Like giving crack to a cocaine addict: my life with a 110% subprime mortgage

In 2005, I was given a 110% mortgage by a mainstream lender. For a feckless 29 year old with a history of bad debt, it was like pushing crack on a cocaine addict.

Perhaps that’s a bit strong – but that “free” money can be financially lethal, if not literally so. To this day, I see it as one of the most irresponsible things any business has ever done to me. Yet, it was commonplace at the time and for that reason I won’t name and shame the lender.

Oh screw it, it was Northern Rock.

I’d been working as a journalist for a national newspaper in London. This time I’m really not going to name names due to sheer embarrassment – the paper used to support the Nazis and is the only paper in the world to be banned as a credible source by Wikipedia. You know the one.

The rabbit hutch I’d been living in near Kensington High Street was being sold and, as a friend of mine – a biscuit designer – lived a short commute away in Brighton (this was before Southern Rail abolished the concept of achievable commutes), I decided to do a bit of sofa surfing on the south coast.

Once more, you’ll notice, I’ve declined to name a name – this time, the biscuit designer’s. I will continue unapologetically in this manner as I have no wish to keep London’s libel lawyers in gin and funny wigs. And if you think the people in this blog post are you, there’s an outside chance you’re wrong. But it’s slim.

I was a card-carrying, flag-waving, ocean-going member of the UK’s large subprime community.

They call Brighton “The Graveyard of Ambition” because when Londoners move there (it’s always Londoners), they never move away. But they carry on working in the capital before eventually getting sick of the unachievable commute and taking much poorer paid jobs locally so they can continue living by the sea.

I was immediately bitten by the Brighton bug and suggested buying a flat with my biscuit designer friend (I’m going to call him ‘Dave’ because I can’t think of any other names). At that point, house prices were rising as quickly as the credit was flowing.

So Dave and I decided to buy a two-bedroom flat together on the sort of whim that might persuade you to change up from Debenhams to Calvin Klein boxer shorts.

They gave us money for nice furniture. A year later we were still watching TV in two fishing chairs.

In terms of risk, I wasn’t 100% prime or even near-prime. I was a card-carrying, flag-waving, ocean-going member of the UK’s large subprime community. I viewed cash machines in the way normal people view fruit machines, whooping with joy on the rare occasions they paid out.

But no-one at the bank seemed to care about my credit-worthiness. In fact, the heart-warmingly generous lending manager reminded us we’d need something to sit on and asked us whether we might want a few extra grand for some nice furniture.

Fast forward a year and we were still watching TV in two fishing chairs – you know the ones with beer holders. There was no nice furniture.

So where had the money gone?

In the mildest of salutes to responsibility, we’d both paid off credit cards – and then started using them again. We’d also shrunk our overdrafts to almost nothing – and then watched as they rebounded enthusiastically into the red.

I asked Dave just yesterday if he remembered how poor we were.

“Don’t be stupid,” he said. “We were loaded; we lived like kings – well, for a while anyway. I was the only biscuit designer in East or West Sussex who had a plasma TV on my bedroom ceiling.”

He really did. No girlfriend – but a plasma on the ceiling. Class.

We also had the most expensive Sky TV package, the fastest broadband, and the most luxurious health club membership. We were living a bit like Withnail and I. Dave was the decadent and devil-may-care ‘Withnail’ and I was ‘I’, the worrier who reluctantly participated in the high life, nonetheless.

But reality soon caught up with us. We began missing payments on bills. Letters from phone companies, banks and credit card companies became a daily occurrence. Honestly, we had more mail than the BBC at one point. Luxury items, like the gym and Sky TV, were cancelled.

Everything turned to shit. You don’t realise how depressing it was until you look back at it.

I remember a particularly sad moment when we both ended our contract with the Grosvenor fine wines club. But the fiscal environment had worsened too. Dark clouds were gathering.

Interest rates had risen and the mortgage repayments, which were variable, climbed sharply. I was forced to change jobs and took a £10k pay cut. Everything turned to shit. You don’t realise how depressing it was until you look back at it. For the next few years, money was a constant worry. And it drove a wedge between Dave and me.

As I’ve implied, Dave was a little bit more irresponsible – or Withnailish – than me and always seemed to owe me money. Communication broke down until it was conducted almost exclusively by half-smudged Post-it notes.

If we’d just rented, like we should have, we wouldn’t have gotten into that mess.

And we *were* in a mess. Dave got really close to bankruptcy and eventually became the shamed-faced owner of an Individual Voluntary Arrangement.

Credit wonks will know what that is but, for the cooler kids, it’s a way of avoiding bankruptcy and involves brokering deals with all your creditors to come up with a single monthly payment that’s shared between them. You commit to pay consistently and, in return, they stop levying interest and charges.

Things took a turn for the (even) worse when Dave moved to Casablanca, saddling me with the whole debt.

What saved me from that was the mortgage holidays we took. Mortgage holidays, you say? Oh yes! You can stop paying your mortgage for a few months. But, of course, that too has its downsides. The interest from the monthly payment you’ve decided to take as a payment holiday gets added to your mortgage. If you’ve ever taken one of these holidays or inquired about them, you’ll have noticed that they add a few pounds a month to your future mortgage payments.

Oh, and then things got even worse. Swaggering like a modern day Humphrey Bogart, Dave literally moved to Casablanca, in Morocco, where the biscuit design industry was booming. He somehow persuaded me to take legal ownership of the whole negative-equity-ridden flat, saddling me with the entire debt.

Helen put a stiletto up my behind and told me to get a proper job.

But, look. I’m still here. I’m a survivor! So how did I pull through?

Love, actually.

Yes, I met my then future and now current wife, Helen, and moved in with her, enabling me to rent out the Money Pit so that it paid for itself. I also got a great job – in Brighton. So much for The Graveyard of Ambition. I think, looking back, that was Helen’s doing too, since she put a stiletto up my behind and told me to get a proper job.

So I was able, slowly, to pay off my debts and now, 14 years later, I owe roughly what the asking price of the house was when we bought it in 2005. But, of course, it’s worth a lot more – about £70k more – and provides a good rental income.

So what did I learn?

First, avoid mortgage holidays. In fact, if you need one – and there’s no serious change in your circumstances – you probably shouldn’t have a mortgage in the first place.

But, actually, you should think about whether a mortgage is right for you in the first place. Renting would almost certainly have suited Dave and me better.

Finally, be careful who you buy with. I don’t mean Northern Rock, in my case. I mean Dave. If you’re going to buy with someone – if you have a Dave or Davina in your life – make sure they’re not the sort of person who thinks a ceiling-mounted plasma TV is cool.

My experiences and the lessons I learned inspired me to pass on that knowledge that now seems embarrassingly obvious – but never was – to others. This was one of the motivations I had when creating Mouthy Money alongside the site’s editor, Amy Rowe.

As you can see (you’re on it now), it’s a money blog – or digital magazine – with some 20 writers telling inspiring stories about their every day money challenges and successes. There’s loads here about mortgages and house buying so, please, take a look around. Touch things, if you really have to. But don’t break anything.

We’re different from the typical money blogger site because we don’t target people who think they need financial advice. Our audience is people who enjoy reading about other people’s lives and learning from their mistakes and successes.

They’re people who hate reading about finance but love reading about people’s financial decisions.

Before I go, I’ll leave you with another quote from Dave. I asked him what advice he might have for people thinking of getting a mortgage.

He thought for a minute, took a swig from what I now imagine to have been a Malibu and Coke and said: “If you can afford it, do it. If you can’t, do it anyway. It’ll be all right in the end.”

And, speaking as Dave’s chief creditor, that is most definitely NOT the moral of this story.