If someone can give me any advice on this I'd be really grateful

ElChup

Hi. I;m new here but I think this forum could become invaluable to me.

Basically the situation is that I have some about a year been living with my fiance! so my own flat is lying empty. I'm having trouble letting it and am thinking about selling it as I've just been made redundant and won't be able to maintain the payments. Now I've had the flat for just under 3 years so the mortgage hasn't been paid off much. However, at the top of the market I took out a secured £35,000 loan as the value exceed the original purchase price by some £70,000.

Then the credit crunch happened.

The value is now only £15,000 more than the purchase price so I am in negative equity. However, the negative equity only applies to some of the loan, not the mortgage. I just spoke to the lender, who is from a different bank to the mortgagee, and all they would say was if I wanted to sell the flat the secured loan would have to be repaid in full. No, in priciple I know this is what happens in an ideal world, but if there's negative equity and no money to pay off the debt, what happens then?? I got rather irrate with them as I found them very unhelpful, but the main problem I now have is what do I do?? I just want rid of the thing. I can afford to pay off the loan at the standard monthly payments if I'm rid of the mortgage, but obviously I would have to get them to convert it into an unsecured loan. Furthermore, I don't really want a situation where I have to stop paying the loan and mortgage to force possession because if there's another way of doing it without screwing up my credit rating I'd very much be interested in pursuing it! However, they just told me "go and speak to an financial advisor".

Any ideas where I should start??

GeorgeUK

I've no experience in this area, but i would start by contacting nationaldebtline or citizens advice to see what they have to say about it.

climbgirl

ElChup wrote: »

However, the negative equity only applies to some of the loan, not the mortgage.

I don't think you're right about this. I know what you're saying, that the shortfall in value (the negative equity) only partially impacts the secured loan and that there is still enough value in the house to fully cover the mortgage. But that's not the way the bank will see it! They secured the full loan on the house and that's how it still stands in their view. If it comes to repossession, both banks will want to get as much as they can to recoup their losses. I would presume that the mortgage would take priority, given that the loan is held with a different bank.

I don't really understand your urgency to sell - in this market, just finding a buyer is going to be an extremely tall order and there's no way you're going to get enough value to cover the mortgage and secured loan. So unless you've got money sitting in the bank to make up the shortfall, I can't see how that option is going to work for you.

If I were you, I'd be trying harder to rent it. If you're struggling to find a tenant look at reasons why - maybe you're pricing it too high for the area? Rental rates have dropped a lot recently - buyers who can't sell their properties are renting instead and the market is a bit flooded (depending on where you are). But it's still possible to find tenants.

You need to seek advice from a financial adviser or from citizen's advice ASAP and try to find a way to avoid repossession. There is help available for people struggling with mortgage payments, citizen's advice will be able to put you onto this. But seek advice as soon as you can. The banks won't wait long.

lollypopswater

Not something I know about either sorry. Although if your credit rating is ok could you get a 15k unsecured loan to pay off the balance of the secured loan once you've sold your flat?

Also how sure are you that your flat will sell? The price you will get for it? Also have you factored in fees to put it on the market and sell etc? Just a thought, don't want to worry you but in my experience you are looking at a few thousand to sell.

Hope it works out for you. LPW

climbgirl

lollypopswater wrote: »

Although if your credit rating is ok could you get a 15k unsecured loan to pay off the balance of the secured loan once you've sold your flat?

I don't think this is an option - no bank in this current market is going to lend £15k to somebody who isn't working. Sorry to be blunt, but I don't want to raise false hopes.

You need to get some professional advice pronto - it's an extremely tough time to sell a house, the toughest it's been in decades. It's pretty clear you're not going to be able to sell at a value high enough to cover both the loan and the outstanding mortgage.

If you can't rent it at a level that is going to service both the mortgage and the loan and you don't have an income coming in, neither bank is going to wait around long before repossessing.

You need some professional advice and you need it fast.

lollypopswater

True and fair point, hadn't really considered the fact that the op was no longer working.

I would back up your point that there are still tenants around, I have my place let at the minute - has been since Jan.

Although I would say that in my circumstance the rental income after agency fees doesn't cover the full mortgage (£120 short a month roughly) but does mean no council tax or electricity bills etc to pay.

Also the op hasn't said if the rental is through an agent who should be able to advise on why it's not letting?

Strongly agree with your point that op needs to get advice and fast!

Fire_Fox

ElChup wrote: »

Basically the situation is that I have some about a year been living with my fiance! so my own flat is lying empty. I'm having trouble letting it and am thinking about selling it as I've just been made redundant and won't be able to maintain the payments. Now I've had the flat for just under 3 years so the mortgage hasn't been paid off much. However, at the top of the market I took out a secured £35,000 loan as the value exceed the original purchase price by some £70,000.

Then the credit crunch happened.

Why haven't you been able to let the flat for the last year? What is wrong - price, state of decoration? If you can't let you are unlikely to be better placed to sell. Are you on an interest-only mortgage deal yet? Will the bank do this or allow you to defer some payments?

What did you do with the £35k, do you have any other assets to show for this? Are you likely to get any redundancy money to use against negative equity?

climbgirl

lollypopswater wrote: »

Although I would say that in my circumstance the rental income after agency fees doesn't cover the full mortgage (£120 short a month roughly) but does mean no council tax or electricity bills etc to pay.

Yes, that's what concerns me about the renting option here - because the rental market is flooded with properties people can't sell, rental incomes are falling and it might be tough to get enough to cover both the loan and the mortgage.

But if you can make some or most of the payments, that's going to help stave off repossession for the short term.

I know the govt has been talking about help for people who can't make mortgage repayments because they've lost their jobs - get onto citizen's advice and find out how this works and how you get it.

The original poster hasn't said if they have any savings / assets to use to cover the mortgage / loan payments in the short term or to top up any rental income in order to make the full payments. I'm assuming there are no savings? What did you do with the £35k loan? Is there anything to sell (car etc) to cover the repayments in the short term?

ElChup

climbgirl wrote: »

Yes, that's what concerns me about the renting option here - because the rental market is flooded with properties people can't sell, rental incomes are falling and it might be tough to get enough to cover both the loan and the mortgage.

But if you can make some or most of the payments, that's going to help stave off repossession for the short term.

I know the govt has been talking about help for people who can't make mortgage repayments because they've lost their jobs - get onto citizen's advice and find out how this works and how you get it.

The original poster hasn't said if they have any savings / assets to use to cover the mortgage / loan payments in the short term or to top up any rental income in order to make the full payments. I'm assuming there are no savings? What did you do with the £35k loan? Is there anything to sell (car etc) to cover the repayments in the short term?

No savings or other sources of money. The £35k loan went to pay off other debts.

The flat hasn't rented just because nobody is interested at the value I need. Even dropping value I'm having problems. I'd just like to have shot of the whole thing ideally and just pay off the remaining debt. It would makle things manageable and certainly releave the stress. But that seems to be an issue.

Well, I'd best find a way to get some advice, firstly maybe from CAB and then a financial advisor. I need an expert to tell me how bad it is in reality!

Anyhow, thank you everyone for your response so far. I'm not used to seeing such effort at other boards when I've been a newbie and I appreciate it.