Relationship Split - Selling House with Second Charge

Silvafox

Hi all, I've taken advice and given advice on this forum but now I need advice for a sad reason. My partner and I are splitting amicably and we're in a mess financially...surprise surprise.

I'll try and make it brief but exact.

We are selling the property that is jointly owned by us. It also has a second charge on the property.

Figures (rounded up for ease)

Mortgage balance to pay: £149,000 Kensington
Redemption: £8,500
Second Charge Settlement Figure: £23,000 Welcome
Fees to sell: £3000

The house will be put up for sale around £180,000 but realistically it'll may go for around £175,000.

So, we are aware that we are stuffed as to getting anything out of the sale and will have to rent and if you work it out, we'll in fact be short.

Our questions are:

If we sell for say £175k then we know the first charge (Kensington) will take their share of the mortgage balance and the redemption, then the loan people (Welcome) will be left with whats left... maybe up to £10k short.

What will happen do you think? We're worried they might be able to stop the sale or hinder it? Also, do the estate agents get their fees before Welcome too or will we have to find their fees on top ourselves?

Although we took the loan out etc etc with Welcome, we are stuffed good and proper as we are left with no equity now and with us being with Kensington, they want a sickening 6% redemption.

The loan was only for £15k too and we've already paid £8k off and the settlement is still £23k! Surely if we offer whatever we can from the sale (approx. £14k) then would anyone think they might accept it as a full and final settlement - so we would of effectively paid them £22k for a £15k loan within 3 years...so they've still made £7k. Is this just wishful thinking?

Obviously I'm expecting them to split the remaining balance between us and alter them into personal loans, but then the balances will go sky high again as they were taken over 10 years.

Can anyone understand what I've tried to say and offer any help?

It would be much appreciated. We will be getting a solicitor to help anyway with the house sale, but wondered if anyone has any knowedge to help us out first.

Thanks.

MJMum

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Silvafox

Edited coz of errors....

Silvafox

MJMum wrote:

Don't sell until you are out of the ERC period? (Would the property rent & would the potential rent cover the interest on the mortgage?)

ERC period is june when it goes down to 4% for the next year! So am still gonna have £6k redemption then.

Can't be rented as the monthly payments on it are £1100 per month and Ireckon we couldn't get mroe than £750 per month anyway. Also, we want a clean break from the house and Welcome.

Thanks.

Richard_Webster

You won't be able to pass a clear title to your buyer unless you can persuade Welcome to release the second charge in return for turning the balance outstanding it into a personal loan. Your solicitors and the agents only get paid after Welcome so their fees would have to be included in any "deal". Unless your solicitor can get discharge documents for both mortgages you can't complete the sale at all.

You are not in a very strong position and your only negotiating point is that if you walked away and let Kensington repossess, the likelihood is that the place would sell for less as a repo and Welcome would be even worse off! So therefore why don't they agree a deal with you now?

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

Silvafox

Richard_Webster wrote:

You won't be able to pass a clear title to your buyer unless you can persuade Welcome to release the second charge in return for turning the balance outstanding it into a personal loan. Your solicitors and the agents only get paid after Welcome so their fees would have to be included in any "deal". Unless your solicitor can get discharge documents for both mortgages you can't complete the sale at all.

You are not in a very strong position and your only negotiating point is that if you walked away and let Kensington repossess, the likelihood is that the place would sell for less as a repo and Welcome would be even worse off! So therefore why don't they agree a deal with you now?

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

Richard,

Thank you.

Not looking good then....worse than I expected.

However, I do know from a previous conversation with Welcome that they will consider removing the charge if it was that or a reposesssion. We got into arrears last year and we told Welcome that we could either sell and they would get a few thousand 9as little as £1k) or that we would let Kensington take the house.

After one conversation they just told us that when we had a buyer, they would remove the charge, we would give them what we could and then the loan would be turned into a personal loan.

Although, we don't want the property reposessed, maybe we could organise something with them again? It should be more appealing to them this time as last time we could only offer them about £1k after paying off arrears etc. This time we'll be able to give them at least £10k.

I suppose it depends who I talk to at thier end as to the way they view it. it either one of two ways - they either take £10k, remove the charge and turn the loan into personal loans OR they don't get anything and we hand the keys in to Kensington. Then they'll have to go to all sorts of lengths in court to chase us for the money. However, I must stress that we don't want that and are trying to sort it responsibly.

I'm more stressed now... if I could stay in the house I would but I can't afford it as its £1100 mortgage and £420 for Welcome per month.

Thanks for the advice.

Silvafox

As promised, thought I'd update with an important, and slightly embarrassing outcome!

Out of the panic and rush of trying to sort things out, I had misread the redemption charges. I was under the impression that we had 6% to pay but it turns out that actually runs out in June this year, leaving no redemption at all to pay! I was misreading it.

Lesson learnt from not sitting down calmly and thinking things through. I'm over the moon obviously and we can now pay off Welcome and Kensington etc but its caused some very unwelcome stress. I hope some of the info that some of the posters kindly offered will still help others in the future anyway.

Also, Kensington have now offered me a much better rate, but with Welcome still attached I still can't afford to stay there. The only way I could stay in house is if my partner took half of the loan on but I'm 99.9% sure Welcome won't agree to that, so its having to go on the market.

Thanks all who helped me out with advice.