Renting out house with mortgage arrears

ranpin

We've being trying to sell our house (mortgage via C&G). Purchase price was £280k 6 years ago (outstanding mortgage is £220k with £8k arrears have been paying interest only £555 for about 12 months with contribution of £50pm towards arrears). We moved out of the house a year ago as we thought C&G would go down path of repossession (with hindsight maybe should have stayed put). Have only received one offer of £200k on the property so it looks as though we will be in negative equity territory subject to C&G giving permission to sell at that. C&G told me that after 6 months or so they may consolidate the arrears into the mortgage in order that we could rent the property out (we would get around £1000 pm). They've now said we do not fit the criteria for this.
Option now seem to be to hand the property back to C&G and deal with the shortfall somehow. Is it likely that they may allow us to rent out the property if thats our only option?
Anybody been in a similar situation?

HappyMJ

DO NOT hand the property back.. It will be sold at any price and that will increase your shortfall significantly.

You need to continue to market the property and get it sold. Keep reducing the price and make sure it is at it's most presentable all the time.

They have said you don't fit the criteria for renting it out so don't even bother thinking about it. You will just be deferring action until later and probably be in a worse situation.

ranpin

Thanks, I fully agree but it looks that we are going to need to sell at a loss anyway, is £25k shortfall really worse than £50k if it can't be covered?
I'm an undischarged bankrupt and my wife is in a DMP due to loans she took out to try and keep my businesses going. We'd like her to avoid bankruptcy but her credit rating is shot to pieces anyway and wonder whether its time to draw a line under everything.

The_J

Yes, I think you are probably at that point.

edit: by the way, what Happy was referring to. The mortgage amount is fixed, if you are repossessed (same as handing property back) the amount you owe does not disappear, it's just reduced by whatever they sell it for. If they sell it for 150k then you have to pay the difference (unless you go bankrupt) so the bank doesn't care what it's sold for, only you do.

clive12

I am unsure from your post if the amount you are paying is the full contractual payment or a reduced amount.

In my experience lenders will consider consolidating the arrears as long as you pay the fcp for a period specified by them.

They used to offer it as an option but a number of lenders have changed their policy so although they still offer it they decide if you are eligible and contact you.

If you can afford to pay the FCP I would say continue to pay it as they may not offer it this month.

ranpin

No we are paying interest + £50 towards arrears.
This arrangement was for 3 months and ceases at the end of May. I'm not sure where they will go after this whether they will start repossession or continue with the above arrangement.

clive12

ranpin wrote: »

No we are paying interest + £50 towards arrears.
This arrangement was for 3 months and ceases at the end of May. I'm not sure where they will go after this whether they will start repossession or continue with the above arrangement.

You might want to question who told you about consolidations as if you arent paying the FCP payment then it seems unlikely they would consider you eligible as your arrears are just constantly increasing.

Have you tried speaking to them about why there is arrears and being honest with them (not suggesting you arent but its quite easy to bury your head in the sand)

They might want to do things like a monthly budget but if you are reasonable with them (they should) be reasonable with you.