Is repossesion the best option?

Xiderpunk

GDB2222 wrote: »

As has been pointed out, this is not practicable, because step 1 in the process won't work. The real question the OP should be asking is whether BOTH of them should become bankrupt and start again? Unless they do that, they are both on the hook for the £180k mortgage. Bankruptcy means they eventually come out of this with nil net worth, compared to the present position where they have negative net worth.

Sure if you are considering worth. Presumably they need somewhere to live and if the mortgage repayments are affordable then there is a good chance those repayments are cheaper than rent. Repossession whilst re-setting their net-worth would exclude them from home ownership for at least 6 years, even after they would be considered sub-prime therefore be charged extortionate interest on any borrowing. So it is of course an option open to them, but they need to understand and accept the consequences.

flecker

abankerbutnotafatcat wrote: »

Firstly, I have a lot of sympathy with people in this position - it must put a real strain on everything. But it is only a paper loss - they have a roof over their heads and 2 incomes with which they can continue to pay the mortgage and over the long term house prices should recover. A home is primarily that, not an investment. Hopefully, they are able to start repaying some of the capital which will, of course, reduce the interest especially if they fix in now.

My main point for writing - please don't be harsh with me if i'm sat here in my SE England bubble, I may be a banker but not in property and i've been out of the country for the past seven years - have house prices in some areas of the country really fallen by over half since 2006 (the flat worth half what they paid is stated to be nicer) ???

In Northern Ireland, yes - it's around 50%. Wales is around 25%. Other parts of the UK are between 13-23% (Halifax figures).

But, as always, flats (especially new build) fall harder and faster than houses, and these averages hide some much heftier localised drops (as well as stability / rises in other areas).

So if the OP isn't talking about Northern Ireland, I'd guess they're talking about a new build flat?

betmunch

I actually laughed out loud when I read that!!!

Please stop replying, hes clearly a troll.

Great story mind!

abankerbutnotafatcat

flecker wrote: »

In Northern Ireland, yes - it's around 50%. Wales is around 25%. Other parts of the UK are between 13-23% (Halifax figures).

But, as always, flats (especially new build) fall harder and faster than houses, and these averages hide some much heftier localised drops (as well as stability / rises in other areas).

So if the OP isn't talking about Northern Ireland, I'd guess they're talking about a new build flat?

Thanks, flecker. I guess Northern Ireland has moved more in line with Ireland than GB.

jimjames

Can they afford to pay the mortgage - answer appears to be yes so why go through all this to end up in the same house?

wassup2 wrote: »

with a bit of luck she will have enough money to go to the auction and by his old repossed flat at the price they should have paid some 8 years ealier .

Why do they think they should have been able to buy 8 years ago at a price 50% below the market rate? That was the price then, its not the price now. In the meantime they've had somewhere to live for 8 years!

The_Blue_Hatter

wassup2 wrote: »

The details below are entirely fictional and any similarities to any persons I know are entirely coincidental and unintentional!

Okay, the story so far.
Once upon a time about 6 years back, a young naive couple go round several houses and then buy one after being told buy virtually everyone that houses are a safe bet and they need to get on the housing ladder as soon as possible. Their mortgage adviser even told them that he could fix things so that they could borrow more than they really should have on paper. The advice they got was to over reach themselves as this would be good in the long run. So they bought their first place for 180000 and lived quite happily for several years and got some kids etc. So now they have an interest only payments of 9000 per year and still have to pay the capital of 180000. The flat opposite is a bit nicer and is on the market today at 90000. So their negative equity is around 90000. The advice I am giving them is as thus based on him earning less
than her:-

1) They should have the mortgage transferred into his name. This will be the hard part, getting your name off the mortgage.
2) He should take out unsecured loans under his name only as well as credit cards etc. preferably from the same mortgage broker. This will also be very hard as lenders now are far more careful who they are lending money to.
3) She should buy the flat opposite; possibly using the unsecured loans as a deposit. This would be possible as the deposit would not show up as an unsecured loan as in your partners name.
3) Once she has bought flat opposite then he should stop paying his mortgage and other loans including credit card etc. Easy peasy.
4) They should then rent his flat out, whilst still not paying the mortgage on his old flat. The money earned by him should be used to pay her mortgage off whilst interest rates are still low. You would want to rent it our privately to someone you know who knows what is going on and chrge them less than the going rate so they go along with it.
5) She should continue paying the mortgage on their new lower priced but equivalent flat. All the money he earns should be used to pay off the her flat. Yes.
6) He should continue to hold onto his flat for as long as possible without paying any more money towards it. Yes
7)Eventually the banks will repossess the flat maybe after 18 months or so and the tenants will be kicked out. He will be declared bankrupt and not be credit worth for sometime and maybe able to negotiate his way out after a year or so (remember he has no assets and no cash as he gave it all to his partner). If the tennant secretly knew what was going on and had been paying reduced rent for a year or so they wont be hit so hard.
8)If they have saved enough by not paying the mortage on his old flat and by using the rent money that came in through his old flat then with a bit of luck she will have enough money to go to the auction and by his old repossed flat at the price they should have paid some 8 years ealier before the banks, mortgage advisers, estate agents etc colluded in making them pay a price much higher than should off or could afford to do so. Im trying to help but stop blaming everyone else for your own silly decision. Take into consideration that you might not win the auction.

So before this process after 20 further years they would ended with a flat for which they paid 180000 plus interest; after this process they would have a similar flat for 90000 plus half the interest they would have paid and in addition they would have bought back their old flat at a sum considerably less than 90000 as at auction properties usually fetch 80% of market value.

Of course I withdraw the above advice unreservedly if it is anyway illegal or detrimental to their wealth.

It is perhaps morally wrong if not illegal to take out loans without any intention of paying them however let me know your thoughts.

In summary you have very little chance of getting away with this and if the authorities find out you done it on purpose it is very much illegal. You would probably have to "seperate" from your other half aswell to have a chance of making it look genuine. There will be plenty of people telling you how morally wrong this is and, well, it is but I for one wont mind you screwing over a mortgage lender considering they are currently screwing us over with the rates they are offering.

One thing to note, the reason you have 90k negative equity is not because you were advised you could borrow an obscene amount, its because you decided to spend it.

Trollfever

Skule holidays and bored.

Another flaw.

Check out voidable preference in bankruptcy.