Home > Case Studies > Stuck With a Mortgage I Couldn't Afford: A Case Study

Stuck With a Mortgage I Couldn't Afford: A Case Study

By: Emma Eilbeck BA (hons) - Updated: 15 Oct 2012 | comments*Discuss
 
Property Mortgage Svr Ltv Lender

If you are stuck paying a mortgage you cannot afford, packing up and selling may not be the only option open to you. The government is doing its best to try and prevent people being turned out of their houses, so it is worth seeing what help is available.

Jack and his wife had two small children and had lived in their property for about six years. When they bought the property they borrowed as much money as they could, which ended up with them having a mortgage for 105% of their property’s value. Up until recently they had been able to remortgage every two years onto a similar priced deal, but thanks to the credit crunch they were finding it almost impossible to get an affordable rate.

What to Do

“Me and my wife went to visit a mortgage broker who informed us that no lender was now offering 105% mortgages. He instructed a valuation to be carried out on our property which to our horror came back saying that the value of the house had only risen very slightly,” explains Jack.

“This meant that we could not apply for a mortgage at 90% LTV as there was not enough equity in our property. The only option open to us would to go onto our mortgage lender’s SVR rate at the end of our current deal,” explains Jack.However, the lender’s SVR was substantially higher than what they had been used to paying on their mortgage, they knew that if they were forced onto this rate they would have a struggle paying.

Your Options

“We had read about how the government is trying to do a lot to help people who cannot afford their mortgage repayments, so we looked into a few of the schemes available,” says Jack.

They went to visit a mortgage broker to ask about the schemes, he told them that the first thing they should do is speak to their lender and ask if they can defer mortgage payments for a couple of months or take a mortgage holiday.

“We did think about this option but the problem was that we were never going to be able to afford the repayments as long as the rate was so high, and there was no hope of us having higher salaries in a few months time either,” explains Jack.

Seeking Government Help

“We were advised by our mortgage lender that we could apply for the government’s mortgage rescue scheme. This was designed for people who had experienced a payment shock and were unable to meet their mortgage payments,” explains Jack.

The shared equity part of the scheme, which is what Jack and his family were best suited to worked by the Registered Social Landlords providing an equity loan, which allowed their monthly payments to go down. Up until the 2009 Budget they would not have been able to apply for this because they did not have a lot of equity in their property, but the scheme has now been opened up for people who are in negative equity.

“The loan that the RSL provided meant our mortgage payments were at a level we could cope with. The process to get the loan was quite time consuming and there was a lot of paperwork to fill in, but it enabled us to stay in our home,” says Jack.

Jack is on a stable income so the RSL was willing to offer the loan as they knew there would come a day when Jack and his family would be able to meet their mortgage payments and pay off the loan.

Now more than ever the government is trying to keep as many people in their homes as possible, they do not want to see anybody repossessed, if it is preventable. So if you are worried you cannot make your mortgage payments you should speak with your mortgage lender in the first instance and then see what government help is available, as there may be help out there that could save your home.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Kezzah01
    Re: The Right to Acquire Scheme
    i am currently looking into the right to acquire for our property from guinness partnership. up to now they have said our property…
    22 August 2019
  • Stephanie
    Re: Are You Classed as a Key Worker?
    I am a teacher working for a training provider delivering apprenticeships in health and social care. I also provide essential…
    5 August 2019
  • Niss
    Re: Buying Your Council House
    How long do I have to live in my council house after getting a mortgage before I can rent it out.
    28 July 2019
  • Pecks
    Re: The Right to Acquire Scheme
    I would like to buy home but its unclear the housing association built or bought thing its stillcouncil in my eyes just a limited…
    28 July 2019
  • Tazz
    Re: The Right to Acquire Scheme
    While under raglan I was told I could buy my flat but I was at risk of being made redundant so I didn’t go for buying my flat now…
    26 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Holly
    Re: The Right to Buy Scheme
    Hello can some one help me plzs my partner as lived with he's mum and dad for many years about 25 to 30 years and his parents have lived…
    17 July 2019
  • Holly
    Re: Buying Your Council House
    Hello could some one help me my partner as lived with he's mum and dad most of he's life but he had to move out do to a family member…
    17 July 2019