Buy to let disaster - is my own home at risk

buytoletmuppet

Like a lot of people I suppose i was lulles into the buy to let market buy a developer who promised the world, rent would easily clear the mortgage yadda yadda.

Im not looking for sympathy as its my own damn fault im in this mess.

What i want to know is. if worst came to worse and i couldnt afford to keep both my place of residence and the buy to let on, what would be the buy to let banks response? Could they come after my place of residence?

Ive never missed a payment on either but if something did happen am i effectivley going to be made homeless?

spuds_2

Do you have any equity? If the house were repossessed, sold, but the sale did not cover the mortgage, then I believe they can pursue you for the outstanding amount. Someone with a lot more knowledge will be along soon to give you some advice. Welcome to the forum - sorry to hear of your worries.

dimbo61

If you dont pay the mortgage they will reposses the BTL property and sell it at auction then chase you for all the outstanding arrers and costs to sell the property plus interest and charges.

buytoletmuppet

Outstanding on it is £134,000 however its been a disaster from start to finish

The construction company went bust, meaning the deeds werent transferred so when i wanted to sell it i couldnt. It also meant a years ground rent/ service charge had to be paid in full.

Originally the flats were valued at 150k. However 3 have already been repossed. One is on the market at 125k

Im just wondering if it went really wrong if i could come to some sort of arrangement with bank to pay it off (difference), rather than lose my home

VfM4meplse

They can then heap on unreasonable additional charges; it's not unknown to be lumbered with a debt far larger than the mortgage itself :eek: . The lender can keep chasing you for more money for years after you think it is over.

I thnk you need the help of a professional IFA. Try to keep afloat whatever you do. Get a good tenant in (yes I know this is easier said than done) and cut your losses if necessary by selling as a going concern.

Good luck

silvercar

Im just wondering if it went really wrong if i could come to some sort of arrangement with bank to pay it off (difference), rather than lose my home

yes. If they repossessed and sold it at a loss,they would ask you to repay the shortfall. If you don't have the money the most likely outcome is that they agree a repayment plan with you. Almost like a loan over a few years. Worst case is that they get a charging order on your residential home to ensure you pay back the shortfall. Only if you fell behind with these repayments could they then go for repossession of your main home.

dunstonh

Yes they can come after you and that could potentially force the sale of your main residence.

This is why mortgaged buy to lets are considered a high risk investment. Higher than stockmarket, unless you choose to gear your investments (or buy on margin). Stockmarket goes up and down but it has no impact on your house. Borrowing defaults and they can come after you for the the lot and if you cant pay it, they could force you to bankruptcy.

I would estimate that most of the newbie landlords in recent years dont realise the risk they have taken. If you said to them would they borrow money and invest it on the stockamarket they would say never. Yet that is what they have done with the property. (share price = property price. Rental income = dividends).

Radiantsoul

silvercar wrote: »

yes. If they repossessed and sold it at a loss,they would ask you to repay the shortfall. If you don't have the money the most likely outcome is that they agree a repayment plan with you. Almost like a loan over a few years. Worst case is that they get a charging order on your residential home to ensure you pay back the shortfall. Only if you fell behind with these repayments could they then go for repossession of your main home.

I would assume if the bank comes to an arrangement it would require a legal charge over the residential property. A charging order requires judgement first, and would probably only be done if an agreement couldn't be reached. But charging orders are only enforceable by court order and the court has to balance several factors. A more likely enforcement action is judgement and bankruptcy.

silvercar

A more likely enforcement action is judgement and bankruptcy.

Why bankrupt someone, when you can get your money by repossessing their home?

Radiantsoul

Well if the BTL company and the residential mortgage are with the same company then they may be able to seek possession of the residential property if they have an all monies charge over the property. But the charge might only secure the residential mortgage.

If the companies are different then the company could get a charging order. But when deciding whether to grant an order to sell the judges must weigh up the right of the person living their against the debtor and generally they are hard to grant. The risk is a bank has to rest on security, meaning it might not be repaid in decades. Finally it is not easy to know much much equity is in a property prior to obtaining a CO, you can value a property on a driveby basis but determining prior creditors is difficult.

In the case of bankruptcy the judge has much less discretion, the property must be sold regardless of the bankrupts situation. Plus any other assets are flushed out.

dunstonh

They could go for the money in multiple ways. Whatever they choose, it could end up in you saying goodbye to your home ultimately.