Confusing, complicated situation, help gratefully received please - New SoA posted

BlueIsTheColour

Hi and thanks in advance, this post may well be long and will probably be confusing, but I am hoping that someone may be able to help me with this....*crosses fingers*

I will try to be as concise as possible, basically, I have about £16k of debt, mainly CCs and 1 OD, and up until I lost my job in July, had been making the minimum payments for years, obviously when I lost my job this changed and as I was on JSA I had an appointment with CCCS and offered £1 token payments until my circumstances changed. During this conversation my adviser talked about IVA's and BR when I had found a job. Luckily for me I have now found a job and start in mid Jan, on a lot less money than I was on before, and having just done CCCS debt remedy again, it seems my options are low start DMP which would take 13years to clear or BR.

Now this is where it gets complicated, I have a house, mortgaged with my OH, which was bought from new 3.5years ago, on a 75:25 scheme from the developer where they paid 25%, we paid 75% but the place is 100% ours, its not a shared equity scheme, their 25% is repayable on the 10year anniversary, and is variable, in that if the place had leapt in value they would get 25% of the increased value not what there original 25% was, however, its all very hazy as to what would happen if their 25% was worth much less....

Anyway, it would only be me going BR, and our place was purchased at £161k, with us having a mortgage for £121k, so initially it looks as though we have loads of equity but we dont, as this difference is owed to the developer, however, now, our place is only worth about £130k max, so a lot less than we paid for it, and if it was sold wouldn't provide enough to clear the mortgage and the developers 25%, so....

If I was to go BR does anyone have a clue what would happen house wise? My OH is on it with me, but we have no equity, so am very very confused by it. My CCCS advisor mentioned that one of the deciding factors was local rents for similar properties, and they are about the same if not more than our mortgage payment, as we are now on interest only due to our lack of income, and if we were in repayment, this is only a little bit more than local rents too...

Sorry for ranting on and on and probably making no sense, but am hoping someone may be able to offer some advice to me? Thanks in advance

peachyprice

Hi Blue,
Welcome to the forum.
Should you have been paying into an endowment to cover the 25%?
Is there anything in writing saying what happens to this if house prices have fallen? I think you need to clarify this with the developer. In theory if you go bankrupt your OH could be held liable for the whole amount.

As far as your house being in negative equity, you should be able to keep it, no problem, even if there is equity only 50% of it would be your and your OH would be able to do a deal to buy your share from the OR. Rental prices wouldn't really factor in your BR as it's only you going BR.

Hope that helps some.

fiveyearplan

Hi and welcome BITC. I assume you want to stay in your house. You are in negative equity therefore for the purposes of BR that is a good position! Does your contract with the builder have any BR clause in it? You shouldn't have anything to worry about the 25% as that wouldn't be deemed equity because you still owe the money for it.

willsandolly

BlueIsTheColour wrote: »

Hi and thanks in advance, this post may well be long and will probably be confusing, but I am hoping that someone may be able to help me with this....*crosses fingers*

I will try to be as concise as possible, basically, I have about £16k of debt, mainly CCs and 1 OD, and up until I lost my job in July, had been making the minimum payments for years, obviously when I lost my job this changed and as I was on JSA I had an appointment with CCCS and offered £1 token payments until my circumstances changed. During this conversation my adviser talked about IVA's and BR when I had found a job. Luckily for me I have now found a job and start in mid Jan, on a lot less money than I was on before, and having just done CCCS debt remedy again, it seems my options are low start DMP which would take 13years to clear or BR.

Now this is where it gets complicated, I have a house, mortgaged with my OH, which was bought from new 3.5years ago, on a 75:25 scheme from the developer where they paid 25%, we paid 75% but the place is 100% ours, its not a shared equity scheme, their 25% is repayable on the 10year anniversary, and is variable, in that if the place had leapt in value they would get 25% of the increased value not what there original 25% was, however, its all very hazy as to what would happen if their 25% was worth much less....

Anyway, it would only be me going BR, and our place was purchased at £161k, with us having a mortgage for £121k, so initially it looks as though we have loads of equity but we dont, as this difference is owed to the developer, however, now, our place is only worth about £130k max, so a lot less than we paid for it, and if it was sold wouldn't provide enough to clear the mortgage and the developers 25%, so....

If I was to go BR does anyone have a clue what would happen house wise? My OH is on it with me, but we have no equity, so am very very confused by it. My CCCS advisor mentioned that one of the deciding factors was local rents for similar properties, and they are about the same if not more than our mortgage payment, as we are now on interest only due to our lack of income, and if we were in repayment, this is only a little bit more than local rents too...

Sorry for ranting on and on and probably making no sense, but am hoping someone may be able to offer some advice to me? Thanks in advance

HI

I think you will find that the developer takes a risk that they could lose out. they offer these schemes to get people buying their houses and they would rather be owed 25% of the purchase price , payable in ten years time than not sell a house at all and have nothing coming in.

When times were good the developers were on to a good thing and even now it helps them sell in a stagnant market.

I recently asked a similar question just because i was curious as to how the developers stand in these bad times. I dont think you have anything to worry about. They would only get back 25% of the current value of that equity, just like they would have if the market had continued in an up trend.

fiveyearplan

But the main thing is that you stay in the house - I wouldn't worry too much about what may or may not happen in 10 years time.

maxmycardagain

I think you will find that the developer takes a risk that they could lose out. they offer these schemes to get people buying their houses and they would rather be owed 25% of the purchase price , payable in ten years time than not sell a house at all and have nothing coming in.

thier 25% at the start should vastly increase if the property isnt sold for 20 years, and overall property prises WILL rise, developers arent stupid nor charitable, they still make a profit selling just 75% and can probably have any "25%'s" added to thier portfolio's too

BlueIsTheColour

peachyprice wrote: »

Hi Blue,
Welcome to the forum.
Should you have been paying into an endowment to cover the 25%?
Is there anything in writing saying what happens to this if house prices have fallen? I think you need to clarify this with the developer. In theory if you go bankrupt your OH could be held liable for the whole amount.

As far as your house being in negative equity, you should be able to keep it, no problem, even if there is equity only 50% of it would be your and your OH would be able to do a deal to buy your share from the OR. Rental prices wouldn't really factor in your BR as it's only you going BR.

Hope that helps some.

Hi Peachy,

No we werent advised to do that, basically it is an interest free loan with no repayments until the 10year anniversary negotiable to 15yr in times of hardship, the theory being that in 10years we could remortgage for a higher value to free up the amount to repay the developer.....Looking back now it seems the most stupidest thing we ever agreed to, and at the time, even our solicitor didnt even really understand it! Another solicitor has since attempted to look at the paperwork we have from the sale and they couldnt make head nor tale of it either.

I recall a conversation with our original solicitor who thought it was odd, as he sais that if we sold the place then our mortgage would get paid off first and then whatever was left would go to the developer even if that didnt amount to 25% which at the time made no sense either.....I dont even think the developers solicitors knew that much about it, it was just a way for them to move housing stock at inflated prices it seems....

Thanks for replying

BlueIsTheColour

fiveyearplan wrote: »

Hi and welcome BITC. I assume you want to stay in your house. You are in negative equity therefore for the purposes of BR that is a good position! Does your contract with the builder have any BR clause in it? You shouldn't have anything to worry about the 25% as that wouldn't be deemed equity because you still owe the money for it.

Hi 5yrplan, tbh I dont even know if we do want to stay here, as for what we pay in mortgage we could rent a much bigger place, this is a 2bed apt and you can rent a 3/4 bed house for just a little more than we pay now, but the market being what it is, it would never sell, except at a great loss, and then would leave us liable for the 25% developer bit, I think we could sell it at enough to repay the mortgage, but there are 5 for sale in our block of 34 at the min so.....then again, I have wondered if we sold it and repaid the mortgage, would it then be possible to get the 25% bit included in the BR? But obviously my OH is named too, so I expect he would become liable as opposed to it being included??

God this is just so confusing, I wish we'd never bothered, housing ladder eh? Who needs it? The paperwork for the purchase is all at my Mums at the min as she has been having a solicitor look at it for me but I will get it back and will have to go through it with a fine tooth comb.....

Thanks for your advice

BlueIsTheColour

willsandolly wrote: »

HI

I think you will find that the developer takes a risk that they could lose out. they offer these schemes to get people buying their houses and they would rather be owed 25% of the purchase price , payable in ten years time than not sell a house at all and have nothing coming in.

When times were good the developers were on to a good thing and even now it helps them sell in a stagnant market.

I recently asked a similar question just because i was curious as to how the developers stand in these bad times. I dont think you have anything to worry about. They would only get back 25% of the current value of that equity, just like they would have if the market had continued in an up trend.

Thanks, I think you're right but then again, this is where my memory is a bit sketchy but am sure our solicitor said the mortgage would get paid off first, otherwise if they took their 25% off whatever it would now sell for, that wouldnt leave enough to cover the mortgage and as the mortgage is the 1st charge they have priority???

I guess at the time, the market was booming so they thought they were on to a sure fire thing and would make more money as prices were rising fast, not so now and I expect they didnt factor that in??

fiveyearplan

If you were lucky enough to sell in this market you are correct that the mortgage would get paid first and if there was anything left over it would go to the developer. If there was a shortfall your OH would be liable if you were BR and he /she wasn't. If both of you were BR the whole thing would go in and you would owe nothing.

BlueIsTheColour

fiveyearplan wrote: »

If you were lucky enough to sell in this market you are correct that the mortgage would get paid first and if there was anything left over it would go to the developer. If there was a shortfall your OH would be liable if you were BR and he /she wasn't. If both of you were BR the whole thing would go in and you would owe nothing.

I thought that would be the case, there would definitely be a shortfall, not a prayer of us selling for anything like what we paid for it, I doubt it would even sell at all as there are still new build apartments for sale here with builders incentives that remain unsold, so yes OH would then be pursued presumably, which he wouldnt want nor could he afford, I dont think he would want to go bankrupt, he has some debt, tbh not much less than me, but he is making his payments and when I initially suggested a joint DMP he wouldnt entertain it, so I dont think BR would appeal? Hence me dealing with it as best I can myself....

Thanks again, appreciate you taking the time to respond