Help needed - need to sell house but in arrears with the mortgage. Is it possible to get another mortgage?

[greyskiesabove]

I'm desperately in need of financial advice.

Dh was out of work last year and as a consequence, we are in quite a bad state financially

Our credit rating is shot to peices and we have loans and credit cards that we cannot afford to pay. In short, we have no life at the moment and need to sell our home and buy something cheaper.

The problem is, we are also in arrears with the mortgage (arranged arrears)

Can anyone tell me whether you can move house and re-mortgage whilst in arrears with the mortgage, or would being in arrears basically rule out our chances of getting another mortgage. We wouldn't be asking for more money, but I can't see how we could ask for less either - we would buy a cheaper property and pay off the loans and credit cards with the small amount of equity we have left in the house. We would be left with around £20k left to serve as a deposit on a new property.

We can't afford to live in the house we're living in, but I'm also scared of selling up to find that we can't get a mortgage on a different property.

Any advice gratefully received.

TIA

I think that it is highly unlikely you would be able to access a new mortgage in the scenario you outline. Your arrears plus other credit commitments and poor credit score mean you are probably too high a risk for lenders.

Sorry can't be more positive.

you will have to sell and rent and get yourselves in a better credit position

you have no chance at the moment to get a new mortgage but existing lender might allow you to move it so talk to them

Not what I wanted to hear

But thanks both of you

We aren't in arrears with our mortgage but have a shot yo pieces credit rating due to other debts. We havd recently entered an IVA and our current mortgage lender has said they won't offer us any more lending until the iva is completed.

We weren't intending to move but dh has now got a new job which means we will need to. We are in the added problem that we havd to ask permission of our creditors to be able to sell the house - hopefully they will and we will then rent as although mortgages are available for low credit rated people you need a much bigger deposit and to pay higher interest rates. We will probably also have to pay any equity in the house to the creditors (although it has to bd said that we took out the debt, some of which will never get paid back so fair enough really)

I hope you are able to get onto a more stable financial footing - it's not any fun is it?

I would also advise speaking to someone like the consumer credit counselling service herewho helped us a lot.

Thanks for you message Noah. No, it's no fun at all

What is an IVA?

Hope you get sorted soon

An IVA is a next step up from bancruptcy - basically you pay an amount to the creditors monthly over 5 years through a third person (insolvency accountant) and it is legally binding. An amount of debt is written off and they can't increase charges. And no more letters and phone calls.

You need a minimum of debt and an amount of disposable income each month (not including existing debt payments). It all gets monitored and reviewed where necessary on both sides. Not an easy solution but better than bancruptcy.

It stands for Individual Voluntary Arrangement by the way.

Thanks Noah - I'll look into that

"Not an easy solution but better than bancruptcy."

Actually, I'm not sure that can be said categorically. For some people Bankruptcy is absolutely the best and most sensible solution to their debt problems.

We filed bankruptcy in Jan 2007, and were discharged in October 2007. We have another 3 years before it drops off of our credit rating, although obviously we will have to declare that we have been BR in the past if it is ever asked. We didn't have to pay anything due to DH having a lowish wage at the time. If you have a substantial excess in income (more than £100 per month disposable after reasonable living costs, which can include a small amount towards a holiday, children's activities for after school, etc) then you have to pay around 50% of the excess to the OR for 3 years. The rest is all written off, as in an IVA.

In general, if you have substantial debts (£15k +) and assets (such as equity in a house), then an IVA would be possible as long as you are going to have enough income to make at least £250 per month in debt payments, depending on your debt levels. It is generally 30-40p in the £ that the creditors want to be paid back over the course of 5 years.

If there is any risk that you won't be able to sustain the payments for the whole 5 years, think very very carefully, because if you fail to make even 1 payment, they can bankrupt you anyway.

That is true lou.

Due to my profession, if I were to be made bankrupt I wouldn't be able to do it any more and so for us it is preferable for me to not file for bankruptcy. We would also have been making monthly payments under bankruptcy as well.

All situations are different and so getting advice is very important.

I don't know about the UK, but in the US at least, my bankrupcy is no longer on my record.

It was 9 years ago and at the time, I really had no other recourse.

We don't qualify for an IVA because our debts don't quite reach £15k. The gutting thing is, if we could sell the house, we do have enough equity to pay off our debt and would still have enough for a small deposit. Very frustrating.

We are going to talk to our current mortgage lender to see if there's any way that we can stay with them as lenders but move house. It seems our only option. If they say no, we'll have to look into renting, but I really don't want to do that ...

Thanks all

Hope it all works out for you - hopefully the mortgage company will be able to be flexible.

If you didn't have the debts, could you afford to stay in the house you're in? Or is the house the cause of the debts?

If you need a cheaper house, then you need a cheaper house, I guess. But if it's debts caused by the period of unemployment, you might be able to formulate some kind of Debt Management Plan to get you back on an even keel.

Look for a free debt advice service - they should know the ins and outs of the various options available, and if, at the end of the day, it does come down to selling your house, you will at least know you've tried everything.