Desperate for Help with Negative Equity

theinbetweener_2

Hi guys.

First time poster so please be gentle. Unfortunately i am in need of desperate help as i have made a momental mistake that at the moment i only see one bad way out of.

I purchased my first apartment in the north west of England in late 2008. I had purchased off plan in the February of that year which now turns out to be the worst decision i could ever have made. I also was limited for choice in terms of a mortgage and the interest rate is fixed for another 6 months at 7%. I purchased for £140,000 and the same apartments are now going for £85,000. The move hasnt worked out on a personal level either and I am desperate to move due to a very serious family illness and the fact i miss home so much (in a completely different part of England). I have £30k in savings but i dont think it is even close to what i need, even then i dont know if i can sell it.

I have a good job which pays above the average. Any rental income will cover about half of the mortgage and im not sure if the mortgage would let me anyway. I just do not know what to do. I am at a loss and extremely depressed about the whole situation.

If anyone has any advice at all, i would be more than grateful.

thanks

ciano125

Welcome first of all, you've come to the right place. Also have a read through the other boards as well as you might find more info on them that might be of use.

Unfortunately though, I think you may be right. You've made a bad investment. You weren't the first and won't be the last though. My opinion, for what it's worth, over pay your mortgage by as much as possible to get the debt down. It might be worth sticking the £30k savings you have in, I'm sure others will be able to advise on that. You say you have an above average job, that's great, make use of it. Read through the debt free wannabe boards for inspiration. Things are going to be tough for quite a while but you can work through it.

I'm not sure just handing the keys back would be the best thing, I imagine you would be declared bankrupt, I don't know, but that would follow you around for years and make it very difficult for the future, probably more difficult than you're finding it now.

I know this probably wasn't what you wanted to hear, but they're the only magic beans I've got I'm afraid.

Chin up though, it could be a lot worse. Trust me.

G51shopaholic

why such a dramatic drop in price? It is a near 40% drop in price - who did your valuation back when you bought it?

It is a sad fact that you bought at the crest of a rising market and are now suffering the "crash" in a big way.

You could have it revalued but if sales are poor then you've no much chance of coming out of this any less covered in muck!

Your choices are sit tight, see if things improve over the next few years.

Sell up and do a disappearing act and hope nobody can trace you re the debt (not likely).

Rent the flat out through a GOOD local agent and again sit out the market.

Sue the person who did the valuation and try and get some money back.

Fire_Fox

Welcome to MSE! What happens after six months, do you go onto standard variable rate mortgage? Why do you have £30K savings when you have a debt at 7%, surely you aren't getting that in interest? How much will it cut your repayments to pay that off your mortgage? Are there any penalties for early repayment or overpayments?

Do you know what that will mean for your outgoings? If you move home presumably you will have to give up your job? What will you do for income then? How many bedrooms does the flat have, can you take in a lodger for the next six months?

Handing back the keys is not a good move, it has all the same implications as being repossesed: the house will be sold at a low price and you will be chased for both the shortfall and the costs incurred in selling. Agree the net result would probably mean you going bankrupt which should be a last resort.

Have you discussed the situation with your lender? What they need from you in order for you to be able to sell and convert the shortfall to a loan? Whether they will consent to you letting out the flat or consent for you to sell at a loss? I would suggest you don't have this conversation over the phone, you make an appointment to see the mortgage adviser at your bank.

ciano125

G51shopaholic wrote: »

Sue the person who did the valuation and try and get some money back.

I don't know if this has been successful elsewhere, but I'd be sceptical of the chances of winning. The surveyor will have listed all the comparable sales in the area AT THE TIME, if it was worth £X then, then the valuation stands up. Just because prices have fallen since does not mean the valuer was negligent. Ever read something like "the value of your investment can rise as well as fall" or "past performance is not an indicator of future performance"?

As I say, I don't think there is an easy way out unfortunately.

theinbetweener_2

Thank you for your reply. I dont know why they dropped but the market just dissapeared over night. there is alot of car manufacturers in the area so i guess that contributed.

i have thought (many many times) that the valuation was surely just wrong. It was done by the halifax who are my mortgage supplier They actually valued it at 2k higher than i'd paid which just couldnt have been the case. Is it actually an option to sue the valuer? or will they just claim 'recession'?

theinbetweener_2

thank you ciano, im trying upon trying to see the bright side. i just feel ill every single day. :-(

Il keep trying.

theinbetweener_2

i revert to the standard variable rate yes. I think my savings would save me around £100 a month if i put them into the mortgage. there is slight fee of 3% over on about 15k of it but in the scheme of things i dont think thats bad.

I called my lender once a few months ago and they just tried to peddle me a different mortgage after i pay a £2.5k product fee...moving and starting afresh, albeit with a huge loan around my neck is attractive though. I will try and find a branch to walk into and ask about that.

geoffky

Prices have crashed big time in some places ...i have just paid 188k for a 4 bed detached in Cheshire..it was up for 299k ....nearly a 40% drop...and no its not a repo..

PasturesNew

Sit tight and pretend you don't own it. See the mortgage going out as rent. Many people are in negative equity during their lives (I was once), it's only a problem if you are forced to sell - at the moment you really are just choosing to sell to distance yourself from the purchase decision.

Just sit tight, live there, save as hard as you can and see how different things are in 3 years.

Once you're on the SVR your interest rate will drop, you can chuck all or some of your £30k (and further savings) at your mortgage and be able to see the wood for the trees.

For now, the summer's coming... just think of the hot sunny days ahead and get out in the sun.

G_M

I agree overpaying the mortgage is step one. Throw the whole £30K in if the T&Cs allow such overpayments.
Step 2 get a lodger if you have a spare bedroom and use the rent to overpay mortgage again. Everything to bring down the debt on your mortgage.
This has 2 benefits:
1) Eventually your mortgage comes down to the value of the property (and property prices are creeping up again now) so you can sell and
2) you save money in the long term cos you pay less interest. Your savings are earning what? 3%? 4%? Before tax! But your paying mortgage interest at 7%!

once your morgage is low enough, you can move back to the family area and either sell the property and pay off the mortgage or rent the property and have the rent pay the mortgage.