Allowing your house to be reposessed

badbaz1975

Hi
My friend and I were having a debate last night about whether or not it was best to give the keys to his flat back.

A bit of background, he bought the flat for £120k, but recently has seen the value drop to approx £85k!!! There are a few other flats in the same block up for around this price and have been up for sale for a number of months.

At the minute, he can only afford to pay the interest only on the mortgage.

After speaking to all the local estate agents , they all confirmed that it almost impossible for the flat value to rise back up to the original price in the foreseeable future.

Therefore he is debating whether or not to give the keys back and let the place get repossessed.

Would be really interested to get some other views on this if anyone has any please?

Thanks

Thrugelmir

Can he not afford to pay any of the capital?

Sibley

I wouldn''t give the keys back.

If he is worried about the price falling why isn't he worried what he will lose renting?

Also, he will be blacklisted. How will he feel when his flat rises in price and somebody else owns it?

That's what will happen.
Stay put. Prices will be rising 24% over the coming 4 years.

It's a long term investment. At the end of the day it will be worth more than 120K sooner or later.

BlondeHeadOn

Sibley wrote: »

I wouldn''t give the keys back.

If he is worried about the price falling why isn't he worried what he will lose renting?

Also, he will be blacklisted. How will he feel when his flat rises in price and somebody else owns it?

That's what will happen.
Stay put. Prices will be rising 24% over the coming 4 years.

It's a long term investment. At the end of the day it will be worth more than 120K sooner or later.

Really???

Interesting prediction there....

StevieJ

Is it not true that the bank will go for a quick sale probably below the £85k and your friend will still be responsible to the bank for the debt, unless they live in some parts of the US.

StevieJ

Out of interest, what were they predicting when he bought the flat

After speaking to all the local estate agents , they all confirmed that it almost impossible for the flat value to rise back up to the original price in the foreseeable future.

badbaz1975

Thanks everyone. Sorry forgot to say

He really doesnt want to live there anymore. Not big enough for his family. So is currently renting it, which just covers the interest only mortgage. The problem is, that if the tenant moves out and there is a gap in payment, he's will be in the sh*t.

Jimmy_31

Sibley wrote: »

I wouldn''t give the keys back.

If he is worried about the price falling why isn't he worried what he will lose renting?

Also, he will be blacklisted. How will he feel when his flat rises in price and somebody else owns it?

That's what will happen.
Stay put. Prices will be rising 24% over the coming 4 years.

It's a long term investment. At the end of the day it will be worth more than 120K sooner or later.

Remember the shiney new build apartment i mentioned a while back that was first bought for 120k in 2006, and has just been repoed and sold for 40k.

Another one has just popped up about a week ago.

Where are all these jobs coming from that will enable house prices to rise by 24.327455463873% over the next 208 weeks.

Its looking like its going to be later sibley, a lot later.

PasturesNew

If he's not living in it and is in negative equity, he needs to do everything he can to earn more money to try to get that shortfall sorted out within, say, 5 years. Taking a second job, evening job, seasonal work, weekend job ... and watching the pennies VERY carefully. Saving everything to pay down that mortgage.

As it starts to decrease (or savings increase if he's tied into a mortgage he can't pay down) he'll become motivated to bridge that gap.

Then, in 5 years' time, when he looks back, even if the flat is still only worth £100k he'll know he's done everything he can to stay afloat, to not go bankrupt, to not have problems for the next 10 years because of his default and he'll be feeling happy and strong.

Right now, the idea of that probably sucks, but if he commits to a fixed term to sort it out once and forever he'll reap the rewards for years in terms of less stress, no long-term fall out and a feeling of self-worth.

michaels

Does he have any assets? Will he need credit in the next 6 years? May be BR is is best bet?

Rotor

The bank can still chase him for the debt for 12 years or more (http://www.stop-repossessions.co.uk/government-help/mortgage-debt-after-repossession.htmlwhich )will also include interest. So if he goes on to get a decent job or inheritance he could find the banks after him.
Or go bankrupt with all the problems that entails - no mortgage , loans , poss bank account etc for 6 years