Is there a way to get rid of a house without selling!

rickdews

ello, This is my first post here but please could somebody give me some advice. :ABasically, my girlfriend is in a bit of state with her house and neither of us know what to do. It might help if I briefly explain how it's come about...

A few years ago before I met my partner she was running a courier business and earning around £30,000 a year. She took out a mortgage on a £170,000 house. But then totally unexpectedly she contracted severe Rheumatoid Arthritis and could hardly walk. She gave up her business and was unable to work. Now about three years later she is 31-years-old and living on benefits. Unfortunately she still has the mortgage on her three-bedroom house and due to the fall in house prices she would be selling it for less than she bought it - negative equity I think she mentioned. (I understand that this would give her debt and she already has some from elsewhere). All of her benefits cover the mortgage and not the essential things that they are intended for with disabled people. She struggles to pay the rest of the mortgage and bills which amount to around £1,000 a month. She's failed to make the payments on a number of occaions and come close to being re-posessed. She said that she had to re-mortgage for £200,000 to avoid this (I don't know how that works personally).

Basically, she desperately wants to leave the house which is draining her financially, emotionally and physically. I met her a year ago and I've helped her to decorate the house and sort out the garden a bit. She's not a scrounger and she sells some of her artwork (she graduated with a degree in fine art at from Leeds University) on the internet and she's currently applying for part-time jobs as they're all she can manage with the illness.

We're both stumped about what she can do with the house. It's frustrating because the financial help she's entitled is being wasted on mortgage payments and her life's being made even harder by it. She doesn't have any close family so help from them is not in the question. Please would anybody be able to tell me what she could do and what organisations she could contact to help get out of the hole she's in.
I've drawn up this list of options but if anybody could comment on them with their own knowledge or experience that would be really helpful.

1. Put the house on the market
2.Move lodgers into the house
3. Move out into rented accommodation and rent the house out to a family or several individuals.
4.Go bankrupt and leave the house
5. Give the house away to somebody who puts their names on the deeds? Does anybody know if there are organisations that will take a house off your hands with no costs involved?

Many thanks

Rick

gauly

1. Put the house on the market - yep, you can do this but the mortgage company has to agree to the sale. Since she is in negative equity they will have to agree to converting the extra she owes them into an unsecured loan which might be difficult to get them to agree to.
2. Lodgers - if having a lodger would cover the mortgage then this sounds a good idea.
3. Rent it out - its going to be difficult to get permission to let since she isn't going to qualify for a buy-to-let mortgage so she might have to do this fraudulently.
4. Bankruptcy - might work if she is going to be claiming benefits for a long time and doesn't need credit. Its obviously going to be difficult to rent/get a credit card/etc for many years and there are certain professions you can't do after having been bankrupt.
5. Give the house away - why would a company want to buy a house for more than it is worth? And who would give them the credit to do this? You can't just give a house away without permission from the mortgage company.

blckbrd

Don't know anything about it other than that they exist but maybe a mortgage rescue scheme may help.

http://mortgagehelp.direct.gov.uk/

G_M

gauly is pretty well right. Options 1 and 5 are non-starters.

option 3 letting: Permission needed from lender, need to check cost of mortgage + cost of renting a new place to live, against rental income after tax and expenses; it's stressfull too and there are always more costs than people initially think so lots of preparatory research needed.

option 2 lodgers: easiest. lodgers have few rights so if it doesn't work out you can get rid of them. there's a gov scheme. Need some basic ground rules (what facilities they can/can't use, visitors?, share bills or all-inclusive, etc)

option 4. Gets her away from a stressful situation but lots of implications. Last resort.

dmg24

Does she not get her mortgage interest paid for her?

Annisele

I posted my response on the OP's other thread (didn't realise it was a duplicate): http://forums.moneysavingexpert.com/showthread.html?t=2398129.

I pretty much said the same as everybody else though.

rickdews

Thanks for the responses. In answer to dmg24, she doesn't have the mortgage interest payments paid for her. The £800+ she pays each month is the interest payment. She hasn't paid any capital on the house.

Since posting this, I've had a look at mortgage rescue schemes. They seem like one of the best routes at the minute if they're possible.

Oh, and sorry for duplicating the original post!

Fire_Fox

I think your girlfriends benefit entitlements need an overhaul, there is SMI to pay the mortgage:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DG_10013261
To be honest tho, a three bedroom house is a lot for one person to manage physically and financially, if you want to move in at some point then you could help get everything in order. If not and she has no further plans to get credit for at least six years then she may be best selling up and going onto a Debt Management Plan, IVA or bankrupt to deal with the shortfall. At the end of the day her mental health will be negatively impacting her physical health.

goldbyron

I would explore some of the companies who can offer a quick cash sale but only at 70-75% of the value which would leave negative equity still. Auction is another possibility - quick and guaranteed at a low enough price. Whatever happens - sell it for something and then maybe you need to negotiate a way to pay back the outstanding balance. I would have thought given the circumstances they should show some empathy.

The alternative of course is to rent until the market bounces back. Ask some agents to give a rental value and do your figures to make sure it works out.

Gather all the information on the alternatives and then choose the best option. Better than sitting there worrying and becomimg more ill. Some decisive action will help her no doubt.

Owain_Moneysaver

Lodger would probably be the quickest way of getting some income - but if she is (or will be) getting means-tested benefits may affect benefit entitlement.

Could she rent out the drive or garage using parkatmyplace.com?

GDB2222

Fire_Fox wrote: »

To be honest tho, a three bedroom house is a lot for one person to manage physically and financially, if you want to move in at some point then you could help get everything in order.

I don't know much about benefits, but I think that cohabitation would make a big difference to your girlfriend's entitlement - so you need to find out what the effect would be before you move in.

I too am perplexed why she doesn't get help from benefits with her mortgage interest. Quite frankly, unless she can get something sorted out to pay the interest, she's not getting anywhere. In that case, she should consider bankruptcy quite carefully. It's there precisely to relieve people of impossible debts.