Buy to let landlords? Please can I ask....?

00ec25

bloom1234 wrote: »

Any idea what happens to the difference if you sell at a loss? Does the debt stay with mortgage provider or is it transferred?

I think the days where you could carry over a negative equity loss to your next mortgage are long gone#
anyway yoy will not have a next mortgage, you will be renting

so
the normal situation now is that you will be expected to make good the shortfall at popint of sale. this often means you have tpo take out a separate (non mortgage) loan , Unsecured loans such as that are expensive, if you can get it!

GDB2222

bloom1234 wrote: »

Basically we want out as the area has really gone down hill over the past 2 years. we've been here 6 and I don't want my children growing up here. It's a 3 bed house with decent garden space so us beinf able to rent a house in a nicer area while still being home owners is very appealing. If we could sell this and increase our mortgage a bit that's the option I would go for but it isn't happening.

They are too young to be out of the garden at the moment but think average area on the side of an estate with most homes bought turning into mostly rented out and an abundance of horses and unruly youths with no respect and scrap metal collection. I know it's not like this on the outskirts of every estate, we just seem to have been really unlucky.

We're trying to decipher whether it's best to get out right now and either surrender the house, make a huge loss and work out a way to repay the loss as a loan or try to stick it out and rent it out as soon as we can. I'm loath to surrender because we can afford the repayments and to overpay a bit but the NE is a lot to lose.

If the area had stayed the same I wouldn't be bothered but I hate living here. It's my sensible head saying keep hold of it or we might never get back on the housing market,

To be honest every time something is stolen from the garden, there's a commotion heard outside or abuse shouted at my neighbour who seems to be a target of youths who don't even live close, just pass through etc I want to just get our things and go regardless but I want to do what's best in the long run. I'll just have to stay regardless of how it makes me feel.

I think that you need to consider all of the options open to you. Write down the pros and cons of each option, and consider each one is logically as possible.

1 let your house, continue paying the mortgage, and rent somewhere else. One difficulty with that is that the area may deteriorate further, in which case you could get into more and more negative equity. It is also very complicated renting out a property – not really ideal for the amateur landlord that you would be, at least initially.

2 continue living there and paying the mortgage.
You know the difficulties with doing that, plus the possibility that the negative equity will get worse.

3 let the house be repossessed, and let the lenders pursue you for the shortfall. This works best if you are also prepared to go bankrupt. This gets rid of the negative equity in one go, and it allows you to move on to a new area. However, it is at the expense of your credit rating, not to mention your dignity. To be frank, I am not convinced that I would go bankrupt to save £20,000, but you need to think about it seriously and dispassionately.

4 sell the house, provided that the lenders are prepared to convert your negative equity into a personal loan. They may be, I guess.

ViolaLass

What makes you think that renting a nicer place in a nicer area will be cheaper than the place you're currently in?

brit1234

Even if you get consent to rent the bank may/will with draw it in a couple of years and ask you to get a buy to let mortgage. You haven't got the equity for that and would likely forced to sell when the market has fallen further.

So either sell now, sell in a couple of years making a potentially bigger loss or stay on the SVR which is likely to go up during the next few years.

Good luck on what you decide.

HAMISH_MCTAVISH

bloom1234 wrote: »

Does this sound like the best course of action over surrendering the house in order to get out?

Yes, of course it does.

You don't have the money to cover the shortfall. So you can't sell. The bank won't let you sell unless you can cover the mortgage.

Getting in higher interest rate debt (as a personal loan would be compared to a mortgage) to cover the sales shortfall would be a very bad idea.

Going bankrupt by surrendering the property which will then be sold at a loss you can't cover is an even worse idea.

Our thoughts are that we are better off owning something that in 20-30 year's time will either have increased in value or at least still be earning rent than surrendering now.

It almost certainly won't take that long.

Current forecasts are for prices to return to peak levels by 2017 as a national average.

Would we be able to decrease monthly payments if we did pay in about 15-20k? Who values the home?

Yes.

Overpayments to reduce LTV will certainly help.

Mortgages are available at around base rate plus 2% or so for those with decent LTV ratios.

Homes are advertised for what we paid but not selling, is that the true value?.

The "true value" is the price at which both a proceedable buyer and a willing vendor agree to sell the house.

At the moment there are very few proceedable buyers as the banks are rationing mortgages because they don't have enough money to lend.

Equally, there are very few sellers willing to sell at a discount, as there is no need because the rental market is so strong thanks to population growth and the mortgage famine.

Hence why prices have basically been stagnant for the last few years, while rents have soared to new record highs instead.

Yorkie1

Will mortgage lenders permit CTL in the case of negative equity?

OP, you need to check out a) whether your lender permits CTL, and b) what their criteria are.

Werdnal

Yorkie1 wrote: »

OP, you need to check out a) whether your lender permits CTL, and b) what their criteria are.

First line of my first reply said that

Until OP can get WRITTEN confirmation of what mortgage deal MIGHT be available to allow them to let, this whole thread is hypothetical!

I do note that in a later post, OP suggested this might wait until they have overpaid more of their mortgage, but with the sudden influx of accidental LLs applying left, right and centre for CTL, I feel mortgage lenders are only likely to tighten their criteria in the future.

Yorkie1

Oops, sorry Werdnal

bloom1234

Violalass, we currently pay 630 per month mortgage. The current let value (I trawl the home selling/letting sites) is approx 400-425. Houses in better areas. Closer to my son's school for instance like for like size wise are around 500-550 per month.

Feel so stuck. We didn't buy at the peak or buy to sell for profit (even though sure, it would have been lovely wouldn't it). We bought an ok house as newlyweds and over the past 2 years the area has taken a complete nose dive. I'm struggling to see past anything and feel like I'm clutching at straws.

I haven't looked into insolvency/bankruptsy but by the sound of it, because we 'can' afford to repay the mortgage, it wouldn't be an option so we'd be slapped with a hefty interest rate on a loan to the tune of 20-30k. 6 years with zero credit seems fairly appealing compared to this. My neighbour who rents told me today that the lady over the road wants out, she'd leave if she could afford to rent somewhere else. Around the corner wants to go, because they're having trouble with some of the original locals (we live in a 6-7 year old development), and is asking 5k above what he paid and it isn't going to happen.

Being a landlord is sounding like it would be far too expensive and risky.

GDB2222

bloom1234 wrote: »

I haven't looked into insolvency/bankruptsy but by the sound of it, because we 'can' afford to repay the mortgage, it wouldn't be an option so we'd be slapped with a hefty interest rate on a loan to the tune of 20-30k. 6 years with zero credit seems fairly appealing compared to this. My neighbour who rents told me today that the lady over the road wants out, she'd leave if she could afford to rent somewhere else. Around the corner wants to go, because they're having trouble with some of the original locals (we live in a 6-7 year old development), and is asking 5k above what he paid and it isn't going to happen.

Being a landlord is sounding like it would be far too expensive and risky.

I would suggest having a look at bankruptcy, if only to reject it as an option. You can file for bankruptcy even if you can afford to pay the interest on your debts. You are eligible provided that your total debts exceed your total assets. Most people are discharged after 1 year. They may be required to make a contribution towards their debts for up to 3 years out of any "surplus" income they have after meeting living costs. In practice, that is pretty rare.

The advantage is that after one year you are free of £20,000 of negative equity and can start to rebuild your capital base. One disadvantage is that you are perceived as a bad risk by lenders for about 6 years. Also, as Hamish says, you are off the property ladder for that period. So, if prices start to move up in 2017 as Hamish predicts, you will lose out on any gains.