Buying house with owner's mortgage shortfall

shabby_chic

The house we would like to buy is being sold by a couple who have separated. They bought in 2007 and now they are selling they have a large shortfall due to the asking price being 45k lower than they paid. I believe their mortgage company must approve any offers but wondered if anyone has any experience of this situation. Can the mortgage company reject an offer? The house has been on the market for over 2 years, dropping in price during this time.

Thanks for any info

Annisele

I take it the property hasn't (yet) been repossessed?

If that's the case, then the mortgage company doesn't have to approve offers. But - and it's a big 'but' - the mortgage loan has to be repaid on sale. So, if you offer £45k less than the mortgage redemption amount and the vendors make that up with their £45k of savings/personal loan/money cobbled together from wherever, all is well.

If the vendors don't have enough money to repay the mortgage on sale, then the lenders won't release their charge over the house - so in effect it can't be sold.

Fire_Fox

I wouldn't touch this situation with a bargepole. Chances are the vendors will be arguing about who is going to take the hit, how the debt is going to be split and then there is the mortgage company who may not agree to the sale. That is a big enough shortfall for one party to contemplate bankruptcy: if the vendors stop paying the mortgage this could turn into an even bigger nightmare.

Richard_Webster

I take it the property hasn't (yet) been repossessed?

If that's the case, then the mortgage company doesn't have to approve offers. But - and it's a big 'but' - the mortgage loan has to be repaid on sale. So, if you offer £45k less than the mortgage redemption amount and the vendors make that up with their £45k of savings/personal loan/money cobbled together from wherever, all is well.

If the vendors don't have enough money to repay the mortgage on sale, then the lenders won't release their charge over the house - so in effect it can't be sold.

That is certainly the normal practice.

However the seller can approach the lender and point out that if they end up repossessing the property more debt will have run on and the property will sell for even less as a repo so why don't they do a deal now and agree to release the charge on payment of a lesser sum? The seller would have to agree to carry on making loan repayments without any security for the lender. The lender might agree to some such deal but it is by no means gauaranteed.

shabby_chic

Thanks for the replies. May well be worth forgetting about this one!