Massive massive problems

loadsadet

Would be very grateful for some advice.

Wife and I both had very well paid jobs. I had to relocate and it was also a lower paid job so £1500 per month lower income for me. We had our first child and wife was on maternity leave for a year so her income drastically reduced, and back to work part time. Overall our income dropped £2K per month compared to a few years ago.

To counter this ended up with loans totalling 25K a couple of years ago spiralling to loans and CC debts totalling £80K (all in my name - Barclaycard, MBNA, Barclays, NRAM and Hitachi).

To cut a long story short our main problem is being unable to sell the house we own that we don't even live in! Been on the market 2 years, when I found out was going to have to move. In negative equity now by a long way. If we manage to get a sale at the current price it is being marketed we will have a shortfall of £40K. If it went to auction looking at £100K shortfall. Been just about keeping up with mortgage payments of £2250 per month with a few gaps, hence arrears of £7900.

After some persistence managed to arrange token payments of £1 per month for all the unsecured debts - this has been for 12 months now.

What should we do with the house? We will never live in it again and feel aggrieved about continuing to pay out for it when we're never going to live there again. Have rented it out for 12 of the last 24 months to keep things ticking over a bit. Cannot afford any mortgage payments now that we're not receiving any rental income as tenants moved out. Before then just about breaking even. Had a couple of viewings but no offers. Market in that area is dead. Considering voluntary repossession but not sure where that will leave us. Mortgage is in joint names - all other debts are only mine.

If I had no debts and we weren't paying the mortgage we'd have £1300 per month surplus. If we got rid of the house at least we could comfortably sort out some sort of repayment plan. We're resigned to the fact that we'll be renting for some considerable length of time as credit rating now gone from excellent to something resembling Greece's credit rating. May also have the option of a family member taking out a loan of £25K to consider a F&F on the unsecured debts and I would pay them back every month, but obviously not an option while we're still making ridiculous mortgage payments. Mortgage company are doing everything they can to get their money from us and not showing any sympathy at all.

Damn the crash in the housing market. If we'd sold straight away at asking price the equity would have paid off all the unsecured debts. Can't believe how badly things have turned in that area.

Sorry for the long post.

CommitedToChange

Hello and welcome - can you post up an SOA as that will give us more of an idea on suggestions.

Shovel_Lad

As CommitedToChange says post a SOA and we'll try to help.

The link is here:
http://www.stoozing.com/msoc/soacalc.php

Angry_Bear

Are you considering bankruptcy? I ask because it's not clear from your post if you're aware that with voluntary reposession you would be responsible for whatever shortfall was left after the bank sell it - as they will reduce the price to whatever it takes to sell, you could end up still owing them more than £100k.
The people here will be able to give you great advice on managing your budget and dealing with your debts, but you should probably speak to a professional (why not try CAB) about the repossession/bankruptcy.

FireWyrm

Bankruptcy without a doubt is the way to go. You cannot possibly ever pay off the mortgage shortfall and the unsecured debts together. You could of course manage to hang onto the house, but the unsecured debts are bordering on stupid amounts. I'm just not sure why you chose to run them up in the first place and none of them are obliged to even consider the idea of a full and final settlement.

This clearly has nothing to do with the market downturn and you were in trouble long before that happened, it sounds like you have just basically limped along from then to now. Obviously a number of life choices conspired to cause your already precarious situation to worsen, the maternity leave for one, but hindsight is a wonderful thing.

I guess its time to cut your losses finally since no amount of jiggling the monthly finances will fix this in a sensible amount of time unfortunately.

The market isnt dead in your area, your house is vastly overpriced. Unfortunately, you will almost certainly lose it if you dont start paying the mortgage again and thus you will be worse off since the bank will simply go to auction. Since half a loaf is better than none at all, I would knock another 10K at least off the price and keep doing that until you get some interest. You really have no other choices.

Lensman_2

I think you have already (half) decided to let the house go.

I have been in a similar situation and struggled with a similar shortfall in my expenditure for longer than I should have. Eventually, pulling the direct debits was actually liberating and a big release.

Make no mistake, my future was changed possibly forever - not by not paying those bills - but by the debt load I carried and a drastic change in circumstances that led up to it.

But I am in a better place now than I was then, and you are now.

Please do not voluntarily surrender the house. Pull the direct debit by all means. Even write to say that your circumstances have changed and that you want them to consider repossession. But don't sign any forms.

Lastly - you need professional advice. Such weighty decisions should not be made alone or just with the help of people like me on the internet.

CAB were excellent for me...

R_P_W

How did you end up with £80k of unsecured debt?

whitewing

On the plus side, you have kept your family together under extremely trying circumstances.

Do the SOA as suggested.

racing_blue

We are all in the same race: build net wealth by having an income greater than expenditure and making shrewd investment choices. Although with negative equity and £80K of unsecured debt, you are starting some way back from the line, it has to be said! Rules are the same though.

Net wealth is the main game. What you have in your favour is a massively leveraged asset (house). Obviously leverage can work against you as much as for you. If you sell your house now, you will be making a losing move and the buyer will be making a winning move. I don't know how big your mortgage is, but your payments are similar to mine before I halved them by switching to IO, that was on a mortgage of £420k.

Lets say you have a mortgage of £400k and you think your house is worth £380k. And you have £80k of unsecured debt. so net wealth of -£100k. A 1% rise in house prices will increase your net wealth by 4%. Amazing! Sell up now and you lose that leverage.

The sub game is cashflow. You need to play the monthly cashflow game right to get a seat at the table to play the main game. Here I guess you need to be inventive at the moment.

Remember... it's always darkest before dawn.

mustnotspend

Are you trying to get new tenants in? This would help with the cash flow...

ghostmadlittlemiss

I appreciate it must be difficult to find new tenants for a house when you don't live in the area any more. Would it help to look into letting it through an agency? I know they take commission from the rent but it would be better than it standing empty.
Kayleigh