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  1. Hi, Just wanted to share the story (to date) of my sister-in-law's experience with the housing market. Wondering if there are possibly hundreds of others out there who made similarly disastrous decisions, and what the fallout will be for everyone. A timeline of events: Nov 2007: SIL and her boyfriend view a new build 3-bed terrace house on a Barratts estate in the southwest. House is ok size, but backs onto a railway line. Also, is in an area that's considered poor. They agree to buy at full asking price (nearly £190k) using barratts "dreamstart" mortgage scheme: 25% equity loan from barratts acting as deposit, 75% "traditional" loan from either nationwide or Halifax, can't remember which. 25% equity loan is interest free for 10 years. Due to be paid back in a lump sum when house is sold or in 10 years, whichever is sooner. Amount paid back will be 25% of value of house, at time of sale or whenever paid back, whether value is up or down from original purchase price. Summer 2008: SIL and boyfriend get married, spend maybe 3k on wedding. Quite modest. Both still employed in average-wage paying jobs. Everyone in the family assumes they have a plan to repay equity loan. Fast forward... Autumn 2012: SIL has twins. It becomes apparent that despite having the same reasonably paid, steady jobs with a combined income of around £45/50k pa, SIL and BIL are struggling with money. They borrow around £16k from their parents for things like a new car and who knows what else. Autumn 2014: SIL decides to move house, goes about getting house valued etc. Value has dropped (big surprise) to around £155k. All equity paid in is now wiped out, a couple of thousand down on that as well. 25% equity loan still owed in full, no savings in place to pay that back, although the reality of that doesn't seem to register yet. Moving is out of the question. March 2015: SIL goes through accounts, works out that she and husband will have to work overtime for next 2 years and budget extremely tightly, putting all extra earnings into overpaying mortgage. The hope is that the equity will build up to at least 10% so that a re-mortgage will be possible, in order to pay off the barratts equity loan of 25%. So there you have it. I wonder how many people made similar decisions and seemingly forgot about the equity loan? I'm not sure when schemes like these first came about - could have been 2007, so will there be a surge of repossessions in 2017? One flaw in my SILs current plan, AFAICS, is that once there is some equity in the house, say 10%, and this is assuming the value of the house doesn't drop even more, is that if they are refused a re-mortgage in 2 years time, what is to stop barratts just repossessing the house since they have a 2nd charge on it? Bit of a long winded story, hope it made sense.
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