What happens to a deposit if home is repossessed b/c can't pay mortgage?

fuddyduddy12

I have never owned a property so no nothing about mortgages hence the following question;

If I want to buy a property that costs £350k and I put down a deposit of £250k and I get a mortgage for the remaining £100k. If I were to lose my job and no longer be able to pay the mortgage and my home was repossessed, would I lose all the money (i.e. my deposit of £250k plus whatever percentage of the mortgage I had already paid) or would I get back my deposit (£250k) if the property sold for more than £250k?

This is probably a really dumb question but I can't find anything clear online about how this work in the event of not being able to pay the mortgage but having put down a hefty deposit and what happens if the house is repossessed. Also what happens if a home is repossessed and then sold for less than the original deposit?

Also, is the deposit my "equity" in the property (in the scenario of me not being able to pay my mortgage or is it the deposit + whatever percentage of the mortgage I have paid?

Thanks.

Muscle750

As i understand it yes the lender would sell the property and they would take what was owed to them plus charges admin etc and then send you a cheque for the remainder i may be totally wrong but thats how i would imagine it would work

opinions4u

Scenario:

Purchase £350k
Mortgage £100k
Deposit £250k

Repossessed.

Lender sells for £275k
Debt, including accrued interest and legal fees £110k
Funds returned to borrower £165k

Equity describes the difference between value and debt.

Repossessed properties invariably sell for much less than a well maintained lived in property.

So in my very realitic example you would only get back £165k of the £250k you put in.

GeorgeHowell

The equity is the difference between what the property can be sold for and the amount of the outstanding loan. This could be more than the original deposit, equal to it, less than it, zero, or even negative depending on the property's sale value at the time.

With a repossession, the lender will try to sell the property for enough to get back the amount of the outstanding loan. The lender does however have an obligation to achieve a fair market price and cannot sell the place dirt cheap just in order to get its money back quickly. However if the lender cannot get back the amount of the loan, the borrower still legally owes the remainder, even though they no longer own a property.

Repossession is to be avoided at all costs and if the situation becomes untenable it is far better for the borrower to sell the property and pay off the mortgage themselves if at all possible, rather than ceding control to the lender.

Joe_Bloggs

The 250K is your equity in the 350K property. If the 100K mortgage went bad then the lender would try and sell the property to get back the 100K. The rest minus their costs would be yours.

Better to sell rather than be repossessed in these circumstances since it is easy to sell a 350K property for just over 100K.
J_B.

DVardysShadow

GeorgeHowell wrote: »

... With a repossession, the lender will try to sell the property for enough to get back the amount of the outstanding loan. The lender does however have an obligation to achieve a fair market price and cannot sell the place dirt cheap just in order to get its money back quickly. However if the lender cannot get back the amount of the loan, the borrower still legally owes the remainder, even though they no longer own a property.

But the truth of the matter is that agents will often make sure properties go at mate's rates for a kickback. They will advertise correctly, but they will be very obstructive about viewings and offers. So if ever you end up repo'd, get a mystery buyer involved, who would be willing to provide a statement. But far better if you approach the situation to sell the property yourself.

fuddyduddy12

Thanks for all the replies.

I wanted to say that the repo would be the worst case scenario. I have a job, am in good health (fingers crossed), have no debts and have family who could loan me some money if the worst came to the worst. I really wanted to know how equity works and you have answered that well.

I wonder if someone can recommend a book or a website that would explain all the different faq for mortgage laymen like myself so that I can weight up all the facts.

Thanks again.

Thrugelmir

fuddyduddy12 wrote: »

I wonder if someone can recommend a book or a website that would explain all the different faq for mortgage laymen like myself so that I can weight up all the facts.

You are on it..............;)

Ask as many "dumb" questions as you wish, and you will receive the collective wisdom and opinion of this board.

opinions4u

From the top of this page.

http://www.moneysavingexpert.com/mortgages/mortgage-guide?utm_source=forum&utm_medium=clicks&utm_campaign=resourcebar