Should we cut our losses and sell?

Posted on 31 July 2008

Hi,

My partner and I bought a house 2 years ago in Northampton. We live in london, but our plan was to move to northampton, however, due to work commitments this never happended. When we bought the house we got a together mortgage and used the loan part to do the house up.  We rented out the property for a while, but this didnt nearly cover the mortgage and so we are now trying to sell the house.

We want to buy somewhwere in London. we have found a few properties we like which we could afford, however, as we have a together mortgage, when we sell the house we will still have the loan to pay back. part of the loan will be covered by what we have paid in the mortgage so far, but about £13000 will be left outstanding.

As we are all aware, the interest rates are getting higher and ot is getting harder to get a mortgage. what is the best thing for us to do? Sell the house and cut our loses and pay off the loan and wait until after this to buy somewhere else, or, is there anyway we can sell this house and buy on in london with this loan??

Please help, I really dont know what the best thing is to do!

thanks

Sam

It’s very difficult to answer this question without all the relevant information relating to your circumstances, if you are asking whether you can keep the loan once you redeem your mortgage the simple answer is yes, however I believe the revert to rate of this unsecured loan is a punishing 8% above SVR.

As a £13,000 loan will not necessarily prevent you from getting a new mortgage, it may be worth your while looking to consolidate this debt into your new mortgage, however whether or not you can do this will come down to the affordability assessment made by the lender.

Lenders look at affordability in a number of ways but to get a rough guide, add up all your monthly debt repayments, multiply this by 12 to get an annual cost and then deduct this from your annual income.

Use our calculators to find a rough guide of what your could borrow and bear in mind you will also need a deposit of around 5-10% to purchase a new property.

One of our Charcol brokers would be delighted to assist you in finding a solution that best suits your needs, so please do call on 0845 413 1053.

 

Answers provided in response to Ask Bea are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of Charcol Limited. All comments are made in good faith, and neither Charcol Limited nor Bea will accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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