Beneficial Interest/Mortgage Shortfall Query

Angiepange

Im a bit confused and wondered if anyone can clarify this for me?

I understand that if we vol repossess our house and it is then sold even after discharge the shortfall will be included in our BR.

What im not sure on is if we have been offered and bought the BI will we then become liable for this shortfall because we have bought the BI?

I have seen conflicting info on this and really hope someone knows the correct info. Many thanks in advance.

Angie x

peppa-pig

If you buy the BI and then the house is repossessed whether that be voluntary or not, the shortfall will NOT be included in the BR.

If you don't buy the BI and then the house is repossessed whether that be voluntary or not, the shortfall WILL be included in the BR regardless of how long it takes to sell the property.

You really need to consider if you can afford to keep up the mortgage payments or not before buying the BI as once you have bought it there is no going back and if you were to lose the house in the future the shortfall would be your problem and not covered by your BR.

script

Now, I may be completely wrong here.

And for goodness sake - please get more advice.

But I understood - that even if you DID buy the BI - and the house was subsequently sold or repo'ed or voluntary given back.

Even if all this happened after you are discharged from BR.

Any shortfall WOULD be included in your BR.

Because in essence it was still a "provable" debt in BR.

But, please do get more opinions on this.

And please anyone - if I am wrong please tell me - and I'll gladly apologise.

Sorry to add to any "confusion"

peppa-pig

I thought if the BI was purchased the OR no longer had any interest in it and therefore it couldn't be included??

Hopefully someone will be along soon with the 'correct' answer!!

peachyprice

I do beleive script ir correct.

There is a thread on here somewhere from last year where Richard_S did some pretty extensive investiagtion and the conclusion was that buying the BI has no bearing on any future shortfall being included in BR.

When you buy the BI you are only buying the right to any future equity, you are not buying the debt from the OR, therefore the debt still exists as proveable.

However, as far as we are aware this hasn't been put to the test so there's no concrete evidence that this would actually stand up in court.

Personally, I if had a large negative equity and there was a chance I wouldn't be able to afford the mortgage at some stage in the future I would not buy the BI, purely because I'm a chicken and wouldn't want to be the test case.;) There are ways and means of staying in neg equity for the 3 years.

peppa-pig

sorry for giving wrong info angie

Angiepange

Thanks all for the info.

Hi Peppa please dont apologise no need. I just want to know for certain and cant seem to find anything official on this. We have our OR interview on Weds so Im gonna ask him. I also have a cousin who is a solicitor (on hol at moment) so I will see if he can find out when I can speak to him.

Our dilemma is this:

Both just gone BR.

House valued by estate agents in Jan 2009 when we we thought we might be able to sell at £135000 to £145000. Mortgage currently on a fix rate (90%interest) until Nov 2010 is £152000 but with ERC of £7000 until Nov 2010. SO looking at poss NE of £24000 which includes the ERC, would be less if we could sell for £145000 after ERC finishes, but still NE unless house prices start rising again.

We feel our income now which at moment is £19k plus small amount benefits is too low to sustain a £152k mortgage when we come off fixed and it converts to SVR. Ok at the moment if we were on SVR we would be paying less than we are now but when interest rates rise we would be unable to get a good fixed deal as we are BR's so we would be at the mercy of int rate rises. I dont want to be worrying how to afford a mortgage and the possible/likely increase in payments after having gone thru BR, the thought of more debt terrifying :eek:

Do we stay in our house for now while we can still afford mortgage as its fixed for another year and then hope we can continue to pay mortgage if it rises as hopefully in a years time our income should have increased.??? We plan to stay in area for 5 more yrs while youngest finishes her education and then move away. By this time hopefully house prices have risen and we can sell, pay off mortgage and rent in a new area.

OR Do we move out of house soon over next few months into rented, let it be repossessed, shortfall to go into our BR and no longer have worry of affording the mortgage if it rises in future???? Would still have worry of renting a house as BR's and all the upheaval moving out etc.

What also makes the decision harder is what we are paying on mortgage at moment is same if not a little less as to what we would pay for rentals round here.

I just dont know what to do for the best. Im petrified of renting (sounds silly I know!!), first of all actually being able to find somewhere suitable, then living with fact you could be given notice at any time and have to go thru moving all again. I know lots of people seem to find a place and manage ok its just when you have never done it before you dont know what to expect.

I also realise we may have no choice in things, our house is with the OR now and we will have to see if we are offered BI or not or they want us to sell it (again unlikely I think cos of the NE). Thats why I need to be clear on whether buying the BI would mean we are liable for future shortfall if we move out/vol re possess the house.

Sorry this post has rambled a bit and theres probably no right answer to our dilemma, just wondered what other people would do?

Thanks Angie x

peachyprice

You don't have to buy the BI to stay in the house though, the OR only has 3 years to make a decision about the house after that it reverts back to you anyway. If there's no equity they won't make you sell it, this has nothing to do with buying the BI.

peachyprice

Have a read of this thread, post#16 onwards in particular, where someone actually got a written reply from the IS stating that buying the BI does not change what happens to a future shortfall

http://forums.moneysavingexpert.com/showthread.html?p=13665505&highlight=#post13665505

wayforward_2

peachyprice wrote: »

There are ways and means of staying in neg equity for the 3 years.

I would be interested to know what the ways and means are?!

fiveyearplan

wayforward wrote: »

I would be interested to know what the ways and means are?!

Me too! Peachy???