Repossession,please need advice

cathy57

Hello everyone,

Thanks to this great site,I have finally taken the first steps to try to clear or at least do something about my debts.
I am so ashamed and embarrassed to have put myself into such a mess,that only my boyfriend is aware of the situation.He lives abroad and is not partcularly helpful anyway.So I feel totally alone with a great weight on my shoulders.I have posted before on the bankrupcy board,but I am ,if possible,going to try to avoid this route.
I have about £55000 worth of dates.I started a DMP with payplan two months ago.I pay them £500 a month (it should take 9 years to repay!).
I have 2 mortgaged properties,one where I live and one which is rented out.
The rented property is my problem,it has no equity,it now needs work, and I know I can't afford to keep it.I have paid only half of the mortgage last month and I don't think I am going to be able pay next month.
So I am seriously thinking to have the property repossessed either volontary or not.I am not too sure what would be best.
Also,the tenant's contract ends 31st of January.How long would they be able to stay in the event of repossession either volontary or not?I want to be totally honest with them and keep them aware of the situation.
I would be very grateful if you could please give me some advice.Many thanks.

RAS

Hi

if you go for a rolling tenancy (do not actively renew the tenancy, then you are only obliged to give a month's notice anyway. I think. You could check on the Rental forum, although I would not nec explain the background.

Repros seem to take anything upto 9 months at the moment.

piptom&AndyPandy

Hi
I'd always advise to try and sell no matter what, in the long term it's better for you.

Pip

cathy57

Hi,
Thank you for your replies.
I know it would be better to sell,but I have no equity in this property and also it could take months ,so what choice do I have?
I know it doesn't look very good,but the way I see it,if the tenants accept to stay in the flat on a rolling tenancy until it is repossessed,at least I could use their rent to pay some of my debts.
Any comments on this please?

stapeley

Can the tenants buy it ?

cathy57

I don't think so,but I guess I could always ask them.Thank you for the suggestion.

neas

how'd you buy the place if it has no equity? oO Doesnt the rent cover the mortgage?

Mickyfinn

Hi Cathy,

You are not alone, I speak to many landlords in your situation. Could you answer some questions for me so I can evaluate the situation?

What is the current situation with the rented property, namely:

Mortgage outstanding £
Redemption Penaties £
Interest Rate (any special rates e.g. fixed for 3 yrs) %
Current Mortgage Payment
Mortgage type - Interest only or repayment
Rental income per month:
Private let or letting agent (charges)?
Are the tenants likely to want to stay/renew?

Thanks

Phil

cathy57

Mickyfinn wrote: »

Hi Cathy,

You are not alone, I speak to many landlords in your situation. Could you answer some questions for me so I can evaluate the situation?

What is the current situation with the rented property, namely:

Hi Phil,
Thank you for your reply.

Mortgage outstanding £154000
Redemption Penaties £9500
Interest Rate (any special rates e.g. fixed for 3 yrs) % -I am not too sure,but pretty high over 6.5% until July 2009.
Current Mortgage Payment £980
Mortgage type - Interest only or repayment Interest only
Rental income per month:£950
Private let or letting agent (charges)?Private let-I have just cancel the letting agent-
Are the tenants likely to want to stay/renew? They are not sure,but if they do,they have to give me 2 months notice,their contract ends 31st of January.

Thanks

Phil

Also I pay service charge of £35.00 a month on the flat and as I said earlier,the bathroom is in desperate need of work,the tenants are very patient,but I just haven't got the money.

Thanks again for your reply,I hope you can help.

Cathy

Mickyfinn

Hi Cathy,

If you manage to keep the tenants for another six month agreement you will save £9,500 of redemption fees.

Currently you are losing at least £65 per month (excluding gas safety certificate, repairs etc.).

You could ask the tenants if they would like the option to buy the property and sign an agreement which would allow this (the rent would increase plus you would need to bear in mind the interest rate after the July 2009 change.) This way you should be able to cover your costs and avoid the redemption penalty.

Without the property valuation I cannot offer advice on the repossession route but the bank will add lots of fees for selling the property plus you will get a black mark on the CIFAS database - preventing you buying another property. The banks are not lending as freely as they were so buying property at auction is quite difficult at the moment so it is unlikely to sell for a high price.

Have you had the property valued?

If you want a Hometrack valuation report (used by surveyors and mortgage lenders) free of charge you can private message me the property address and type (2 bed flat etc) and I'll email it to you.

If the tenants don't want to stay obviously you'll be footing £1,015 per month (mortgage+service charge) for each month it's empty - it would be worth checking either way to see if the lender would be willing to be flexible with you in case this happens. They may offer payment holidays or reduced payments if you conatct them early, but either way you need the answer to this in advance.

If there is equity or cash in the property you may be able to sell the flat with the tenants in situ - I assume there's at least £16,400 (10% deposit in the flat?) to an investor.

So to conclude:

1. Keep the tenants for another 6 months if possible to save £9,500 of costs.
2. Grant tenants an option to buy over the next 3-5 years and increase their rent for the privilege - thus covering your costs.
3. Calculate the equity - or difference between the mortgage and the likely selling price. Then sell it to an investor with tenants in situ.
4. Either way - discuss options with your lender early regarding payment holidays etc. The Consumer Credit Counselling Service 0800 138 1111 and Citizens Advice should be on your call list to discuss the options too.

Hope this is useful - if you need any further assistance or that valuation report do get in touch.

Phil