Undervalued, overmortgaged

leighpea80

Hi,

Im just looking for some advice for my other half.

My boyfriend is currently getting divorced and the financial side of things is the only thing that needs to be settled.
When he and his ex met she already had a house so they remortgaged so he could be put on the mortgage. The financial advisor took everything in hand and they signed the agreement, the advisor had managed to get the house valued at £70,000. At the time they questioned this as other houses were valued at £59990, but the advisor told them to accept the offer. Which they did and signed for. A year after signing the agreement they received a letter advising that the financial advisor in question was no longer working for the firm and should not be contacted at all. It also now appears that the financial company in general has also gone into administration.

What we want to know, is if the mortgage that the financial advisor got for them is legal as they are in a huge amount of negative equity and cannot possibly sell it, or have his name removed from the mortgage to finalise the divorce.

Any advice would be greatly appreciated.

Thrugelmir

leighpea80 wrote: »

What we want to know, is if the mortgage that the financial advisor got for them is legal as they are in a huge amount of negative equity and cannot possibly sell it, or have his name removed from the mortgage to finalise the divorce.

To make a fresh start better to sell the property and tackle the shortfall on the mortgage. How much is the negative equity likely to be? As lenders will be open to negotiation particularly if a lump sum is offered in full and final settlement.

There's no mileage in the remortgage issue.

The_J

When did this happen? The mortgage company would have valued the property and agreed with the figure entered.

I can assure you, they would only have "questioned" this valuation after house prices dropped and they found themselves in this situation.

leighpea80

Theres going to be about £25000 shortfall as the house has been valued at £46000.
There are other financial obstacles that they are sorting through, but in all my boyfriend will be walking away with about £30000 worth of debt.
The question of going bankrupt has come up, but Im wondering if this amount is an amount we could work our way out of.

leighpea80

They remortaged in 2008 so house prices were already in decline with no way of going up. The houses in the area have never been valued above 60000 and from what I understand no-one came and valued the home at the time.

Thrugelmir

I assume when remortgaging (adding the name) that they withdrew additional money.

Are you in a position (as a couple) to take the mortgage on in your own right?

As default will ruin your chances of home ownership for some number of years.

The lender may accept around £6 - £10k in settlement of your partners share of the negative equity. Though this will still a default on the credit record.

I would advise against bankruptcy unless the situation is dire and beyond redemption. How do you arrive at the figure of £30k of debt?

leighpea80

The £30K will be because my boyfriend is taking on the repayments of loans and credit cards which they had also taken out amounting to about £22K, plus what they expect to from negative equity. However, as my boyfriend is taking on the other debts I would much rather she accepts liability for the repayment of the negative equity!

The_J

Who is the mortgage with?

Getting a valuation above fair market value at that time was virtually impossible and it's very strange that, at that time, a valuation wasn't done.

betmunch

Surely how the valuation was achieved is irrelivant as the val would have been done for the Lenders benefit and not the clients.

Client asked for the money and they got the money. They took a (probably) 25 year contract to pay back this money, if they stick the that contract then the negative equity issue goes away.

They problem comes in that the parties want to break the contract early and a symptom of this is that there is negative equity so the Lender is right to force them to continue as is.

to the OP, I'm afraid this is the "Baggage" your new partner comes with. From your post there is nothing wrong with the mortgage at all. Your partner asked for money, the bank checked they were happy with the security, and lent him the money.

If anything, from your post, if he were to default and the Bank be left out of pocket, they could claim against the Surveyor after the repo had gone through.

I would suggest either he or his ex live in the property and pays the mortgage until the balance is low enough to sell or remortgage, but until that time you need to accept this will affect your future planning

leighpea80

The_J wrote: »

Who is the mortgage with?

Getting a valuation above fair market value at that time was virtually impossible and it's very strange that, at that time, a valuation wasn't done.

Its with Accord. The fact that no valuation happened is the part we are looking into and also if this particular mortgage broker was legit!

If it comes back theres nothing we can do about it, then so be it we will take it all on the chin and figure out the finances from there. But we both feel this is something that definitely needs looking into before its put on the market or his ex looks at taking on the mortgage herself.

leighpea80

Thanks Betmunch,

Unfortunately I thought this would be the outcome and I appreciate your reply.

I think on my part I would just like a clean slate and to be able to move on, but I think this will be something that we have to live with for a little bit longer. Im not sure how this will affect the divorce but I think that could be for another thread!

We'll take it to the lender and see what they say, but like I said I think this is something that has to be dealt with for a little bit longer!