Need to improve to sell, but with little income and a credit blip

Posted on 13 May 2008

Hi Katie,

My ex boyfriend is selling the flat we lived in, in West London. We are on very good terms and have been working together on getting it ready for sale. It was bought in 2000 for 72k and is now worth around 153,000. The mortgage (with Abbe) stands at 74k and is in his name only. The bathroom (pink, 20 yrs old) and kitchen (orange, ditto) badly need replacing and we had planned to pay for this ourselves from his salary and my student funds (I'm a law p/g studying to be a barrister.

Unfortunately he was made redundant a couple of months ago and can't contribute and my funding has changed, making it difficult for me too. The mortgage-provider isn't very helpful, even though the flat is empty and ready for sale as soon as the works are finished. What kind of financial option would enable us to replace the bathroom and kitchen so as to get the best price for the flat - a remortgage? a bridging loan? Any funds will be repaid immediately the flat is sold. BTW he has one CCJ - the insurers on our credit card refused to pay out on the policy and the cc provider went to court - although we hope to have this set aside once our solicitor has proven that the insurers should have settled the claim.

Normally you would take a further advice from your current lender, and use a rate that has no ERCs (tie-ins) so that you’re not penalised when you sell and pay it off.  However you have two issues here: the first is that the lender would want to see that your income still covers the total debt, which it sounds like it does not, and secondly, that Abbey are a mainstream lender and therefore would not take borrowers with credit difficulties. This leaves you looking at other places to borrow that may not be as responsible with checking your budget. Any loan would require monthly interest payments, and it is these that you cannot evidence you can meet.  Whilst there may be lenders who could offer perhaps a sub-prime (for people with credit problems) secured (taking a second charge on the property) home loan, not only would the interest rate be onerous, there would probably be tie-ins, and most crucially, it would realistically be a substantial stretch on your income.

 

You probably wish to satisfy yourself by looking into these second charge mortgages/ secured loans, but I would recommend that you definitely should not push your budget any further. Regrettably, you may have little safe choice but to sell the property without the improvements.

 

Many thanks for your help.

Category: Bad credit, Secured loans

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