Negative Equity - advice please

gilligansyle · 8 January 2008 at 12:19AM

I have posted on the DFW board as I am struggling financially. Everyone has been really helpful, but I wondered if someone could answer this question.

My mortgage and secured loan together are about £127500. There are early redemption penalties until April next year, so until then if I sold I would be in negative equity, especially with fees etc.

The repayments are over 2/3 of my income, because of the equity situation I can't remortgage.

So my question is:-
is owning a house all its cracked up to be?

I could rent a house like mine for half what I am paying. If I can hang on until next year that is. If I can't what is the situation if I sell for less than the outstanding secured debt. Can I sell for less than that?

clutton_2 · 8 January 2008 at 12:39AM

you can sell your home for whatever figure you want - but you will still owe however much you still owe on your mortgage, and lenders are allowed legally to pursue you for 6 or 7 years. You may want to go to CAB and talk to one of their debt advisers - you clearly cannot sustain 2/3rds repayments for another year.

Richard_Webster · 8 January 2008 at 3:50PM

you can sell your home for whatever figure you want

If the Lender will allow you to do so.

Buyer's solicitor will want mortgage cleared from title and lender will only clear it if sufficient money is paid. If not cleared then buyer will not go ahead.

If sale price is less than mortgage they are not that likely to agree to this, but they might, if they feel that the property might go down in value and they would be a worse position later. Then they would want you agree to pay the rest of the loan on an unsecured basis. You do have to realise that you cannot force them to do this. If they won't agree then the mortgage won't be cleared off and no buyer will buy your house.

pinkshoes · 8 January 2008 at 4:06PM

gilligansyle wrote: »

So my question is:-
is owning a house all its cracked up to be?

If you plan carefully, do the maths, don't borrow more than you can feasibly afford, set a sensible and realistic budget, and anticipate things like interest rate rises, house price drops, then yes, owning a house is fabulous.

I notice your 20 year old son lives with you. Could he help you out with the mortgage, or take over half of it?

Or perhaps if not, he (or you!) would agree to have the box room, so you can rent the largest of the 3 bedrooms out to a lodger?

JohnInDebt · 8 January 2008 at 4:29PM

clutton wrote: »

you can sell your home for whatever figure you want - but you will still owe however much you still owe on your mortgage, and lenders are allowed legally to pursue you for 6 or 7 years. You may want to go to CAB and talk to one of their debt advisers - you clearly cannot sustain 2/3rds repayments for another year.

Good advice about seeking help now before it's too late, but mortgage debt can be chased for 12 years (Section 20 of the Limitation Act 1980).

gilligansyle · 8 January 2008 at 10:37PM

Because of the condition of the house, I would not get top price for it, I would be able to get enough to clear the first mortgage, but not all of the secured loan. So technically, the secured loan could convert to unsecured?

I was really just wondering what the position is.

I took out the mortgage when there was someone else contributing to the household. He was not party to the mortgage for various reasons, and that is why this has arisen. Together with the fact that my son lost his job in November.

kunekune · 8 January 2008 at 10:50PM

Being brutal, because that's what I think you want us to be. If your son is living with you and paying no rent, but receiving benefits, you are saving DWP a lot of money. If he wasn't at home, you could rent his room out and probably make enough to pay the mortgage. Has he tried every route to find a new job? I know we love our children, but there are limits if they are adults and are putting our own financial security at risk. If he moved out, would he get help with his rent? You need to ask some hard questions: no-one is going to be nice to you just because you are being nice to your son, however gorgeous he is.

Rabiddog_2 · 9 January 2008 at 4:19AM

Yes your son should pay you rent which is documented (ie rent book) , he will get this back from the DWP as he would if he lived anywhere else.. so HE will be no worse off and you will get to keep your house. There is nothing illegal in this. Plus his £60pw quid dole money could help out. SO £80pw rent plus £30pw from his dole equals House saved, conscience clear, son incentivised :T

gilligansyle · 26 January 2008 at 2:57PM

Rabiddog wrote: »

Yes your son should pay you rent which is documented (ie rent book) , he will get this back from the DWP as he would if he lived anywhere else.. so HE will be no worse off and you will get to keep your house. There is nothing illegal in this. Plus his £60pw quid dole money could help out. SO £80pw rent plus £30pw from his dole equals House saved, conscience clear, son incentivised :T

Have only just seen this reply, it is the local authority Housing Benefit who would pay the rent, and I am told that they would see this as a contrived tenancy and as such fraudulent.

lynzpower · 26 January 2008 at 3:34PM

have you put in a HB claim for your interest share to be paid by HB?

gilligansyle · 26 January 2008 at 3:42PM

I don't get HB as I am in full time employment, it is my son who is unemployed. The poster was suggesting that I charge him rent and give him a rent book and that he gets DWP to pay the rent. My response is to the fact that it would be HB paying the rent and it may be fraud.

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Negative Equity - advice please

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