loans secured on homes - quick q regarding moving

[ELF1981]

We have our house for sale, which was sold this morning stc. The buyers want us out in about two weeks (OMG!) which is fine as we can move in with my parents while we got a mortgage sorted on an another property.
However, we have a loan secured on the house - do you reckon they are going to get arsey with us as we wont be able to secure the loan on anything until we get the place?
I cant phone them tomorrow to find out, but just wondered if anybody had a little advice / thoughts?

anybody?

I think IIRC as soon as the house is sold you have to clear the loan.

I did have a quick look on the site and it said the loan can be cleared or put to the new house, I'm just hoping they are not going to be realy mean and say that we have to repay, when we are going to have a new property in a couple of months, just not an immediate transfer!

Eeeek.

I think they are likely to want the loan repaid if you're not going to have a property in the interim period for it to be secured on, and they won't lift their charge on the property until it is repaid on the sale of your house. Is it a company that does unsecured loans too? It's possible they might allow you to convert it to unsecured, but there might be penalties or fees with that option.

they won't release their "charge" against your current house unless the loan is repaid, with a charge against it you won't be able to sell it.

In reality you should be able to use the equity (which I'm assuming you have...) on your current house to repay it, so it shouldn't be a problem.

If you still need the extrra cash when you get your new house you can "add" this this to the mortgage (i.e. have a bigger mortgage than you've currently got) - which would probably work out cheaper anyway as the mortgage interest rate is generally cheaper than a secured loan.

Agree they will expect any equity to go towards paying it off. Do you also have a mrotgage on it to redeem , in which the loan security is a 2nd charge ?

The issue is that the company loaned us the money over the value of the equity knowing we were going to sell in a couple of years times. For example, if we have £2k equity, they loaned us £10k. They said this was not a problem.

Now we are selling and we dont have enough equity to pay off the loan, but we didn't want to pay off, just to transfer to the new house. Issue being we dont currently have a new house.

Have spoken to the loan co, they are saying they have changed their T&C and dont think they can transfer the loan to ANY new home (which goes against the details written in my contract as it clearly says it can be transferred). They have now dropped their loan values to being 85% of the equity value in the house - ie house valued at £100k with no mortgage could borrow £85k, same house with mortgage of £40k could borrow £45k. Which is going to make it impossible for us to transfer as we would have to have a very small mortgage compared to the house value - where do they expect us to get that?!

My loan and mortgage are fully within our income values, in fact DH wages can cover them both, and my salary is just a bonus once those two are paid each month.

I have faxed them some details about the house value (as they are saying they will block the sale if we are selling under the market value - who in their right mind would do that?!) how long it has been in the market, and put forward a proposal that we pay them a lump sum of £6k on completion, and I'll up the monthly repayments to nearly double while we dont have a property. I'll even pay extra interest as an unsecured loan while we are getting the other property sorted.

God, I have NEVER defaulted on payments, the only issue I have is a month or two in my whole eight year lending history where I missed my credit card payment by a day or so because the date got away with me.

I'm going to be so if they block the sale!

I'm very today

I'd just add that you need to make sure your conveyancing solicitor is aware of what's going on, as in the normal course of events, they pay off the mortgage from the gross proceeds of sale, then any secured loan (which is essentially a second mortgage), then the estate agents fees then their own fees and disbursements.

The solicitors are professionally obliged to clear all mortgages upon completion, thereby transferring the property free of debt to your borrowers.

It may be only a couple of days before completion that your solicitor gets round to doing the completion statement and becomes aware that there's a shortfall, then there'll be a last minute panic unless you keep them informed.

If I were you I'd be looking into alternative, unsecured borrowing to clear the secured loan to avoid a major prob. on completion day.

If this loan is a second charge on the house you can overreach them by getting the first mortgagee to sell the house as mortgagee in possession. Quite complicated and would need the agreement of the first mortgagee.

Once the house was sold the second chargeholder would then come back to you for the extra and you need would to do a deal with them, but it sounds like you are well able and willng to do so.

They would be very stupid to try and block the sale beause all you would have to do is stop all repayments to them and first mortgagee (putting the money away of course as you will still owe it) and eventually smeone would repossess anyway!!! Not something you want to do but hopefully, if they are being silly, you can try and use this as a bargaining tool.

Best of luck

I'm just feeling very miserable and down about it all now

If the sale falls through, it will be the 5th time the property has fallen through.

Sorry you're feeling down, Elf.

There is no reason for the sale to fall through, as long as you can arrange alternative borrowing to cover the second charge, so if I were you I'd be shopping around now, so there's time to sort it out befroe completion.

Good luck.

The loan company have accepted my alternative solution and are not going to block the sale!