Stuck in a Negative Equity Nightmare

hitmanray

Hello

I am looking for a bit of advice to see if any of you knowledgeable folks can suggest a new plan of action that may be able to get me out of a rather large hole I have managed to get myself into. My story is a bit complex, so please bear with me and I'll be as brief as possible.

I bought a property in the South of England in Jan '07 on a 95% LTV Interest only 3 year fixed rate mortgage from Northern Rock.

In Feb of '09 I transferred from the UK to the US where I have lived ever since (and plan to remain). For the past 2 years I have had a consistent tenant paying me rent. That tenant has just moved out and I am currently talking to a Letting Agent about getting a new tenant.

At no point through the rental period of the property have I been able to secure enough rental income to cover the costs of the interest on the mortgage, the buildings insurance and the ground fees. The property is costing me about GBP 80 per month when leased and a lot more for every month it is empty.

The letting agents has recommended I make GBP2,500 on improvements to the property in order to get top end rental income.

Looking at current sell prices I think the property is probably only just in negative equity (when taking sales fees into account).

My fixed rate with Northern Rock has ended and I am on their standard variable rate (currently very low). However my fear is if/when the market begins to recover, rates will increase and my monthly out-of-pocket amount will increase.

So here's my options as I see it:
1) Sell up ASAP and take a bath on all monies invested over the last 4 years (prob GBP25,000 as an estimate). May face legal issues on this.
2) Keep renting the property until the market improves and hope I can get out before interest rates hike and kill me.

But here's the major question...

As I am no longer resident in the UK is there a 3rd option such as something like declaring insolvency/walking away from the property that would not negatively effect my life here in the US (any international law experts out there?). When I came to the US I wasn't able to bring any of my positive credit rating data over with me, so by that rationale I figured it probably wouldn't do me any harm over here. But I am also in the process of applying for my Green Card which could complicate things further.

Thanks for reading. Any opinions/thoughts/recommendations welcome as this has turned into a major head-scratcher for me!

Thanks!

katsu

Erm, declaring yourself insolvent would mean you lose the money you invested any way, so why not just sell up? I can't see why you would risk the long term consequences of being bankrupt if you did return to the UK (no idea on international implications) rather than just sell the place.

Maybe someone else can see what I'm missing.