We want to pick your brains

tic_toc

Hi,
We are new to this forum but have learnt so much already from reading your posts.

We are soon to be facing BR and in the process of filling in the forms. We would like to pick up on peoples experiences and knowledge with regards to the possibility of keeping our home

On top of all our unsecured debts we have a mortgage and secured loan on our house. Going on valuations in Dec 08 we have calculated that we have approx £48,000 in negative equity.
We have tried to sell our house but didnt even get anyone through the door to view it.
We do have some arrears, but are currently 3 months into an agreement with our mortgage lender that if we my 6 full monthly payments they will add the arrears to our mortgage. Can we still do this after BR?

We are currently making these payments. Will this go in our favour with the OR re us keeping our house?

Due to the amount of negative equity wouldnt it be better for the creditors/OR to let us keep the house and continue to make the payments?

Despite us having an agreement with our mortgage lender, could the OR force repo due to our arrears as our finances would still be tight with very little income left over?

We would appreciate hearing you knowledge, views and experiences that may help us with the above questions?

Bethankim

Hiya and welcome

As your house is in negative equity you will be offered your beneficial interest in your house for £1 plus solicitors fees.

there are pro's and cons to this and i would try and explain it, but im a bit wooly on that side of things so i shall keep to what i know - and hopefully those more knowledgeable than me can help too

stintond

yes , it would be better for the creditors to let you keep the house and I dare say it would be better for the OR as well , but would it be better for you?
Me , personally , with 48k of neg equity , I would leave the house to be repossed and before going bankrupt get yourself rented accomodation , that way all the negative equity can be thrown in the pot.
if you keep the house , you have to consider how long it will be before you are back in equity again.
I was in this situation and the secured company hinted that they might have accepted less than the 60k we owed if as a full and final settlement ,but like yourselves , we couldnt get any offers on the house even , eventually , to cover the original mortgage.

peachyprice

If you want to stay in the house there's no reason why you can't. To let a house go that you like and can afford just because it's in negative equity at this point in time would be foolish. Unless you intend to move in the near future negative equity is irrelevant, and is most definitley in your favour.

Even if, 5 years down the line you decided that you could no longer afford/don't want the house and there was still NE, it would be covered by your bankruptcy.

You are allowed to pay mortgage arrears while BR, and the OR would not take a house with no equity.

HTH

stintond

the poiny I want to make is the fact thatby staying in the neg equity house they have to pay off the neg equity before they can start actually paying for the house. In my case , I reckoned it would have been 6 to 7 years before I was back in equity , in comparison , 6 years from now , I hope to have a lot of equity in my new house.
So th op needs to consider both scenarios and , looking forward , say 5 years , ask themselves which situation would make them better off

peachyprice

But negative equity only arises with a fall in house prices, if prices rise, which they will eventally, NE isn't there to be paid off. Which is why I said the house is in NE at this point in time. In 3 years time it may well not be, and the house will have been given up for nothing.

stintond

yes , I know what you are saying but the point I want to make is , well firstly , I dont think the prices of the houses are going to hit the 2007 peak any time soon because this situation was on the back of the banks throwing money around like there was no tomorrow , but anyway , while tic_toc is staying in the neg equity house waiting for the house prices to go back up , all this time she could have been building up equity in the new property.for instance , our house was valued at 105000 at the 2007 peak , we had spent 12 months delaying the bankruptcy because we always thought the house prices would continue going up and would eventually cover the debts , now look what happened.
Of course , tic toc does have the problem of getting a mortgage and paying the extra rates of interest , but in my opinion , the cancellation of this amount of neg equity 48000 (plus the interest which is added on every year) is enough to justify throwing back the house.

peachyprice

I think you mis-understand what negative equity is.

It isn't a debt, and doesn't make any difference to the amount of money you owe unless you want to sell the house.

There is no interest added to your mortgage for being in negative equity, and the more you pay off your mortgage the smaller the negative equity becomes, building up equity all the time, so houses will not need to reach 2007 prices for your NE to diminish.

Even if you keep the house now and prices do not improve there is no point in giving up a house you can afford and like because any mortgage shortfall will ALWAYS be included in your BR, no matter how long after discharge it is, 5 years, 10 years, 15 years.

Can you see why it's not necessary to let a perfectly good house go just because it's in negative equity today?

stintond

well its just that , with my last house I was paying over 1000 a month on the mortgage and I had 23 years to go of this , now ,given that it is now valued at 80000 , I am glad to have walked away from it.
Imagine that once I get discharged I went back and bought a similar house for 80000. If I then go back to paying 1000 a month that house could be paid off altogether in about 8 or nine years.
By contrast had I stayed in my old house , after 8 years of paying 1000 a month I would be looking at maybe breaking even at that point , so , therefore , in 8 years time I would then have to pay the rest of the mortgage off for the next 14 years , whereas now I could be mrtgage free at that time and still be living in the same or similar valued house.

fooman

you are presuming house prices don't go up in the next 6 years tho :rotfl:

stintond

yes we have to presume that they wont go up , in our situation the house would have had to go up by 50% to cover the debts we had.