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    • Jake25uk
    • By Jake25uk 27th Sep 16, 11:15 PM
    • 12Posts
    • 1Thanks
    Jake25uk
    Help with mortgage shortfall
    • #1
    • 27th Sep 16, 11:15 PM
    Help with mortgage shortfall 27th Sep 16 at 11:15 PM
    I own a flat which I lived in before I got a home and family and was advised to keep it whist buying my house as I was locked in to the mortgage for 6 months and had plenty of equity (flat then valued at 105,000... i owe 72,500) and would sell easy. However during these 6 months the credit crunch hit and the value plummeted (and has never gone up again). I tried to sell the flat many times over the years and got into lots of debt having to pay both mortgages and got a bad credit rating, the mortgage on the flat is very high and quite low on the house i live in, the house has about £40,000 or more equity but the flat is in negitive equity . We have recently rented to bad tenants who have not paid and we are in real trouble. It is affecting our family and we can not go on. The lenders for the flat morgage will not help and my bad credit means its hard getting equity release for a shortfall from the house if i sold the flat at a loss.
    I got some advise from community law and was told to sell the flat at a loss and get flat mortgage lenders to agree to put a charge on my home and accept payments for the short fall ( someone wants to buy for 52,000 for a quick sale with the bad tenants sitting) and i would make payments for the 20,500 shortfall (with my home at risk if i do not pay).
    The flat mortgage lenders (santander) have said NO and they will try to reposess my home if i sell at a loss.
    The community law man said a judge would not let them reposess if i make fair payments and have equity.
    I really do not know what to do and wnat to make sure my home is not taken. I can afford reasonable payments but cannot take being a landlord any more. It is ruining my family financially and emotionally.

    Because I own 2 properties (even though I loose money each month rather than earn, even with tenants) i have had trouble getting any advice or help ( i cannot afford solicitors fees... can hardly afford food at the moment).

    Sorry for the long post (and not so good spelling). Any help would be greatly appreciated.
Page 2
    • Pixie5740
    • By Pixie5740 28th Sep 16, 10:18 PM
    • 8,849 Posts
    • 11,856 Thanks
    Pixie5740
    The tenants pay rent in exchange for exclusive occupation of the property ergo there is a valid tenancy agreement whether it's in writing or not.

    Sure going to court costs money but surely that's cheaper than the current situation. If it turns out you really can't sell then you may as well find some paying tenants to soften the blow.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Jake25uk
    • By Jake25uk 28th Sep 16, 10:42 PM
    • 12 Posts
    • 1 Thanks
    Jake25uk
    I understand there is a tenancy agreement even if not in writing but without one i cannot issue a section 21 as I have no date to start it from without a date on paper from a AST, or so i have been told.
    Also, yes it would be cheaper in the long run to pay court/bayliff charges but I physicaly cannot magic that money up from thin air and do not have it due to the tenants not paying etc.
    • Pixie5740
    • By Pixie5740 28th Sep 16, 10:49 PM
    • 8,849 Posts
    • 11,856 Thanks
    Pixie5740
    For arrears you can use a Section 8 rather than a Section 21. I understand you cannot magic money up from nowhere but you need to do something. Cut back on something else in your budget. If that means you can't afford to pay some non-priority bills such as credit cards then so be it (if it turns out that remortgaging is a total no go) and either start a self-managed DMP or contact one of the debt charities (CAP UK, National Debtline, Step Change).
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • csgohan4
    • By csgohan4 29th Sep 16, 8:06 AM
    • 2,529 Posts
    • 1,566 Thanks
    csgohan4
    being a LL is not for the faint hearted, I hope it works out for you.


    For those reading in the future vet your tenants thoroughly and know what you are getting yourself into letting.
    • silvercar
    • By silvercar 29th Sep 16, 10:18 AM
    • 34,045 Posts
    • 142,312 Thanks
    silvercar
    If you hand back the keys to Santander, they will be the ones who have to deal with the bad tenants.

    They will either start the process for evicting the tenants and then sell the property or they will sell the property as tenanted. Either way, once the property is sold they will come after you to make up the shortfall. More than likely they will come to some arrangement for monthly repayments. They may or may not seek to get a charging order on your current home to secure the shortfall as a secured loan.

    What you can't do is sell the flat without their agreement or enough money to clear the loan.

    Given this advice from csgohan4:

    For those reading in the future vet your tenants thoroughly and know what you are getting yourself into letting.
    I'll add some of my own:

    Never have your residential home mortgage with the same lender as any other loans, it gives the lender the power to use the equity in your home for all your other borrowing you may have.
    • Bonfire Bride
    • By Bonfire Bride 29th Sep 16, 8:30 PM
    • 658 Posts
    • 804 Thanks
    Bonfire Bride
    Bonfire bride... i know I have ccjs and other debts which were built up when we had 2 properties and no tenant and whilst having bad tenants and have been told by my bank that my rating is not good.
    Originally posted by Jake25uk
    It all depends on how old the CCJ's are, the amounts and how your credit file has been recently. I'm not a financial advisor but it may be worth speaking with an adverse credit broker.

    Like I said though, if the additional borrowing is not financially comfortable for you, then I wouldn't consider it.
    Mummy to 2 little boys born in 2013 & 2015
    House on the market for 19 months ....SOLD! ...complete!
    Natalie
    • tlc678910
    • By tlc678910 30th Sep 16, 5:02 PM
    • 385 Posts
    • 757 Thanks
    tlc678910
    Hi,
    Sorry to hear about all the problems you are experiencing.

    In terms of seeing the wood from the trees your priority is to keep your payments up to date on your home (the home you live in).

    Next work out your essential payments e.g. council tax, utilities, food, essential insurance and transport to work.

    Don't prioritise paying for the rental over these costs. Your problem (the lack of cash to pay rental mortgage and equity shortfall) isn't going to go away overnight so you do need to be able to afford proper food.

    What is left? Contact the mortgage holder for your flat. Update them what you can afford to pay (or that you are unable to make payments at the present time and you don't forsee this changing much anytime soon). You need them to let you sell the flat for it's market value or repossess. No matter what they say if you stop paying it will come to a head eventually.

    In time the rental should repossess and they will chase you for the money. You can then try to arrange an affordable monthly payment. If you are taken to court try to agree an affordable monthly payment with the court. Making regular (affordable) payments towards the shortfall should go in your favour in court.

    Good luck
    Tlc
    • tlc678910
    • By tlc678910 30th Sep 16, 5:17 PM
    • 385 Posts
    • 757 Thanks
    tlc678910
    Thank you. Do you think it is worth speaking to the mortgage provider for the house about getting at the equity?
    The other problem I have is I dont trust the tenant tobpay the hb even if it is sucessful and do not have the spare money to pay the court cost and bayliffs. Also the tenants have no proper tenantcy agreement i writing as they were only supposed to be staying for 2 months originally (this was over a year ago) I know this is a mess.
    Originally posted by Jake25uk
    Serve the tenants notice for rent arrears - if they meet the criteria for this, which I am no expert,I believe is 8 weeks arrears. Do lots of googling to get this notice correct.

    Advise the tenants to take this notice to the Council. If they are genuinely waiting for housing benefit then this notice is likely to prompt the council to speed up the process. The Council informing them that if they are evicted due to willfull not paying their rent they will be found intentionally homeless and not rehoused will focus the tenants mind to pay it to you.

    If the tenants have been poor payers before and the housing benefit are communicating with you ask the housing benefit/tenants for you to be paid direct which I believe can happen with poor payment record.

    Tlc
    • Jake25uk
    • By Jake25uk 5th Oct 16, 2:10 AM
    • 12 Posts
    • 1 Thanks
    Jake25uk
    Thank you for this advice, do you think that (letting them reposesse the rental property) is a better idea than trying to remortgage my home to release some equity with a specialist 'bad credit' mortgage?
    • tlc678910
    • By tlc678910 6th Oct 16, 1:29 PM
    • 385 Posts
    • 757 Thanks
    tlc678910
    Thank you for this advice, do you think that (letting them reposesse the rental property) is a better idea than trying to remortgage my home to release some equity with a specialist 'bad credit' mortgage?
    Originally posted by Jake25uk
    Personally I do. You can't afford the rental property which is why you are getting in a mess. If you try to keep it by taking further (expensive) borrowing against your own home and nothing has changed with your income, so you get behind with this borrowing, you could end up losing your home.

    Good luck
    Tlc
    • Jake25uk
    • By Jake25uk 10th Oct 16, 10:50 PM
    • 12 Posts
    • 1 Thanks
    Jake25uk
    Thank you but what i mean by releasing the equity from my home is that I would use that equity to pay part of the rental mortgage off in order to sell at a loss but be able to pay off the entire mortgage and be rid of the flat without any risk (if this is possible with my credit history)
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