Advice needed on an unconventional re-mortgaging

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davidc

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I would appreciate any advice on how to get out of a difficult financial situation I find myself in..

I have a bad credit rating due to a failed business 2 years ago, with several judgements, mortgage and loan arrears, outstanding creditors and credit cards. I have been paying agreed amounts to most of these, in particular the financial institutions, but find these payments increasingly difficult to make.

In 1999 I bought 20 acres of land with a derilict cottage on it, with a residential mortgage which now stands at 130,000, including 5000 arrears. At the time of buying, it was my intention to renovate the cottage and live there, but I ended up investing my available funds in the business which subsequently failed. I have been making reduced mortgage payments for the last 2 years. The bank concerned, with which I also have an outstanding business loan, personal loan and credit cards, all secured by the property, will not consider a refinancing structure, and have passed my account to their insolvency department. I have also tried almost all of the other mainstream institutions, who have also refused me because of my credit ratings, judgements, etc..

My land and cottage is now worth in the region of 300,000, which means I have equity of 170.000 in it. If I could release this equity, I would be able to clear my outstanding debts and be able to renovate the cottage and live there, as I am currently renting a house. It is also my intention to apply for Planning Permission to develop some of the land in holiday homes, and require financing for the application.

Any of the lending institutions I have approached have told me that they will not remortgage the property, because it is not a residential property, and that they won't take land as security. This is even apart from my bad credit rating.

Can anybody suggest a financial institution who would be prepared to look at this proposal, or who would be prepare to accept the property as security for financing. The land would be worth in excess of 1m with planning permission.

Sorry about the length of this query, but I wanted to explain my situation as clearly as possible. I would really appreciate any advice on this, as I'm at my wits end.
 
I can't see any lender taking on bad debt and lending more money. Why not sell the land, clear all your debts and start afresh?

Sarah

www.rea.ie
 
Thanks for the reply, Sarah.

The debt outstanding is approx 60,000. My existing mortgage is 130,000, so I would be looking for a minimum remortgage of 190,000, using the property value of 300,000 as security. I am in a permanent job with an income of approx 5k net per month, so I would be capable of making the repayments. Surely there must be a lender prepared to take this into account..?
 
You could try Start or one of the other sub-prime lenders but given your track record you'd be paying a punative rate for up to five years (if they lend which isn't a given) plus your rent and other living expenses. If you aren't coping with your debt repayments at the moment why borrow more?

Sarah

www.rea.ie
 
David,

If you are earning 5k net a month then could you not tighten you belt for a few months and almost clear your debts. Your rent couldnt be that much and seeing as the land would be worth 1 million with planning i would imagine you are not based in Dublin and that your rent is not very high. You must have some other serious overheads if you are not easily able to service these relatively modest debts on such a good salary. if you open a credit union account and save 2k a month with them you may not be long before they would give you a large loan that would allow you to consolidate your debt into one loan.(prob at a much lower interest rate). Is there more info that you could share?
 
The arrangements I have made with various creditors and lending institutions amount to approx. 3.5k per month,which is at the top end of what I can afford, so whatever the repayments would be on a 190,000 remortgage would surely be less, even taking my bad history into account.?
 
It may well be worth taking a trip to MABS, they may be able to help arrange lower agreements with the repayments leaving you more spending money month to month (with every spare euro at the end of the month put back directly against the loans).
 
Satanta, I have already negotiated the lowest possible repayments with the creditors..

What I am really looking for is a lending institution which will take into account the current value of the property, it's future potential value, and my ability to repay, based on my current record of repayment...Is anybody aware of any institution which will lend for land with development potential.?
 
Sarah's suggestion might be the best. Although rates are higher with these institutions, they might not be as high as the interest on your current debts.

Is there any chance you could whip the house into some sort of shape so that it would qualify as a residence?
 
It would take about 50k to make the house habitable, so it's not really an option at the moment..

Who are the sub-prime lenders in Ireland, and does anybody know if they lend commercially, or for circumstances such as my own, or will they only lend for a conventional residence.??
 
If regular lenders won't cater for you because of debt issues then going to a sub prime lender is probably not the most prudent idea.
 
Who are the sub-prime lenders in Ireland, and does anybody know if they lend commercially, or for circumstances such as my own, or will they only lend for a conventional residence.??
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Sub prime lenders eg Start and GE Money, will only take a residential property as security. As the cottage you have on the land is not habitable , it is not considered residential. Start have launched a self built product, you may be able to convince them that the refurb of the cottage falls into this category, if you can convince them of this , they will also allow you borrow on the strenght of its value on completion of the work to repay existing debts.


their website does not seem to be up and running yet http://www.start.ie/ their phone number is 01 2096300

good luck with it.
 
Clubman, a sub prime lender appears to be the ONLY resort for people with debt issues such as mine, if regular lenders won't cater for them..Why else would people use them?...My original question was to establish if there was an alternative to them, which there appears not to be..
 
My point is that with existing debts/liabilities that put regular lenders off the last thing you might want to do is to incur more debt with a lender who charges over the odds. Just a prudential comment. Fair enough if you choose to act otherwise. That's your call and responsibility.
 
davidc said:
Clubman, a sub prime lender appears to be the ONLY resort for people with debt issues such as mine, if regular lenders won't cater for them..Why else would people use them?
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They are the only source for someone in that situation to borrow from, the issue is whether someone who the prime lenders feel is a high risk for lending should consider the risks of lending at the very high rates of sub prime lenders given previous troubles.
 
ClubMan said:
My point is that with existing debts/liabilities that put regular lenders off the last thing you might want to do is to incur more debt with a lender who charges over the odds. Just a prudential comment. Fair enough if you choose to act otherwise. That's your call and responsibility.
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I think he wants to consolidate loans so repayments can be brought down?
 
Point taken, and thanks for the advice...It would be my intention to obtain a conventional mortgage as quickly as possible after this, I just need to extricate myself from this situation as soon as possible, so it appears I'll have to go down the dreaded "sub-prime" road..

Thanks to all who replied to this post..
 
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