Getting house reposessed deliberately?

Cantdance_2 · 12 April 2008 at 11:39AM

Okay, sorry, I picked a deliberately controversial heading to get attention, but it's pretty much what I want to ask!

Basically - wife and I split up in October and put the house on the market there and then. House is supposedly worth £155k, has been reduced a couple of months ago to £150K to try and sell but no luck so far.

I am now living at my parents, and till the house is sold I'm still paying half the mortgage and bills so I can't go and rent my own place. Pretty depressing!

Our mortgage is for £137K but with early redemption penalty of about £6K we just can't afford to drop the price any more. I'm kind of getting desprerate here and want to just go to the mortgage company and say 'Here, have the damn house...' -neither of us wants to live there and even if we did sell for £150K, we would be struggling to pay the solicitors and estate agents fees.

So what are the steps that would normally lead to a house getting taken back by the bank? Could we potentially speed up the process by doing it voluntarily? And would it automatically lead to bankruptcy?

Any help gratefully received.

P.S. there's also the small matter of a huge pile of unsecured debts but I can still make the payments on those and rent somewhere if we can get shot of the house!

MissMuppet · 12 April 2008 at 11:43AM

Hope someone can help you on this!!

dexters_mum_2 · 12 April 2008 at 1:50PM

How long before your redemption penalty is up?

Have you considered renting it out at all in between now and when the redemption penalty is up? One of my friends is doing this at the moment as he has 7 months left and has just split with his wife, both have agreed to a 6 month shorthold tennancy to fill the gap, I'm not sure if they are still advertising it for sale though

jamesd · 12 April 2008 at 2:39PM

Lets say you do this. Here's what will happen:

The mortgage lender will add to your debt their legal costs and estate agent bills for the sale.
The mortgage lender will chase you both independently for the whole amount of the difference between what the property gets when sold quickly and the mortgage plus costs. If you are the person with the money, it'll be you that ends up paying.

You should expect the mortgage company to sell for at least 10% less than the best price you can get, so there's no salvation from deliberately getting the place repossessed - it'll just add that much to the debts.

There are some approaches that could be considered. Wife renting a cheaper place and you both renting out the house is one. Switching to interest only to reduce the cost is another.

If you sell it now you'll have to pay the mortgage lender the difference between the sale price and the mortgage balance plus the early redemption penalty. They won't allow the sale to complete unless you can pay this - protecting them is why it's secured.

In short, you're stuck with a loss if you sell now but if you go with renting it out you have a chance to keep the place for a few years until there's a chance of not taking a big loss.

mpsavuk · 12 April 2008 at 3:26PM

Renting brings it's own costs though. Agents fees, maintenance & repairs, insurance etc.

Also the mortgage lenders would have to agree if you were to do this properly.

And of course you'll need to ensure the rent covers the mortgage and all the other costs.

Renting is a business and not a decision to be taken lightly as a quick "get of trouble" clause.

Gorgeous_George · 12 April 2008 at 3:44PM

It's a bad siutuation that will be made worse by repossession.

Is the ex living in it? If so, she should pay the mortgage or at least the majoriy of it. Otherwise, you may as well live in it. This is a JOINT problem.

If you don't want the house, sell it. You may need to drop the price to 125K to do so. That'll hurt but the pain now is nothing compared to what is likely to happen if you don't resolve the problem now.

In the States, hand the keys in and the debt disappears. Over here, the banks will chase both of you until you both die, or the debt is repaid. And the costs will just keep going up. Repossession should not be an option.

GG

Capricorn_One · 12 April 2008 at 10:42PM

Cantdance wrote: »

Okay, sorry, I picked a deliberately controversial heading to get attention, but it's pretty much what I want to ask!

Basically - wife and I split up in October and put the house on the market there and then. House is supposedly worth £150k, has been reduced a couple of months ago to £145K to try and sell but no luck so far.

I am now living at my parents, and till the house is sold I'm still paying half the mortgage and bills so I can't go and rent my own place. Pretty depressing!

Our mortgage is for £137K but with early redemption penalty of about £6K we just can't afford to drop the price any more. I'm kind of getting desprerate here and want to just go to the mortgage company and say 'Here, have the damn house...' -neither of us wants to live there and even if we did sell for £145K, we couldn't afford to pay the solicitors and estate agents fees.

So what are the steps that would normally lead to a house getting taken back by the bank? Could we potentially speed up the process by doing it voluntarily? And would it automatically lead to bankruptcy?

Any help gratefully received.

P.S. there's also the small matter of a huge pile of unsecured debts but I can still make the payments on those and rent somewhere if we can get shot of the house!

Hi Cantdance,

don't know if anyone's mentioned this but there are companies out there who will buy your house from you. Check the local papers.
Sorry if you knew this already.

Best wishes for the future.

Ed.

jamesd · 13 April 2008 at 4:30AM

Note that the companies which will buy look to buy at a price that is at least 15% below the market value, so you lose 15% more than even dropping the price to the point where you can sell it yourself.

allan673 · 13 April 2008 at 8:12AM

can you pay interest only

HelpWhereIcan · 13 April 2008 at 9:50AM

From the sounds of it there is a realistic chance that your credit profile has already been damaged by your situation.

If at all possible do not make it worse by taking extreme action like that. The damage a repossession can do to your chances of getting somewhere else in the future (possibly even rented) is not to be underestimated- 6 years generally where you are unable to access credit or mortgages at high street rates.

For the unsecured debts, have you investigated coming to an arrangement with them through Consumer Credit Counselling Service or Payplan? If things are very serious, it may even pay to consider an IVA.This should hopefully free up some income to help keep the mortgage payments up.

Talk to your lender, explain the situation and see if they will accept a period of interest only payments to allow you the breathing space you need to sell the house. This could buy you the time you need to get a suitable offer and/or wait until your early repayment charge is over.

Good Luck

Cantdance_2 · 13 April 2008 at 4:38PM

Hi All,

Thanks very much indeed for your help - let me give you a bit more info so we can properly weigh up the options!

Our mortgage is with Northern Rock and is a 100% LTV mortgage, currently on a discounted rate, due to end in March 2009. We already are paying interest only. In addition to the mortgage for £137K there's also an unsecured loan of £30K which is linked to the mortgage, same rate, same length of term (yes, so over 30 years - eek!) If we sell the house and pay off the mortgage only and not the other loan, the interest rate on that loan goes up from 6% or whatever it is now to a whopping 19% and is still over 30 years. :eek: The repayments on that will go up substantially and probably stuff us up completely. Of course the plan was that by the time the rate had ended, we would be able to remortgage with a higher valuation and roll it all into one mortgage, but we all know that sort of idea is a thing of the past...

World's worst mortgage? Possibly...! So anyway, the mortgage and loan together costs us £908 a month. Of this, the the mortgage is about £670 a month - the rental value of our house is probably in the £500-£550 bracket tops.

So renting it out's a short term option to potentially allow us to save some cash while we sell but I don't think it's sustainable long term... What I wonder is whether the mortgage company would be likely to agree to us letting it out with these figures.

Was half thinking about trying to come to some arrangement with my wife to effectively rent it myself but I had a heavy night last night and the complexities of that are way beyond me at the moment! ;o)

Cheers

James

Getting house reposessed deliberately?

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