Ok so it looks like we may rent out our property but it won't cover mortgage

papermoney

Thanks again for the replies. I'm just about to log off and go home but just wanted to say that the house would not get repossessed if I had tentants in it or not. I have previously stated that the mortgage is affordable even on maternity leave BUT it would be better to sell as it wouldn't be easily affordable. Seems a waste to be paying two mortgages when one property is empty.

BLOO_LOO_2

This is going to drain you.

You need to sell, and you need to tell NR you are going into Neg EQuity, get their views on it as they MAY not allow you do this without some other arrangement.

DO NOT remortgage the other house if you can possibly help it, it just gets the banks claws in you even more.

seraphina

I don't know the exact details, but if the house you wish to let out is repossesed, I think the lenders can come after your main property to make up the shortfall between what they manage to sell the house for and what you owe on the mortgage.

It may be affordable now to keep subsidising the rent by such a large amount but I'm a financial pessimist and only expect things to get worse in the future.

Put it this way, if you take a hit now, you can put a fixed value on your loss. Keep renting it out ad infinitum and you've no idea how much money you may end up losing.

I hope you find a way out - it's a horrible situation to be in. All the best with your new little one!

lynzpower

I think OP needs to think seriously about what they do if and when NR say no to this plan. I think that there is practically no chance of Northern rock allowing you to subsidise it to this degree.

Have you considered selling the place at Auction?

Rachman_2

Can I ask a question - rental value is £450ish a month - your mortgage is £900 a month on it. Rents have not fallen. So please tell me how you thought it was a good idea buying it/keeping it/owing that much on it when the mortgage (repayment) is twice the rent ?
What on earth possessed you to keep it - future appreciation ? Really ?

I am also a bit suss about what your background says

you bought it last year with your husband, you are now divorced this fast and have already moved in with someone else and having his kid - I don't want to sound like Victorian Dad, but bloody hell, either you don't hang about or something's not quite right.

SouthCoast

This is chasing the market down in a coastal town with thanks to Property-Bee:

History

dateevent15 July 2008

• Brief Description changed: ** OPEN TO OFFERS ** A two bedroom ground floor flat within walking distance of Littlehampton centre and the seafront. The accommodation comprises two double bedrooms, lounge, kitchen, bathroom and garage, benefits from double glazing, electric heating and offered with no chain/vacant possession

25 April 2008

• Price changed: from '£139,950' to '£124,995'

09 April 2008

• Price changed: from '£149,950' to '£139,950'

07 March 2008

• Price changed: from '£165,000' to '£149,950'

03 March 2008

• Initial entry found.

aop

What are the facts on both properties? Is it possible to raise the mortgage on your main house sufficient to cover the shortfall on the one you want to sell?

OMG_2-2

Twopints wrote: »

But then the tenants are only paying half of what the mortgage costs so they can afford to have a contingency fund of their own.

Was this post meant to be ironic?

nixinix

Hi,

I think you need to talk to your mortage company - but without mentioning that you can raise an extra £20k (keep that info in your back pocket!) Asking questions like: Can I take on any shortfall as an unsecured loan?

I am really concerned that a new baby costs more and takes up more time than most people realise and when I was a new mom I am not sure I would have coped witht the stress of renting and having to subsdise a property on top of the sleepless nights.

I wish I had a magic wand as it sounds like a nightmare situation to be in. All I can say is at the right price your property will sell even in todays climate (I have accpeted an offer on our property in 24hours because we priced it correctly). You need to find out what price this is and find out how you can afford, or not, to cover the shortfall. I would be droping the price further and then seeing if you can get an offer because then you know what you are working with, you don't have to accept the offer and at that point could decide to rent it out. But if you are renting can you afford to do this for the long term - until prices rise again because it is only then that you will be able to afford to sell? Or can family lend you the shortfall? You can repay them back with the extra you would have had to contribute to the mortgage...

Sorry for waffling I have typed as I have thought - just concerned you haven't taken all costs into account - I know debt is a horrid thought with nothing to show for it, but it might be cheaper than keeping the property in the long term. Good Luck.

If pos. I would keep your OHs house in his name for the foreseeable future so that it is not at risk if the worst happens and yours is repossessed.


As an aside is your x-husband liable for any of the shortfall? Prob. not but would help if if he was...

mikelivingstone

terryw wrote: »

You must have the permission of the lender before you do anything.
Letting out just one property is fraught with danger. <SNIP>
terryw

As well as the risk TerryW highlights you also need to think of other risks such as legal ones and also various additional costs. Otherwise your business plan won't stack up. Here are some risks and costs I have identified:

1) You need to consider tenant safety. So gas checks, electrical certificates and any obvious things like loose floor boards people could trip on, otherwise you could be sued.
2) Fairly soon it will be a requirement to have an energy performance certificate, but I guess if you are selling you may have one already.

3) If you are going to try and manage the rent yourself, you need to make sure that you use the approved government deposit scheme, failing to do so can result in a landlord having to pay the tenant 3 times the deposit back.

4) You will need a contract, you can either use a lawyer which is obviously another expense, but if you feel you take the risk using an off he shelf contract, you'll need a standard AST format document, these can be downloaded or be bought from WH Smith.

5) Voids: This is a big risk if you are also trying to sell, as this will put most tenants off. Think about it from their perspective, many want to stay put for at least 12 months or longer, you will find if you are trying to sell it will put them off and you could end up with several months worth of voids (though I guess technically this is where you are at present.)

6) Bakcground checks: If you are going to let to someone, you do need to do full background checks. Some landlords find they end up with problem tenants who either fail to pay rent on time or damage the house. So you'll definitely need to pay for a credit check and then you will want to do employer and other references.

7) Insurance: you probably also want to get a decent (but again expensive) insurance policy to cover non payment of rent and deliberate damage by tenants (most exclude this) and any resulting legal fees. Remember if you need to evict tenants through the courts, you are only able to claim £200 expenses from them which you'll only get back at 50p a week, whilst it could cost you thousands in legal fees. Certainly the average simple repossession order cost about £1800 in total today and that's before you have had to get bailiffs in and repaired damage.

As you can see letting is pretty expensive these days and with falling house prices even more so. If you think you can make the plan work give it go, but beware the numerous pitfalls