Surrendering a House in Negative Equity

hanskib18

Hi there,
I'm trying to help out a friend who has split with his wife aand struggling with how to move forward.
Their house isn't in a rentable condition and they do not have the money to sort it out, so that's out of the question. They've had it on the market to absolutely no avail and neither of them can afford to take the full mortgage on alone.
So really they're left with surrendering it to the mortgage company for sale at auction. Given the state of the house and the current climate etc etc, my friend is calculating that they'll each be left with approx 15k debt left on the mortgage.
My friend is worrying about how he's going to be able to find a place of his own (he's currently back with his parents) when a hefty amount of his income will be going on the mortgage deficiency and child maintenance.
Anyone got ideas on how he can deal with this debt and be in a position to rent or buy somewhere for himself?
Obviously IVA or bankruptcy would be an absolute last resort so I'm just looking for suggestions.
Thanks a lot

VIGILANT22

No easy answers here.... If the sale does not cover the mortgage, the "owner" will be responsible for the shortfall. Furthermore, lenders have up to 12 years (five years in Scotland) to recover these funds.

hanskib18

Will lenders ever treat the shorfall as a sort of loan and offer a repayment scheme of up to 12 years?

VIGILANT22

This will be at the lender's discretion...

hanskib18

Ok, thanks. I'll get him to speak to them. He obviously can't stay at his parents', but it's finding a way of having a house after taking this debt on

busiscoming2

Going back quite a few years now, when my now husband was splitting up with his ex partner, their house was in negative equity. Me and his ex went to see the lender (Halifax) who agreed they could hand back the property (they were also a couple of months behind with the mortgage payments). The Halifax agreed to setle with a final sum of £6k from them both, which was far less than the arrears and neg eq.

Although it was hard for them to find £3k each, it did mean we could get a mortgage at a later date albeit with a slightly higher than normal interest rate. They also got a letter each from the Halifax and the Insurer (was endowment mtg) saying they had satisfied each of them financially.

So it may be worth them meeting with the lender.

hanskib18

Thanks very much for that thread, useful to hear of someone who's been through the same thing

VIGILANT22

busiscoming2....Excellent post...this encourages people to keep up dialogue with the lender as this does stand in your favour...rather than burying your head in the sand and hoping the problem will go away....hope this has helped the OP..

g_attrill

Are they currently listing the price at a £30k loss, or are they only dropping to their mortgage balance at present? If they agree a repayment plan for any negative equity they can then plan to drop the price further sell at a loss, rather than "handing the keys back", which I would imagine would cost them far more unless the auction scene there is quite lively!