Downsizing to reduce outstanding debts

Posted on 19 January 2011 by Katie Tucker


I would like to downsize home because it would help our finances, we have a repayment abbey mortgage with 18 years left to run, our property is worth £225000 our mortgage is £155000, we are having trouble paying credit cards ( late payments etc, so credit rating bad ) although mortgage is always paid on time, we want to buy a property for £155000 is this possible as a remortgage , moneys left over would pay our bad debts, although this would leave us with zero equity ,what do you suggest?

Mal,

I regret that it would not be possible to purchase a new property for £155,000 and transfer your existing mortgage in full. This is because Abbey do not offer 100% mortgages. The best that you could manage would be to choose a 90% LTV product which would result in a mortgage of £139,500 and mean putting down a deposit of £15,500. You would be releasing £70,000 from the sale of your existing property and so this would still leave you with around £45 -£50,000 to help clear your debts.

The problem that I can foresee with this is your credit history. It is possible that any Lender, not just Abbey, will look at your credit records and decide that you are too high a risk to grant a new mortgage to. This is where an experienced mortgage broker can help you. It may be that they can explain to a Lender why they should lend to you or it may be they are able to examine your credit record and then know which Lender will definitely help you. Alternatively, it might be that there are just no Lenders and you will need to consider moving to rented accommodation?

I recommend that you get a copy of your credit reports, these can be obtained for a small fee or for free online if you are willing to take up a trial offer and then remember to cancel it before any subscription becomes due. Armed with your reports and details of your current Abbey mortgage you should then contact an independent mortgage broker who will be able to advise you on your situation.

Peter

Answers provided in response to Ask the experts 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 necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

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