Negitive equity in bankruptcy

silvercar

Silver, what do you mean about the lease? I'll either be forced to sell through bankruptcy or dust in 76 years why does this matter to me?

If you are giving up the house and going bankrupt it doesn't matter.

If you want to keep the house its value will fall with a short lease. This is a problem if you ever want to sell or if you are forced into repossession without the bankruptcy. Also when you eventually pass on it becomes a problem for whoever inherits. The general rule is that leases on houses (not flats) are cheap to turn into freeholds provided there is at least 80 years left on the lease. Once below 80 years, the lease owner (ie freeholder) is entitled to a "marriage value" which adds to the price. If you want to sell, the shorter the lease, the harder it is to get a mortgage for your buyers.

Enough on your mind at present but worth pointing out.

silvercar

You asked about having the deeds. If you bought only 6 years ago, the deeds will be registered electronically. Your paper deeds are not of value in themselves, but keep them as occasionally they show planning consents etc.

Ineedaname

silvercar wrote: »

If you want to sell, the shorter the lease, the harder it is to get a mortgage for your buyers.

I knew I'd missed something on the subject.

mojoparrot

WOW thanks guys loads more good info. I'm glad you guys pointed the lease out to me. Can I address the lease issue after the bankruptcy is discharged? What would happen if there was negitive equity in the property say 10 years after the bankruptcy and a sale was forced? I'm never really going to "own" this house as my mortgage is interest only for the next 26 years, and looking at bankruptcy information I doubt I'd get a big enough mortgage to cover the house value. Its really about trying to offset the upheaval of moving both for myself and my son.

Thanks once again guys you have been super helpful!!!

Mojo

silvercar

Can I address the lease issue after the bankruptcy is discharged?

Yes, no rush though be aware that the longer you leave it the more it will cost. People do sell houses with a short lease and arrange the lease extension as part of the sale. The downside is that the paperwork takes much longer and a lot of buyers won't want that hassle.

What would happen if there was negitive equity in the property say 10 years after the bankruptcy and a sale was forced?

Provided that you have never, since bankruptcy, signed acknowledging the debt as yours, it should form part of your bankruptcy. Signing for it can include a straight forward acknowledgement or taking on a new mortgage or sometimes a change on your existing mortgage; so you would be limited to not being able to move lenders.

I'm never really going to "own" this house as my mortgage is interest only for the next 26 years, and looking at bankruptcy information I doubt I'd get a big enough mortgage to cover the house value.

Historically houses have been a good investment. People used to talk about prices doubling every 10 years, now that isn't likely to happen, but the chances of prices doubling at some point in the future compared to the 2007 low are reasonable; so never say never.

Its really about trying to offset the upheaval of moving both for myself and my son.

Your son will grow up and house prices will rise - don't ask me which will come first! The question is whether it is worth holding onto the house or making a home for yourselves elsewhere. People do bring up families in rented homes, its a question of whether that is the right decision for you.

pfinance

Hi, I was confused about the same subject and now its a bit clearer, thanks for your posts.

Just one more question: what would happen after 2 years and 3 months if no one buys the ORs beneficial interest in the property?

kepar

If after the 27 months and there is no equity in the property, then it would revert back to the br. If there is equity, then it could be bought at a price or the OR could sell the property to glean the money.

mojoparrot

Thanks Silver more good advice. Thanks to eveyones advice I feel much more informed about this route.

TY

Mojo