Walking away from a mortgage

sibvenom

Can anybody offer any advice?
My nephew has been dumped by his girlfriend and she is moving out with their 2 year old daughter, she has spoken to an advisor and has been told to sign the house over to my nephew. The trouble is that they were given a 120% mortgage and when the 3 year fixed rate term finishes in June he will not be able to afford the mortgage, on top of that the house is worth considerably less now than when they bought it. I personally thing it was very irresponsible of the mortgage company to give them such a high mortgage, purely for reasons such as theirs arising. As a result of this, he has told me that when his girlfriend signs over the house, he says that he will just walk out and let the mortgage company sort it out.
I am worried that he will end up in serious trouble and am very worried about him, what advice should I give him?

minimike2

He doesnt have to take it on.....she cant force him. If she wants out then she should be paying him half on the negative equity.....she would want half if it had gone up in value and so she should pay the half that is now owed in excess of the valuation. The question of irresponsible lending is a different matter. They obviosuly wanted the product, they applied and signed for it so its thier responsibility too.

My advice to him would be to not just accept that he has to take it all on....the mortgage company probably wouldnt agree to it anyway and they must give the consent for it to happen - they would re-asses the mortgage on his sole income. If like you say he cant afford it, then they will decline the proposal anyway.

McKneff

i dont know much about this sort of thing but this is only my personal slant

He cant just "walk away"

I wouldnt accept the mortgage being signed over to me. this means i would be solely responsible for the debt. As things are at the moment they are joiintly responsible. if, say the mortgage is 200,000.00 and the house is sold by the bank after he has abandoned it and they sold it for 150,000.00 he would solely be responsible for the deficit of 50,000 - a serious amount of debt. As well as that he has the responsibility of a child to consider for many years to come.

sdooley

He should not allow her to sign the house over to him. By doing this they will both be in a worse position as she will be voluntarily homeless and therefore ineligible for social housing. The best situation financially (other than continuing to live apart together which presumably is impractical - although some do it) would be for your nephew to move out and agree to pay a reasonable proportion of the mortgage, with his girlfriend's benefits making up the remainder.

Accepting the house from his girlfriend, giving her custody and handing the keys to the bank will just result in your nephew (and probably his girlfriend) being bankrupted by the bank and then pursued for post-bankruptcy earnings by the CSA.

As for mortgage advisors, they are only salesmen, you have to be responsible for yourself and your nephew and his girlfriend were both adults when they took out the mortgage.

minimike2

sdooley wrote: »

As for mortgage advisors, they are only salesmen.quote]

I resent that accusation. I am not a salesman. Bank advisers / Tied Advisers, yes. Not the likes of me though.

lisyloo

he says that he will just walk out and let the mortgage company sort it out

He cannot just walk away.

If he did then the lender would repossess the property.
They would charge for insuring the building and cutting the grass in the meantime etc.
After it was sold there would be an excess whch they would pursue both individuals for.

They have 12 years to pusue and they are BOTH liable which means that if they can't get the money from his girfriend then they will pursue him for the WHOLE lot.
Apart form havingthis hanging round his neck, then jis credit record will be screwed for some considerable time.

As to what to do.
Don't let her walk away for starters (as already suggested)
Could he get a couple of lodgers in to pay the bills?

dunstonh

I personally thing it was very irresponsible of the mortgage company to give them such a high mortgage, purely for reasons such as theirs arising.

In which case no-one would get a mortgage as couples can split at any time. Plus, getting a mortgage is not a risk free thing. You accept risks like this when you purchase.

The lender will decide if the house can be signed over to him or not (probably not) and he (and her) cannot just walk away. If they do that the lender will repossess the house and come after both of them for the outstanding debt. They can then both forget about getting credit again for very many years.

sibvenom

Thanks for the reply, the trouble is that he is quite depressed about losing his girlfriend, daughter and probably the house. He has a good job, but I fear he will just jack it in and declare himself bankrupt and screw his life up for good, which seems such a waste.

Dithering_Dad

If he has zero assets and savings, negative equity on his house then perhaps the best thing to do would be to declare bankruptcy.

He won't be pursued for any debt (including the mortgage debt & negative equity) and after a year, he'll be discharged. It'll take a further 5 years before his credit record is clear.

msmicawber

Could they both move out and find places to live, then rent the house out for the time being? Or, could your nephew stay in the house and get a lodger or lodgers in to help pay the mortgage and bills? I appreciate he's probably not thinking rationally at the moment since he's depressed, but if he's got a good job and a spare room or rooms, it's likely he could ride out this period of negative equity.

sibvenom

That attitude is why the financial world is in crisis! If the mortgage companies had been a little more responsible, there would not be so many people suffering from negative eqity and I would not of had to ask for the advice, as the house price would of risen, they could of both walked away better off and the mortgage company would of been paid. So I am sorry that your advice was of no help at all!

dunstonh wrote: »

In which case no-one would get a mortgage as couples can split at any time. Plus, getting a mortgage is not a risk free thing. You accept risks like this when you purchase.

The lender will decide if the house can be signed over to him or not (probably not) and he (and her) cannot just walk away. If they do that the lender will reposses the house and come after both of them for the outstanding debt. They can then both forget about getting credit again for very many years.