Debt and negative equity - what would you do?

kersplatt

Hi I'm seeing my solicitor tomorrow to go through the final stages of my divorce before the absolut is applied for and therefore going through the financial bits.

I would appreciate suggestions from those who know more about property than I do as I feel that I'm in a catch 22 situation.

I live in a property which is shared ownership with the housing association bought as part of the key worker scheme 8 years ago. At the time that the maisonette was bought we were aware that the lease would need to be renewed and that the house needed work doing to it but saw this as an opportunity to add value to the house. Unfortunately due to my ex husband's difficulties with managing money the work never got done and the lease was never renewed. Not much I can do about that now but the present situation is as follows.

- I currently live in the house with 2 children, the youngest starts full time school in the next year.
- I work as close to full time as I can and pay all the bills and mortgage without financial assistance from my ex husband but he remains on the mortgage as I have had to go on a DMP because I took on all his debts (long story) so I cannot change my mortgage deal in the future without his signature and probably wouldn't get a good deal because of the defaiults against me
- The house is currently valued at £90,000 - bought for 103,000 of which the housing association contributed £35,000 so have a 33% share of any equity or loss if sold.
- The outstanding mortgage I would estimate is around £55,000 so if I sold for £90,000, after the housing association had their share I would probably break even
- To renew the lease on the house back to 99 years it would cost nearly £15,000 but would increase the value of the property to £110,000 - so a £5,000 gain, as long as someone wanted it
- If the lease is renewed and the outstanding work is done, it would be valued at £125,000 but I have no way to raise the capital to renew the lease and do the work

So I'm stuck. If I sell then I lose my only asset (and cheap mortgage) but also break links completely with my ex husband who is a financial liability anyway. I could sit in the property for many years, but my children are different sexes so ultimately they would need separate bedrooms within the next 2-3years. Equally my ex has left me with £27k of debt which he isn't helping to clear and the house may in a few years gain some equity to help pay it off.

Anyway, bottom line is what would you do? My solicitor was stumped when I last saw him. I have no special ties to keep me from leaving the house so it is purely a financial issue

Thanks

BitterAndTwisted

Renewing the lease and doing any improvement just increases the attractiveness of retaining an interest in the property for your soon-to-be-ex.

Why have you taken on responsibility for his debts? As far as I can see, this is a much more pressing issue than the ownership of the property.

Forget for the moment any fantasies of proving your children with their own bedrooms: these are not an absolute necessity and never have been.

kersplatt

I cleared his debts with loans because he kept running them up and leaving us financially stuffed. I did it for 12 years. He has so far not contributed towards these outstanding debts and as far as I'm aware, because they are now only in my name, I am completely 100% liable for them. Rather than shirking the responsibility for them I am doing my best to clear them without his help because I don't have any other option. He in the meantime has run up even more debts and his parents have cleared them for him and apparently he is paying his parents back for this. I basically have no recourse to get him to pay anything and I'm stuck in a house which is in negative equity. I just want to know which option is best. To stay in a house without equity and no way of raising enough capital to improve it's value for probably 5 years and still be tied to him with the mortgage. Or cut my losses and leave now, lose the asset but break financial ties with my ex husband.

I also do not have the funds to pursue him through the small claims court to show that he had benefit from the debts acquired and he is unlikely to pay up regardless, which would then mean more money to chase him down the CCJ route so I am not expecting him to do anything regards this debt.

As far as a fantasy for children having their own bedrooms, I fully expect that my 8 year old will start menstruating in the next 3 years and tehrefore she will not be able to share her bedroom with her 4 years junior brother out of sheer appropriateness

BitterAndTwisted

If you sell the property now and escape with nothing how do you propose to rent somewhere appropriate? With £28k of debts round your neck like a millstone you are going to have a very, very hard job persuading any sensible landlord to take a risk on you.

If push comes to shove your hypothetically menstruating 11 year-old could share your room out of sheer appropriateness. We must cut our cloths etcetera

SouthCoast

Local Housing Allowance will currently only fund the cost of a two bedroom property.

https://lha-direct.voa.gov.uk/Secure/BedroomCalculator.aspx

Brallaqueen

How is your property set up - for example could you have a sofa bed in the lounge and your daughter one of the bedrooms? Or could she share the larger room with you, if you feel this would be more appropriate. Could you put a stud wall up in the lounge and make a single room out of it?

I don't think selling will help you right now - few landlords will touch you with the extent of your debt and history, and there is no security there.

kizkiz

Brallaqueen wrote: »

How is your property set up - for example could you have a sofa bed in the lounge and your daughter one of the bedrooms? .

An ex of mine lived like this
Her mother slept on the sofa bed downstairs and the two girls had a bedroom each
While not ideal, it certainly worked ok

Murtle

Can you say what time of work needs to be done, is it cosmetic / structural or a mix?

Just to see if the work can be done in a different way / cheaper than originally thought.

kersplatt

Hi Murtle

Work that needs to be done

- back door not secure, single glazed, can see a centimetre of daylight at the top due to warping
- double glazing throughout blown or starting to blow - can't see out of front room windows
- no central heating, which isn't a problem in itself but there are no heaters in the kitchen or bathroom
- damp in the childrens bedroom
- maple tree that is starting to cause ground sinkage at the front of the property and obviously is a cause for subsidence in the future
- brick wall to the side of the house needs redoing due to being built with poor quality cement
- general DIY to tart it all up but tbh that isn't a priority

I have no objection to sleeping in the front room in a futon but I intend to have cleared the debt and got my life sorted out properly before I have to consider this as a serious option

caledonian_princess

If you're on a DMP your credit rating will be shot for some time to come? In that case, if you decide to sell you're going to be in rented accommodation for a good while until you get all that mess sorted out. I'm no lawyer but is there any way you can get your partner to sign something saying that any future equity in the house that he may claim would be offset against this debt you're paying off for him? Just thinking about your future security really - the last thing you want is him coming to claim equity in a property he hasn't been paying the mortgage for. If that's possible I think I'd be inclined to stay put and make the best of the sleeping arrangements if not, I'd sell up acknowledging that I won't be buying again for a very long time.

sarahevie

I'd stay in the house if the mortgage is cheaper than equivalent rent. Doesn't matter then if you don't have equity as you wouldn't if you rented either.

Will mean more security of tenure than short term rental contracts, also think it might be hard to find a LL to take you on with such debts.

I don't think the futon idea is too bad.