Negative equity

no1gymbunny

Hi

My Dad and I bought a flat in May 07 for £140 on a £100% interest only mortgage with Bristol & West. After the 2 year fixed period ended we swapped it over to capital & repayment. Since doing that Bristol & West were bought out by Bank of Ireland. We rent the flat out and the mortgage has gone up twice this year - it's now something like £739/month. As it's a flat, we have a monthly management charge of £60, so things are getting expensive and the rental nowhere near covers the mortgage. It's also been empty for about a month now.

The flat's now probably worth £125K and I've spoken to BoI about our options and it appears that aren't any. I just wondered if anybody can think outside the box and have any suggestions that might help us please? I suggested to them that we sell it and then just keep paying the remainder off in monthly installments, but that's not an option. We're really stuck. Wish we'd never bought it now.

maninthestreet

So have rents dropped significantly since you bought this flat??
What mortgage interest rate currently applies to this mortgage.

TrickyDicky101

Can you move into it and live there thus potentially reducing your current housing costs?

tonyh66

Im guessing the rent covered the interest only mortgage but won't cover the repayment mortgage. Welcome to the BTL problem they never mention on homes under the hammer. Not a lot you can do really if the existing mortgage provider won't accept a regular repayment of the negative equity.

neas

Now is a very good time to put the house onto the market. Don't know what area you're in, but FTB/BTL properties are selling very quickly in my area. They're selling within the first few viewings and certainly before they hit next week's property paper.

How 5 years can change things.

Back in 2007 we were at the peak and everything was rosy. Now look at it 5 years later and houses still worth less.

Is this the house that flooded as well?

Not sure of your options other than moving back in, as you say you are in negative equity, are stuck in a rut. BTL are business moves and as a business its not done very well... you could stick it out for 5-10 years and hope to ride it out which would eventually happen or you could raise the n15k funds and sell the thing on.

no1gymbunny

Long story: I was single at the time, bought the flat to live in, I then met someone who's in the forces and moved away to live with him and let the flat out. It was bought it on a residential mortgage and now has permission to let, rather than a buy-to-let mortgage. We are now married and living in military married quarters, so chances are, we'll never live in the flat.

The current mortgage rate is 3.99%. I've suggested switching to a BTL mortgage, but the rate is about 3% higher than we currently pay.

The rent never covered the mortgage. In the first instance, I managed to let it to a corporate tenant at £700pcm. It's now on the market for £580pcm.

no1gymbunny

neas wrote: »

How 5 years can change things.

Back in 2007 we were at the peak and everything was rosy. Now look at it 5 years later and houses still worth less.

Is this the house that flooded as well?

Not sure of your options other than moving back in, as you say you are in negative equity, are stuck in a rut. BTL are business moves and as a business its not done very well... you could stick it out for 5-10 years and hope to ride it out which would eventually happen or you could raise the n15k funds and sell the thing on.

Yes, it did flood - well remembered!

It's tempting to look into raising the £15k, however we already have £30k of debt, so that's not looking particularly promising either! Jeezo!

marathonic

You say the rent doesn't cover the mortgage but are you able to afford over-payments?

You also say you have £30,000 debt. What rate is this at and does it allow over-payments?

If both allow overpayments, overpay the one with the highest interest rate as much as possible.

There's not much you can do about the flat except look hard for a new tenant. The bank would potentially let you sell it on and keep the shortfall as a loan which you'd then need to pay off.

no1gymbunny

Not really able to afford overpayments. Due to moving regularly with husband's job (military, so every couple of years), I've experienced several months of unemployment and therefore the debt has grown. Feels like a never-ending spiral of debt just now! :-(

I'm doing everything I can to find a new tenant.

I did ask the BoI if we could sell and then pay the remainder off, but they said that wouldn't be possible. I guess we could take out a personal loan, so that they (the bank) get all the money in one go?

Fire_Fox

Are they letting you have consent to lease indefinitely even tho you have no equity? What do you mean the debt has grown, are you in arrears? Who has £30K of debt you and father or you and husband or just you?

I doubt you will get a personal loan with one income and any missed or late payments. It's not just £15K you need, you also need estate agents and legal fees to sell. Honestly I'd consider a DMP, IVA, DRO or bankruptcy. The problem with these is that you are financially linked to your father and your husband so you may take one or both down with you.

amjustagirl

I feel your pain am having to take a 9k loan out to pay the negative equity on a property i no longer live in that i've just sold am with Bank of Ireland too, don't understand why you cant just pay them back in installments the remainder like you say. Don't they want the interest?! Try and sell if you can as house prices just keep dropping and it will be hanging over for you forever more but i know its so hard when you already have other debt Sometimes you have just got to cut your losses. Good luck i know how crap it feels.