Negative Equity.. time to say goodbye?

danielley

I am after a bit of advice.

My partner has a Northern Rock mortgage on a property. He is currently on the SVR of 4.79% (i think that right) interest only and owes £89k.
He had the property valued about a year ago and it came out at about £83k
He has been renting the property out, but he is finding it too much a hassle dealing with tenants and maintenance, if he could just sell it he would
If he was to sell for £83k (no guarantee of course) after solicitors fee's etc I reckon he would have a deficit of approx £7-8k

I was wondering what people's opinions of our best exit strategy would be.
The way I see it we have 3 options

a) Sell the house now and get a personal loan for the shortfall
b) Sell the house now and make up the shortfall from a remortgage on my property (I have a £72k mortgage on a £95k valued house currently on C&G svr of 2.5% over 20 yrs)
c) Continue to rent the house and save as much as possible in the meantime and hope that the value increases (or doesn't decrease)


I would really appreciate your comments and thoughts

Many Thanks

VIGILANT22

C.........

Why would you want to service debt with more debt
Don't you get in debt for him just to make his life easier
I have known many many couples like this...things happen and the other partner is saddled with debt that wasn't even theirs
He'll just have to "put himself" out

Good Luck

Dan_1976

If i could afford it I would keep it and hang on. Why pay more out or get into debt?

inca_2

Agree with the post above, I would be vary wary about getting into debt for yor partner. Also if the debt is becoming a problem then why take out another to create more, I realise the mortgage balance will be gone but the loan will still cost a fair bit with it being over a shorter time period and you're then stuck with it for however long ou take it out for.

As for the mortgage, you won't be able to get a further advance with C&G as they will only go up to 80% of your propery's value for additional borrowing which you are almost at. There's also the chance that the value of your partner's property may well have altered in the past year meaning a bigger shortfall to stump up.

I apologise if I'm being dense as I know very little about renting property but does your partner use a management company to deal with tennants/maintenance? If it's the hassle rather than the debt that is a problem could he not look down this avenue?

Pincher

danielley wrote: »

He has been renting the property out, but he is finding it too much a hassle dealing with tenants and maintenance, if he could just sell it he would

I know somebody who qualified after years of medical school, and then couldn't stand dealing with patients.

If the income covers the outgoings, just hold his nose and try not to breathe when standing next to the tenants. I'll bet he wouldn't be so huffy if he had a bunch of foreign girls to look after.;)

danielley

Thanks for all your comments

I’ll just add a few extra bits of info.

He is a reluctant Landlord…. he bought the property in 2005 with his then partner for £85k (on a 100% mortgage) they split up 9 months later and in order to get rid of her quickly her remortgaged up to £90k -stupid idea as there was no proof that the value had risen but like so many others novice he assumed that house prices would always rise…..

We met and eventually moved in together (into my house) in 2007 and he has rented it out since then, initially because he didn’t want to sell the house straight away (in case we didn’t work out) but now he has realised that he’s in negative equity, he can’t!

When I say he can’t be bothered with the hassle, it's more the outlay for updating appliances and paying out for repairs etc, I know how frustrating it is when I have to fork out for things on my house that I live in and see the benefit of. And for a long time the rental income wasn’t covering the mortgage…. Also if and when tenants come to leave, you have the horrible period between lets when you have to cover the mortgage which is expensive too.

I know that it was a catalogue of his personal errors that got him in this situation… but as his fianc! it is in my interest that he sorts this debt out, and up until now he has been burying his head in the sand.

inca wrote: »

As for the mortgage, you won't be able to get a further advance with C&G as they will only go up to 80% of your propery's value for additional borrowing which you are almost at.

Good point about my LTV, I do think I would be able to get a valuation of £100k, but I obviously don’t want to reduce my equity if I don’t have to.

The reason we are thinking of selling the property is that whilst he has this mortgage he cant get another mortgage therefore we cant buy a house together. We don’t have children (yet) so we don’t need to move anytime soon, but as 2 hardworking individuals it's such a shame we cant have the modest life we want….

Thrugelmir

Personally I would sell up and fund the shortfall with a personal loan payable over the shortest period affordable.

I'm sure the removal of the stress and hassle will be worth every penny.

Don't remortgage your property to fund the shortfall.