loan to buy a car with, when they started, what the monthly payments are, what is outstanding and what the value of the car is now)
then I really recomend that you have a meeting / telephone call with one of the experts here on the forum. That way you will get a thorough response and have the oportunity to ask the more personal question re house etc.

You have made the difficult 1st step by seeking advice but I would really encourage you to take 1 more step and spend an hour or so with someone.

Hope it helps

Is it the 0800 number at the top of this web site?

[Reviva UK]

that is a great place to start

[Adam Davies]

Hi
Try to speak with two or three different companies.If they all suggest the same solution then you know that it's probably the best route to take
Regards