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Voluntary repossession an option?
Options
sarahjane88
Posts: 31 Forumite
Myself and a friend took out a mortgage a couple of years ago, but now we are both struggling to make repayments.
Neither of us are now living in the property as we cannot afford to (myself am now pregnant and living with my boyfriend), yet the HBOS seems unwilling to help.
I moved out last June because my contract at work dropped to 16 hours and my friend lost her second job at Christmas.
We have been trying to find solutions such as letting out the flat but the banks are very unwilling to help. They told us we will be charged £1500 in order to change us onto a variable rate before we can even apply for permission.
We have looked at going onto an interest only mortgage but this will only save us £30 because our interest rates are so high.
The bank gave us their head office number to reduce payments, which I have phoned, however I have been warned if the arrears amount becomes more than our monthly payment it will affect our credit rating. They will only reduce our payments for three months. Then they will expect to claw that money back. (By which point I will be on maternity leave and have even less income!!)
All my mortgage advisor has advised is to sit tight until September when my fixed term rate ends but I am struggling to make ends meet. The council tax office are also only giving me a 10 per cent discount even though no-one is staying there.
I just want rid of the flat. I have been trying to protect my credit rating but I am wondering if it is even worth it? Should I just go for voluntary repossession and accept the negative equity since in Scotland they can only chase me for 5 years?
I would sell the property myself but I am realistic considering the current climate and know it will never sell. The age and location of the building is undesirable, and riddled with problems which will cost more money to address.
Please can anyone help?
Neither of us are now living in the property as we cannot afford to (myself am now pregnant and living with my boyfriend), yet the HBOS seems unwilling to help.
I moved out last June because my contract at work dropped to 16 hours and my friend lost her second job at Christmas.
We have been trying to find solutions such as letting out the flat but the banks are very unwilling to help. They told us we will be charged £1500 in order to change us onto a variable rate before we can even apply for permission.
We have looked at going onto an interest only mortgage but this will only save us £30 because our interest rates are so high.
The bank gave us their head office number to reduce payments, which I have phoned, however I have been warned if the arrears amount becomes more than our monthly payment it will affect our credit rating. They will only reduce our payments for three months. Then they will expect to claw that money back. (By which point I will be on maternity leave and have even less income!!)
All my mortgage advisor has advised is to sit tight until September when my fixed term rate ends but I am struggling to make ends meet. The council tax office are also only giving me a 10 per cent discount even though no-one is staying there.
I just want rid of the flat. I have been trying to protect my credit rating but I am wondering if it is even worth it? Should I just go for voluntary repossession and accept the negative equity since in Scotland they can only chase me for 5 years?
I would sell the property myself but I am realistic considering the current climate and know it will never sell. The age and location of the building is undesirable, and riddled with problems which will cost more money to address.
Please can anyone help?
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Comments
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Just to let you know that although you are in Scotland the 5 year time period is for them to begin to chase you for the money - not 'only chase you for 5 years', in reality they can chase you for as many years as they want as long as they begin the chase within 5 years of incurring the shortfall.0
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i dont know mothing about it however could you do this
sell at a fixed really cheap price
and if there is a differnce, take out a loan for that differnce equity between both you and your mate and pay it off that way
in therry say its 100k your motgage 90k and you sell for 70k take the 20k split, 10k loan, alot less than the motgage"Lifes a climb - but the view up in fantastic"
Gina Shoe Challange - £150 14 days - day1 £3.010 -
They can chase you for the rest of your life I'm afraid, and if you let them sell it at auction after a repossession they are likely to accept far less than you might get for it.
Have you looked into how much you could rent it out for? I would not be getting too bogged down at this stage in speaking to the lender about permissions etc, surely your priority should be ensuring there is money coming in to pay the mortgage. If the flat is empty then surely it is better to have some money coming in to pay the mortgage or at least a big chunk of it.
Council tax - If there is nobody living there at all then surely at the very least you would qualify for the "single person" discount, which is a 25% reduction?0 -
If I rent it out I would be able to cover most of the mortgage, if not all. I don't understand how hard it is for the bank to allow me to do this immediately so that they can still get their payments.
I have a leasing agency waiting to take the property on. Could I just let them go ahead? Then properly follow up permission applications in September when I am on a variable rate?
I have spoken to the tax office and all they have offered me is a 10% discount because I have some furniture in the house. I am now considering telling them that I am now living there myself just to get the 25% discount.0 -
I would look at getting it rented then. That kills two birds with one stone as a) you get some income/cashflow to pay the mortgage, and b) you do not need to worry about council tax etc. when it is let out.0
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Rent it out without informing the bank? Would that be ok to do?0
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sarahjane88 wrote: »Rent it out without informing the bank? Would that be ok to do?
No, but what is the alternative?0 -
Why not sell the place?
How big would the shortfall be?
I think if you go down the renting it out route you will have a lot of repair costs, etc. House prices are likely to continue to fall and it sounds like your capital repayments are pretty trivial.0 -
Radiantsoul wrote: »Why not sell the place?
How big would the shortfall be?
I think if you go down the renting it out route you will have a lot of repair costs, etc. House prices are likely to continue to fall and it sounds like your capital repayments are pretty trivial.
A sensible thought: the problem is that the mortgage lender has to agree or no sale can take place, and they are unlikely to agree to a sale for less than the amount they are owed. So the OP might need to take out an unsecured loan for the difference, and the interest on this could prove crippling.0 -
Voyager2002 wrote: »A sensible thought: the problem is that the mortgage lender has to agree or no sale can take place, and they are unlikely to agree to a sale for less than the amount they are owed. So the OP might need to take out an unsecured loan for the difference, and the interest on this could prove crippling.
I suspect the lender will agree to the sale providing it is at market rate. It depends on how big the shortfall is likely to be. If it is huge the OP will probably need to consider bankruptcy.0
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