Mortgage, DMP & Defaults

[Stressedoutmum]

Sorry, was not quite sure where to put this!

Anyway, been a long time since I have been on here. Currently still waiting on PPI claims being dealt with by the Ombudsman, has been more than 2 years now for one of them!! so nothing to tell there.

Brief history of where I was at when I first posted here. Husband was made Bankrupt in October 2009 and I have been in a DMP with Step Change since then also, owing Lloyds TSB over £30K. Still have INXS of £20K to pay on this as paying very little. We also owed a family member £24K (this was the amount we required to release as my husbands share of the equity in our house and the family member loaned it to us rather than see us having to sell our house) So far we have managed to repay £18K of this (thanks to some successful PPI claims that I had!) We have also been on an interest only mortgage since 2009.

There are a couple of areas of concern for us just now.

Our mortgage deal is coming to an end and we are due to speak to our provider and want to start back on a repayment mortgage as I have recently increased my hours at work so the extra money should pay for the increase. We're hoping this will go ok, my only concern is that at the moment we have less than 9 years left on our mortgage, however in order to make the payments manageable we will need to extend the term as long as possible.19/20 years is probably the shortest term we could do, as I am 43 and husband 42 I hope this would be ok.

The other thing is trying to pay back the additional £6K we owe our family. They are not putting pressure on us, however we know we need and should pay this back in the very near future. If we are successful with one of our PPI claims, this could potentially pay this debt off, however I am not that hopeful of a successful outcome so can't rely on that. We don't have enough money left on a monthly basis to make a monthly contribution to them so that's not an option (unless I stopped my DMP but that scares me and after nearly 6 years wouldn't want to do anything that will set us back in time again!) The only other option left would be to borrow against the house. At the moment our LTV on the house is about 60%, however we know that there is no chance of us being able to borrow anything just now as our credit ratings are shot!

My next question would be regarding the defaults on our credit reports. My defaults went on in Aug & Oct 2009 so will be 6 years this year, and my husbands Bankruptcy was declared Oct 2009 so also 6 years. Do these defaults drop off automatically, or will they still show as my debt is still outstanding? If we were to approach our mortgage provider to borrow £6K after this is it possible? I am a bit confused about how the defaults work and have heard conflicting things.

I hope this all makes sense, sorry it seems like a bit of a ramble, but these are the things that go round my head at 2am!!

Thanks xx

[Pixie]

Re: Mortgage, DMP & Defaults

PlanB is our housing specialist and she should be able to help you when she's online later.

You say you're scared of stopping your DMP but I would seriously consider it once you've got your mortgage sorted out. If you started it in 2009 then your debts are probably pre 2007 and very likely to be unenforceable. Even though Stepchange dont charge fees they are backed by the banks.

[MrsD]

Re: Mortgage, DMP & Defaults

your current mortgage provider should be able to extend your mortgage to the year you retire, ours did this without any bother, just a phone call asking them to I would extend for as long as possible, reduces payments and gives you breathing space.

[Riz]

Re: Mortgage, DMP & Defaults

Defaulted accounts drop off your report 6 years from the default date whether the debt is paid off or not. Once dropped off there is no trace on your credit report that it ever existed.

Like wise the bankruptcy order drops off the same after 6 years. You may be asked on an application though if you've ever been declared bankrupt, and you would be obliged to answer yes. Bearing in mind that a record of the bankruptcy will remain on the London Gazette website, so a lender could check if they saw fit.

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Thanks for the replies!

I think the first thing I'll do is sort the mortgage. My current provider has been really great since this all happened in 2009. They put me onto an interest only mortgage when I asked and have continued to extend it, however we feel we have to start making repayments while we can afford it as we are not getting any younger!

I think I'll also need to seriously consider the DMP situation. I started on the unenforceable route last year but things all sort of went pear shaped and I lost track. I think my credit card is unenforceable but not the loan. One of the PPI claims I am pursuing is for the credit card and I'm hoping something comes of that, even if it results in reducing the debt it would still help in that respect. Can they default you again for the same debt? For example I have not missed a payment since I started the DMP, if I suddenly stopped paying it would they put a default on it again, therefore another 6 years of having it on my credit file?

Thanks again!

[MrsD]

Re: Mortgage, DMP & Defaults

a debt can only be defaulted once

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Thanks MrsD!

[PlanB]

Re: Mortgage, DMP & Defaults

Husband was made Bankrupt in October 2009 . . . We also owed a family member £24K (this was the amount we required to release as my husbands share of the equity in our house and the family member loaned it to us rather than see us having to sell our house) . . . We have also been on an interest only mortgage since 2009.

. . . . Our mortgage deal is coming to an end and we are due to speak to our provider and want to start back on a repayment mortgage . . . . we have less than 9 years left on our mortgage, however in order to make the payments manageable we will need to extend the term as long as possible.19/20 years is probably the shortest term we could do, as I am 43 and husband 42 I hope this would be ok.

The other thing is trying to pay back the additional £6K we owe our family. . . . The only other option left would be to borrow against the house. At the moment our LTV on the house is about 60%, however we know that there is no chance of us being able to borrow anything just now as our credit ratings are shot! . . . . If we were to approach our mortgage provider to borrow £6K after this is it possible?

Can you clarify something important. You refer to "we" and "our" mortgage so is your husband still named on the current mortgage and also on the deeds of the house? I can see you raised family money to buy him out technically, but was he actually released from the mortgage which was then transferred into your sole name? Or did you hand over the £24k to his creditors in lieu of selling-up to release his capital share (that's what it sounds like) but he's still on the mortgage/deeds?

Any mortgage deal you want to do (including extending the term) would have to involve him if his name is either on the loan or the deeds. He was BR in October 2009 so that will still show on the CRA files until October 2015 (as Riz has said). In April this year the FCA inflicted mortgage lenders with the MMR (Mortgage Market Review) which tightened the criteria for lending including remortgaging and further advances. Lenders now are obliged to ask borrowers, including existing borrowers, for far more information than in the past including a stress test of your future finances if/when interest rates start to rise again.

Any deal you try to negotiate with your current lender will involve credit scoring because you will in effect be re-underwritten. If you're both on the mortgage then you will both be underwritten. Most applications for a further advance (you want to add £6k to the existing loan) will have a question as to whether you've ever been bankrupt. This will depend on the lender so who is it?

What do you mean by your "mortgage deal is coming to an end" ? Do you mean you have a fixed rate interest deal which is due to expire so you will be faced with higher repayments, or do you mean you have a deal with your lender to charge interest only for a limited period only?

Sorry for all the questions but it's important to know the full story in order to find a way to work round the system.

If your lender doesn't know about the BR or your defaults then maybe it's best to let sleeping dogs lie until at least October but possibly longer. If there's no need to rock the boat then don't. Keep them in ignorant bliss. You've got 9 years left before they can take your mortgage away (unless you get into arrears) so why not let that run it's course on interest-only if that's allowed.

There is nothing to stop you making overpayments towards the capital balance from your new increased salary on an ad hoc basis. This will in turn reduce the monthly interest. See it as a DIY repayment mortgage (but check if there are penalties for overpayments). That way you won't have committed to regular higher payments so if you get hit with an emergency expense you can deal with it by not making a mortgage overpayment that month.

You've got options to explore and plenty of time to explore them preferably not at 2 am

[PlanB]

Re: Mortgage, DMP & Defaults

I think the first thing I'll do is sort the mortgage. My current provider has been really great since this all happened in 2009. They put me onto an interest only mortgage when I asked and have continued to extend it

Ooops I missed this post which answers one of my questions.

[PlanB]

Re: Mortgage, DMP & Defaults

Is this the same mortgage company where you have been reclaiming PPI through the FOS on another thread:

http://forums.all-about-debt.co.uk/s...l=1#post291529

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Hi and thanks PlanB!

The mortgage is still basically in both our names and is with Yorkshire Building Society. As my husband was bankrupt, we were required to release his share of the equity in the home which was £24K.

The mortgage deal I am talking about was a 2 year fixed rate. It comes to an end on 31st January. I don't have to do anything, they have advised by letter that my payments will just revert onto their standard variable rate, however this means my payments will rise by about £100 per month, this would obviously let me pay whatever extra we have to my family but at the same time I wouldn't be paying any capital off so it would feel like a waste of money. If I want to get another fixed rate I am required to phone and speak to an advisor, which I am happy to do but my concern was they would treat it like another application and ask for income etc and do a credit check even though at this point I am not wanting a further advance (that would be later on down the line I think) They moved me onto the current rate 2 years ago without even having to speak to us, but this time they are obviously not happy to do that. I feel like it's a bit of a catch 22 situation. I also wondered if we decided to just remain on the variable rate until after October, and then contact YBS to change deals and possibly ask for a further advance, wouldn't that look a bit suspicious that we have not paid anything to the capital in 6 years but now want to borrow more?

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Is this the same mortgage company where you have been reclaiming PPI through the FOS on another thread:

http://forums.all-about-debt.co.uk/s...l=1#post291529

No, I think we took the original mortgage out with either Bank of Ireland or Bristol & West (I can't remember exactly which one) We always remortgaged every couple of years to take advantage of the best deals. It was when we took out the original mortgage that we were sold the PPI

[PlanB]

Re: Mortgage, DMP & Defaults

I've checked the Yorkshire Building Society website which says you can switch to a new mortgage deal without a credit search or affordability check as long as you're not seeking a further advance or extending the term of the original loan. If you're worried about higher monthly payments from the end of January then this may be something worth exploring:

http://www.ybs.co.uk/mortgages/changing-deal/index.html

Before you get too excited that option may only be on offer to borrowers who have a squeaky clean payment record. You say you're on interest-only by agreement but have you missed any payments in the last couple of years?

If you want to get a further advance or extend the term of the mortgage you will be subject to more scrutiny similar to a whole new mortgage application including your husband's financial situation (is he in work?) since he is on the mortgage and deeds. More information and the YBS current lending criteria is in this link:

http://www.ybs.co.uk/mortgages/borrowing/index.html

It may be a little too soon to seek a £6k advance but possibly something you can ask them to consider after October when the defaults have dropped off both your CRA files. They will need to know the reason for the further advance when the time comes, so my suggestion would be to say it's for a garage or conservatory or home improvements rather than to pay back family who sorted your husband's BR problem. They will want to see estimates for the home improvements but that's easily obtained. They like things which enhance the value of the property not money to buy a new car or take an epic holiday.

I wouldn't do anything for a few days until we've explored all this a little more.

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Yes, this was my worry, that because we will need to extend the term of the original loan it could open up a can or worms!

No we've never missed or been late with a mortgage payment. As soon as we ran into difficulty I contacted YBS and explained what had happened. Initially we had asked for Interest only for 3 to 6 months until we had got back on our feet, but things took a lot longer, and the jobs my husband was able to get were so much lower paid or just temporary contracts. They never chased us up over it though which I was surprised about.

Ok I will hold off doing anything just now, I'm wondering if we should just pay the extra just now and whatever else save up to give to the family. There is always a chance my husband could get a wage increase at some point, the job he is doing just now he is not getting paid what he really should and his boss has touched on this with him. Again, we don't want to wait for that as nothing is certain ( we've learned that in the last 6 years!)

Thanks!

[Stressedoutmum]

Re: Mortgage, DMP & Defaults

Hi there!

Revisiting this situation in next few months. Husband has received a pay rise and will get a further one 3 months from now, so want to take advantage of that and change the mortgage back to repayment

We no longer need a further advance as we have fully paid off the money we owed to our family, which is brilliant! Our defaults have now gone from our files, though the debts are still outstanding and I am still paying my DMP, so I am wondering if asking for the mortgage to be extended what sort of questions will be asked? Am I best to take it over the longest period possible and keep the payments as low as possible instead of trying to pay it off quicker but stretching the budget every month? If they ask about outstanding debt will the fact I have my DMP with over £20K of debt still be a problem. We can comfortably afford the increase in mortgage payments each month if taken at least over 20 years. I am 45 and husband is 44.

Edited to add, I had also wondered if adding my DMP debt to the mortgage would be an option. Our LTV would be fine, but obviously our salaries would need to be looked at but we also don't have any other loans or cards. Other than normal bills my DMP is the only additional thing we pay out at £138 a month and it will be 2030 or something ridiculous like that before it's paid off! If I consolidated it to my mortgage I would save money on a monthly basis, although I'd pay more in the long run.

Thanks again