Intrest only mortgage shortfall, Help please

DTM1985

Hi Guys, been reading this forum for a while but never posted. I am in a terrible situation with my mortgage and would like to know if anyone has some good advice.

Ill try and cut a long story short(ish)

Around 5 years ago I bought a 2 bedroom appartment on an intrest only mortgage, the developer still owns 25% and I got the mortgage on 75% of the property. I bought it at the house price peak and have since been told by an estate agent it was never worth what i payed, so that means it will probably never will be worth the original price.

At the moment I am going nowhere with it but if I sell it there will be a massive shortfall probably in the region of 40-50,000

I cant afford to change it to a repayment mortgage, a lot of people sugest doing this and letting it out but I couldnt afford to do this as the repayment mortgage is to much and if I let it out still on an intrest only, well theres no point if i'll never get back the original price. He advised me to take legal advise but didnt get anywhere but that was about 3 years ago.

I was only 20 when I bought and it was sold to me by the mortgage adviser as a really good deal, In hind sight it was the worst mistake of my life and feel very stupid but guess I was young and didnt know much better.( I dont know if there would be a case for a mis sold mortgage)

At the moment I feel my only option is to have a voluntry re possession then go bankrupt to deal with the shortfall.

If anyone has any alternative suggestions I would be all ears.

Thanks for reading

Thrugelmir

Hi, Welcome to the board,

Are you struggling to pay the mortgage you currently have? Or is it the fact you are in negative equity that's the issue.

DTM1985

Hi Thanks for the reply, I can manage the mortgage (just) But as it is negative equity, alot, It just seems like im on a road to nowhere. If it was a repayment mortgage it would be worth struggling on with. As I have a few other debts (that I can afford) just wondering if its best to go down the bankrupt route, I wouldnt want to but Cant see any other way

Thrugelmir

If you have other debts. Then tackling them first should be your priority.

Although you are unable to switch to a repayment mortgage. Even paying a small amount of capital from your mortgage would be a start. You are only 25 and a mortgage is in a sense a lifetime committment. So plenty of time for the situation to rectify itself. Even if it means paying the mortgage for 40 years!

Have you considered taking a lodger for a while to generate some additional income?

Suggest also you visit the DFW board (Debt Free Wannabe). Plenty of good advice and support on living frugally to save money.

Bankruptcy may seem like the easy way out, but choosing this route does have its own downfalls.

DTM1985

I do have a lodger at the moment but he is leaving soon.
That sounds agood idea about paying some of the capital even if not on a full repayment, I wasnt aware I could do that, I phoned my lender yesterday to disscuss options but they were extremely unhelpful to say the least. I probably need to do more home work on martgages because I feel clueless on the subject. I wonder If I could switch to another lender easily ? I know people with mortgages for simlar amounts and pay similar to me but there on repayment. Maybe I need to see a good mortgage adviser ? I am dealing quite well with my other debts (I did get in to a mess at one point but have them back under control)
I just Dont want to eventually pay all theese off and then have a massive shortfall to deal with that forces bankruptsy

zzzLazyDaisy

Also, remember that you have to live somewhere. If you decide to stop paying the mortgage and go bankrupt you still have to find somewhere else to live, so it is worth checking out rents in your area. When you take into account the money you get from your lodger, you may find that there isn't much in it (many landlords will not allow lodgers).

As far as the negative equity is concerned, this is only an issue if you sell. If you can afford to stay and start overpaying on your mortgage payments, over time you will start to bring down the amount of capital owed.

DTM1985

I can't really afford to overpay anything on the mortgage. And I payed a massively inflated price for the property in the first place and would only own 75%
to be honest I don't want to live at or own the place but selling isn't an option so am Looking for another way out. It was a terrible investment. I could rent somewhere cheaper and life would be more comfortable.
I have thought about seeking professional advice but I don't know who the best person to see is, a mortgage adviser or a debt adviser or someone else.
Thanks for all your advice guys

Mike_parsonnage

Sorry to hear about your situation . Only my view but these buy a share of a property deals should be illegal . If the buyer cannot buy the whole place then they cannot afford it. These types of deals have been happing all over the country in the last 5 - 10 years . They are not to bad in a rising market but send people into the siutation that you find yourself in when the market falls. There must be 1000's of people like you in these situations right now ( that might not help ) but that is a fact.
Only my guess but we are going to be hearing a lot more about these situations in the press and on the telly in the coming years. The Negative equity is a pain but only if you sell. If you can pay how about paying for now without making any rash decisions about Bankruptacy as that has long term affects that will stay with you for years and years.
The banks and the govenment are going to do all they can to stop people like you dumping the properties and bringing the whole housing/banking system down . Why not give it a year and see if anything changes . NO bank is going to forward the other 25% to you to pay the builder ( when has that got to be repaid ) if the builders cannot get their money what are they going to do ? and as I already said there are 1000's like you . Give it a year and see if anything changes before making that jump into bankruptacy.

InMyDreams

DTM1985 wrote: »

As I have a few other debts (that I can afford) just wondering if its best to go down the bankrupt route, I wouldnt want to but Cant see any other way

I can only reiterate Thrugelmir's advice to visit the DFW board. You *can't* afford your debts. Don't kid yourself that you can. If you didn't have them then maybe you would be able to repay your mortgage (which is itself, just another debt and one that is secured on your flat).

Something *has* to give and you have to re-prioritise what you think you can afford. Let the DFW people pick apart a SOA for you. (They will be much 'kinder' than people on this forum.)

DTM1985

Mike_parsonnage wrote: »

Sorry to hear about your situation . Only my view but these buy a share of a property deals should be illegal . If the buyer cannot buy the whole place then they cannot afford it. These types of deals have been happing all over the country in the last 5 - 10 years . They are not to bad in a rising market but send people into the siutation that you find yourself in when the market falls. There must be 1000's of people like you in these situations right now ( that might not help ) but that is a fact.
Only my guess but we are going to be hearing a lot more about these situations in the press and on the telly in the coming years. The Negative equity is a pain but only if you sell. If you can pay how about paying for now without making any rash decisions about Bankruptacy as that has long term affects that will stay with you for years and years.
The banks and the govenment are going to do all they can to stop people like you dumping the properties and bringing the whole housing/banking system down . Why not give it a year and see if anything changes . NO bank is going to forward the other 25% to you to pay the builder ( when has that got to be repaid ) if the builders cannot get their money what are they going to do ? and as I already said there are 1000's like you . Give it a year and see if anything changes before making that jump into bankruptacy.

Thanks for the reply, yeah I guess there must be thousands like me as theese schemes were quite popular at one time, I wonder what some have done or plan to do. I agree about they should be illigal, it was sold to me as a good deal by a mortgage broker company which is no longer trading and has been struck of the FSA register I believe.Im not sure about the 25% its the last thing on my mind TBH but it makes the option of taking the mortgage head on and overpaying etc as sugested by others less appealing.The only thing about giving it more time is I have been in this predicament for a while now. It became apparent a couple of years ago when I went to see an estate agent about selling and he told me to seek leagal advice. I have been exploring every avenue but not getting anywhere so Thought would see if anyone on here knew something I didnt. so guess ive already given it time, if BR is the only option I mite as well get it done and then can start re building. I really dont want to go BR but if its the only option .......

Mike_parsonnage

So when the estate agent told you to take legal advice did you ?