Help! Negative Equity Joint Mortgage with Mum

snugglepet20

Hi, long time reader first time poster, I need advice if anyone can help. Here goes, I bought a house in January 2008 for £125,000 borrowing £127,000 (HLC!) from the bank. I am on interest only and have negative equity in a house that is now worth about £110,000 if I am lucky. I want to move abroad to work and so need to get rid of the house but in order to get the mortgage my Mum signed up for a joint mortgage with me. The bank says I don't earn enough to have her removed and I need to get out of this without damaging her credit score (which is perfect plus she will kill me!). Does anyone have any (legal) ideas?
Thanks

brit1234

snugglepet20 wrote: »

Hi, long time reader first time poster, I need advice if anyone can help. Here goes, I bought a house in January 2008 for £125,000 borrowing £127,000 (HLC!) from the bank. I am on interest only and have negative equity in a house that is now worth about £110,000 if I am lucky. I want to move abroad to work and so need to get rid of the house but in order to get the mortgage my Mum signed up for a joint mortgage with me. The bank says I don't earn enough to have her removed and I need to get out of this without damaging her credit score (which is perfect plus she will kill me!). Does anyone have any (legal) ideas?
Thanks

Is there no way you can pay some off while rates are so low. Negative equity is set to increase and interest rates are set to rise so you should over pay or you are in danger of being repossesed

david29dpo

Not a lot you can do other than sell and arrange a loan to pay the shortfall.

HAMISH_MCTAVISH

Lets be clear about this.

Property is not a short term investment, and should never be treated as such.

You need to re-think your approach. What type of property is it? House/flat/how many bedrooms?

If it is a multi bedroom property, start by getting a house mate, preferably a friend you can trust. This will generate income without changing the mortgage status. If you then need to move overseas, just rent the second room, but be aware you may need to change mortgage to a more expensive BTL product depending on how long you'll be gone for. If it's seasonal work, probably not as you can make a claim it;s a housesitter and you'll be back shortly. If it's permanent, probably so.

I/O is pointless, and very expensive in the long term. You need to be on a repayment mortgage as the amount of interest declines as the mortgage is paid off. It's MUCH cheaper over the long run.

You can't sell at a loss. You can't get out of it without screwing your mums credit. Your only option is to rent out all or part of the property, but at least if you change to a repayment mortgage you'll be paying off an asset that will do very well for you in the long term.

Even if rent doesn't quite cover all the costs initially, you are building an asset that will appreciate in the long term provided you switch to a repayment mortgage, and someone else is then paying for most of it. The worst case scenario is that you have to subsidise the mortgage by a couple of hundred quid a month for the first few years, which is a small price to pay for building equity in an asset that will do very well in the long term.

alexlyne

As previously said, property is a long-term investment, you cant buy a house then have the right to sell it 18 months later (like having children!). At least you only *want* to work abroad, and it's not a *need*.
Repay as much as you can, and look to moving in 2 or 3 years time.


I thought interest only mortages were only given on the understanding that you have regular savings in place to pay back the mortgage amount? If this is the case then you should be able to pay a lump sum off the mortgage now? I'm not sure, I've never had one as they always seemed too risky and the kind of thing desparate people will do when they can't afford a repayment mortgage.
I would doubt you can rent it out... a btl mortage will be higher, and there is no way you can get a new mortgage with negative equity.
I also think your lender was highly irresponsible lending you the money tbh. If they didn't tell you the risks of 100% mortgages along with the fact your mum would be on the paperwork just to have the income high enough, and being on interest only with no savings plan... well that's 3 things that when combined spell disaster. Sorry, but that's the way it is. Maybe you can sue them?

HAMISH_MCTAVISH

alexlyne wrote: »

I would doubt you can rent it out... a btl mortage will be higher, and there is no way you can get a new mortgage with negative equity.

No, he certainly can rent a room immediately to improve cash flow.

As for renting the whole property, it depends how you do it. If he moves out permanently, then he needs to switch to a BTL mortgage.

If he rents a room to a mate, then wants to go and work overseas short term (seasonal work, etc, less than a year) while he rents the other room to a "housesitter", it's more palatable to the bank.

And the first 4K or 5K from renting a room is tax free under a government exemption.

As for switching mortgage, it is still possible even with Negative Equity.

Speak to the existing lender and explain the need to change from I/O to repayment and start paying down the mortgage. Chances are they will allow it and issue a new mortgage even with the negative equity, provided relationship is good and payments are current.

Some banks are also offering better rates (and 100%+ LTV's) for existing customers in this position than they advertise to new customers as well, but you have to ask for them.

Speak to the lender first, theres almost always a way to make something work if pro-active steps are taken.;)

_Andy_

snugglepet20 wrote: »

Hi, long time reader first time poster, I need advice if anyone can help. Here goes, I bought a house in January 2008 for £125,000 borrowing £127,000 (HLC!) from the bank. I am on interest only and have negative equity in a house that is now worth about £110,000 if I am lucky. I want to move abroad to work

How do you propose to settle the remaining £15,000 of negative equity plus finance the legal fess and estate agent's fees?
Sorry but your plan isn't realistic at the moment.

Fire_Fox

snugglepet20 wrote: »

Hi, long time reader first time poster, I need advice if anyone can help. Here goes, I bought a house in January 2008 for £125,000 borrowing £127,000 (HLC!) from the bank. I am on interest only and have negative equity in a house that is now worth about £110,000 if I am lucky. I want to move abroad to work and so need to get rid of the house but in order to get the mortgage my Mum signed up for a joint mortgage with me. The bank says I don't earn enough to have her removed and I need to get out of this without damaging her credit score (which is perfect plus she will kill me!). Does anyone have any (legal) ideas?
Thanks

Your only option is to stay put, rent a room and overpay the mortgage until you have caught up the negative equity. I don't think you will be allowed to move onto a BTL mortgage and let the entire house as you don't have any equity. It's easy to say with the benefit of hindsight but you should have saved up a deposit before buying a property; unfortunately now you will have to save up and plan your move abroad in a few years.