renting flat or repossession?

croneybess77

Hi, I am looking for some advice. We have a two bedroom flat which we unfortunately got on one of the old 110% mortgages so clearly we have no equity and actually owe more than the flats value to 'Northern Rock!!!'. We have had to move away to rental accomodation due to work and family too big for flat. My question is do we continue to rent out the flat which we are losing money on every month and paying management fees we cannot afford or do we just allow the flat to be repossessed so we can be rid of it and start again?

Annisele

There's a third option, which is sell it yourself and come to an arrangement with Northern Rock about paying the shortfall.

If you let it be repossessed, you won't be shot of it - you'll still be liable for the difference between the sale price and the mortgage amount, plus all of the fees NR incurred during the sale. In addition, you'll have trashed your credit rating.

Do you have permission from NR to rent out the flat?

holly_hobby

Repossession should be the last thing you do - apart for the pursuance of shortfall as Anni. discussed (which is on all mortgagors for a period of up to 12 yrs).

All mge applications will ask if you have ever been the subject of a possession order, this is not timebound, so you will ALWAYS have to declare this (futher to which there is actually a register that hte lenders check in any event) - so such an event will never leave you.

IF you get consent to let, I would certainly take it for as long as it is offered, use the excess rent and other disposible income to reduce the os mge as much as is comfortabily possible (to get you back into positive equity asap), by either directly overpaing your mortgage (or place overpayments into a notice account if there are restrictions on overpaying), whilst hopefully the market may also pick up, further assisting the reversal in the current neg equity you are exposed to.

Its going to take time to get you back in a positive equtiy/loan ratio - but it is possible and a much more sensible route than simply throwing your hand and "starting again" of which you now know that really isn't a viable option if you anticipate future mortgage needs.

Hope this helps

Holly

croneybess77

Thanks for replies. Yes we do have permission to rent from NRAM but in reply to Holly we do not have any extra money from renting and actually are having to top up the rent ourselves whilst pay rent elsewhere which we cannot afford and is unsustainable. This is why we are considering losing the property. We are also not looking to rebuy anytime soon as we are quite happy to rent forever and use any money in the future to help our kids buy rather than us. So essentially bad credit doesn't bother us and we cannot afford to keep renting it. Any other suggestions please?

ViolaLass

croneybess77 wrote: »

We are also not looking to rebuy anytime soon as we are quite happy to rent forever and use any money in the future to help our kids buy rather than us.

If you rent, you'll be helping a landlord to buy, not your kids.

DVardysShadow

croneybess77 wrote: »

Thanks for replies. Yes we do have permission to rent from NRAM but in reply to Holly we do not have any extra money from renting and actually are having to top up the rent ourselves whilst pay rent elsewhere which we cannot afford and is unsustainable. This is why we are considering losing the property. We are also not looking to rebuy anytime soon as we are quite happy to rent forever and use any money in the future to help our kids buy rather than us. So essentially bad credit doesn't bother us and we cannot afford to keep renting it. Any other suggestions please?

How much is the shortfall on paying the rent and how much negative equity is there?

I think this needs some figures to come to the best option.

eveie189

croneybess77 wrote: »

We are also not looking to rebuy anytime soon as we are quite happy to rent forever and use any money in the future to help our kids buy rather than us. So essentially bad credit doesn't bother us and we cannot afford to keep renting it. Any other suggestions please?

As far as renting forever is concerned, you need to be aware that most landlord and letting agents do credit checks on prospective tenants so trashing your credit rating now may severely limit your rental choices in the future.

jayphe

ViolaLass wrote: »

If you rent, you'll be helping a landlord to buy, not your kids.

Don't listen to this emotional soundbite, the decision you make today is not something that has to be stuck to forever. Also, very clearly illustrated by your current situation of subsidising your tenants, it's often not true.

If continuing on the current path is going to end up with you running out of money and being repossessed anyway, then at least explore the option of selling up and agreeing with NR how the excess owed may be treated. The downside of selling up is that you might lose your tenant while advertising the place for sale and unless it sells and completes quickly you're left with a big void to cover. You probably need the advice of a good local EA on what they could realistically get as: a tenanted sale, a quick vacated sale, or auction.

No easy answer, good luck.

ViolaLass

jayphe wrote: »

Don't listen to this emotional soundbite, the decision you make today is not something that has to be stuck to forever. Also, very clearly illustrated by your current situation of subsidising your tenants, it's often not true.

My point was that deciding to rent rather than buy 'so that we can help our kids to buy instead' doesn't add up. You'll still have to pay the rent (instead of the mortgage) so you won't be able to save that amount.

linseyproperty

i have kinda the same problem i have a nram morgage on a flat that i rent i am loosing about 300 a month between the difference of the rent i get and the morgage that i pay

i was thinking of letting it get repossessed as i was told nram may not persue me for the shortfall once they sell it when i bought it it was valued at 90k now there selling for around 60k

so would nram def chase me for the difference?

holly_hobby

Yes they (or to whom the debt is assigned) may and probably will - for a period of upto 12 yrs.

Plus you must always disclose if asked, if you have previously been the subject of a possession order (whether voluntary or by court order) - albeit there is no longer a national CML reposession register operated.

Holly