Negative equity..

loolybelle

Hi All!

This is the first time i've done this in a long time, hoping someone can help!!

I bought a flat in 2005 and in the years in-between i've taken out a secured loan (in addition to mortgage), moved out, rented it to a tenant, moved into my girlfriend's house, got married and now the flat is costing me loads!

The fixed rate mortgage ended a year ago (couldn't re-mortgage as equity was insufficient for buy-to-let) so now paying standard variable rate. The ground rent, service charges, agent fees etc mean it's costing over £700 per month just so that i can have the title of 'Landlord'!! Can't afford this any more and within a couple of months will not be able to pay and will fall into arrears.

I do not, currently, have ANY arrears on the mortgage or loan secured on the property.

Questions i need help on:

1. Can i contact mortgage co. (GMAC) and try and get a deal on current interest only mortgage even though it has negative equity AND i don't live there?
2. If i fall into arrears and let it be reposessed what liability would i be left with in the future?
3.Will this implicate my Wife? (Her name is not associated with the property and was purchased before we met.)

Thanks in advance for your help

WillowCat

Option 2 is the head in the sand option - will be extremely costly. If you're even thinking along those lines then you'd be better off selling yourself. (even if you need to raise more money to pay off the mortgage). If you get repossessed then it's likely the flat will sell for less, there'll be associated fees added to the loan and then you'll be hounded for the shortfall anyway.

There'll only be implications with your relationship if you are forced into bankruptcy - you will not be able to get joint credit with your wife.

Do you own (single or jointly) the property you live in with your wife? If so, your share of the equity of that property is an asset which would be considered if you go bankrupt - it's possible to lose your main home as well.

PasturesNew

1. You can contact them, but they're unlikely to be able to help you. If you click on FORUM above, there's a Mortgage Board on this site, where mortgage advisors would know more about each company and what their current terms/deals are

2. They would auction it off. Add the fees and charges and interest to your bill. Then they would come after you for the balance. They can chase you for that for 6-12 years.

3. Not directly, but it's possible if there's equity in your current home they can get their hands on, they might come after that. It could get complex at this point.

Debt_Free_Chick

Re 3 ..... I'm pretty sure it will affect your wife's credit record, if you're financially associated via another credit agreement.

So ... do you currently have any joint credit with your wife? Joint mortgage? Joint loan? Joint current account, with overdraft facility?

If so, then you are already financially associated so, yes - any default by you on your mortgage will affect her credit record too.

andrewmp

You make SVR sound like a bad thing, it's looking pretty good right now!

pinkshoes

If you have a joint bank account or joint financial product with your wife, then yes it will affect her credit rating too.

I presume your mortgage lender DO know you're currently renting it out? Book an appointment to go and speak to them, and see how they can help you.

Could you and your wife live in the flat and rent HER property out? Could you take a second job to make up the short fall?

thebigboss_2

andrewmp wrote: »

You make SVR sound like a bad thing, it's looking pretty good right now!

Not if you're with GMAC it's not. Currently 6.99% and they're not passing any cuts on as far as I'm aware.

loolybelle

Many thanks all of you.

Looks like i'm pretty stuffed!

The secured loan and the mortgage combined will leave me having to find around £27000 if the flat is sold at current valuation (IF it sells!)

What happens in this situation? Can the property be sold if this is the case?
If i'm honest, i'd be prepared to pay the deficit in monthly instalments if it meant ofloading the mortgage.

silvercar

The lender(s) will block the sale unless you clear the debt. You would need to get an unsecured loan for £27000 or get the lender(s) to agree to carry the debt forward as a unsecured loan.

WillowCat

I really feel for you loolybelle.

£700 per month on a flat you don't want is a huge amount of money (I'm assuming this is the the shortfall after the rent money comes in?).

Or the alternative of selling, which won't be easy in this market, and until you get an offer you won't know exactly what the shortfall would be.

I'm old enough to have bought my first house right at the top of the last housing bubble (summer 1989) and I know the hell of being in negative equity. Fortunately it was our residence, and we didn't have to sell (it was very close though a couple times ).

I think there's some people around who expect everyone else to be completely on top of market conditions, and to get into, and out of the market at exactly the right time. But actually, most people (myself included) just kinda get on with life and decisions are made due to life factors (moving out from parents / getting married / moving jobs etc. It's only with hindsight that it seems such a huge mistake.

loolybelle

Thanks again to all for advice.

Even though it's not a great prospect, i suppose there's not much choice but to stay in/stop spending/live like a monk etc.!!!

As mentioned, nobody knows when the bubble will burst...i'm big and ugly enough to accept what has happened and try and communicate with the lenders etc.

This is a great site....it's nice to know there is advice and help out there.