hypothetic al question

Bella_Smythe

hypothetical question. and sorry to bang on about it, but dont want to go through all this then be left up the creek without a paddle, so to speak!
we are in negative equity, probably about £30 K, and about £2 K in mortgage arrears.
we go Bankrupt. the BS (probably) lets us stay on paying interest-only as it would hardly be in their interest to repossess. at some point in the future we want to move. we put the house on the market. situation (a) house sells, left with shortfall, this becomes part of BR?
sitation (b). house doesnt sell. we stop paying anything to BR and walk away. they eventually repossess. and sell. and are left with shortfall. this also becomes part of BR?
is this legal? would it still apply after BR was over (discharged) what if it was say in five years time, and the house 'beneficial interest' had reverted to us? i dont want to be stuck with a house i cant sell and cant ever move from. also not real keen on being homeless? help anyone?

alastairq

would it still apply after BR was over (discharged) what if it was say in five years time, and the house 'beneficial interest' had reverted to us?

Yes!

BR covers all pre-BR unsecured debts.

Mortgage is a secured debt [therefore not included in a BR].....but pre-dates the BR petition.

Once house is sold/re-possessed & sold, any shortfall on the mortgage or secured loan, becomes unsecured.

Since the mortgage [or secured loan] was initiated pre-BR, the unsecured debt then becomes included within the BR.

Beneficial interest refers to the share of any profit in a property.

It does not mean the same as 'ownership'..

It concerns the OR as the BR's share of the value of a property is an asset.


But if that share is nil, or a negative amount, the OR obviously doesn't have any interest in it..so it is reverted back to the BR.


However, if the OR suspects that the market value of the property may, in the future, yield a profit, then the OR can place a Charge on the property, amounting to the BR's share [beneficial interest].

If this doesn't happen, then the BR is free to sell at any point in the future..[and if a profit is made, whooptidoo!]

silvercar

Bella_Smythe wrote: »

hypothetical question. and sorry to bang on about it, but dont want to go through all this then be left up the creek without a paddle, so to speak!
we are in negative equity, probably about £30 K, and about £2 K in mortgage arrears.
we go Bankrupt. the BS (probably) lets us stay on paying interest-only as it would hardly be in their interest to repossess.

Have you always been on interest only? Sometimes lenders are difficult, can't see the wood for the trees, and can want a repayment mortgage. Something worth checking.

at some point in the future we want to move. we put the house on the market. situation (a) house sells, left with shortfall, this becomes part of BR?

You can't sell without the lenders agreement or repaying the shortfall. Unless you can clear the mortgage you need the lender's agreement for a sale. This is unlikely to happen if they realise the shortfall falls straight into your bankruptcy.

sitation (b). house doesnt sell. we stop paying anything to BR and walk away. they eventually repossess. and sell. and are left with shortfall. this also becomes part of BR?
is this legal? would it still apply after BR was over (discharged)

Yes, legal.

what if it was say in five years time, and the house 'beneficial interest' had reverted to us? i dont want to be stuck with a house i cant sell and cant ever move from. also not real or keen on being homeless? help anyone?

Yes, still legal. Provided you haven't signed anything taking responsibility for the debt after your bankruptcy. This includes signing up to a new mortgage deal or anything accepting the debt.

You have to be very careful not to sign anything that may enable the lender to claim you have taken on the debt post- bankruptcy. Be very careful if asked to sign anything if you need to request to stay on interest only.

If you intend walking away at any time in the future, you don't want to move to a repayment mortgage as you will be reducing the shortfall and won't see any gain. (Unless you intend living here for years and years to totally eradicate the shortfall.)

BTW I am assuming both of you are going bankrupt

arcon5

If the mortgage lenses agree for you to say on wouldn't they just simply have you sign a contract agreeing to take on the property post BR?

Bella_Smythe

alistair and silver car - thank you, thats made that a lot clearer. yes we both have to go BR. it hasnt ALWAYS been a repayment mortgage but has for about two years now. i think every 6 months or so they send a letter saying do we want to continue with this? i guess post-BR it would be one of those letters I'd have to be careful with that they hadnt put a sneaky clause in? if they wanted us to go back to repayment then i guess that would force our hand to move into rented, which we are considering as a possibility but its not without its problems in BR is it?
i didnt know we werent allowed to sell without BS's permission, thanks for that. so walk away and let them re-possess is basically the only option if want to move then?
arcon - i dont know if they would be that or not, but if they did, same as wanting to go back to repayment mortgage, it would be a deal breaker.
thanks all B

silvercar

i didnt know we werent allowed to sell without BS's permission, thanks for that. so walk away and let them re-possess is basically the only option if want to move then?

There is a middle way, which is an assisted sale, where they run the sale while you are in the property.

Lots of things to consider, like if you are going to give up the property, is there any point paying the mortgage, given that any arrears will form part of the shortfall. It would give you some time to save up a rental deposit.

Some people find it easier to secure a rental before bankruptcy, so you could stop paying the mortgage and save up now. But these are only options if you decide that you definitely want to give up the property.

Bella_Smythe

we definately want to give up the property AT SOME POINT. its just when thats in question. how long is likely for a BS to take proceedings if we stop paying mortgage in order to save up for a desposit on a rental house?
at the moment i just basically regard paying the interst-only which is £545 as like being rent anyway
B

silvercar

how long is likely for a BS to take proceedings if we stop paying mortgage in order to save up for a desposit on a rental house?

How long is a piece of string?

Do you already have a suspended possession order? If so, it could be much quicker. With no suspended possession order I would say at least 2 months before they took action (but probably more like 4), then a few weeks to get to court then a few more weeks to get balliffs. Minimum 5 months I would say, but could be a lot longer.

Think carefully, it is easy for others to post opinions across the internet; it is you that have the decisions to make. Look at rentals you could afford in your area. Is there much choice? availability? then decide if you would be better off staying put. As you say, paying the mortgage is like paying the rent at the moment, so you could decide to stay put.

luvchocolate

I found after 6 missed mortgage payments it went legal and was repo
4 months later so 10 months in all, in my own experience. x

alastairq

Couple of points really....

first, mortgage payments are nothing like rent at all.

When one pays rent, then one is actually buying a service.

When was the last time anyone got a building society to replace a duff CH boiler?

Thus, when one enters into a rental agreement, the agreement is a two-way affair.

Not so with a mortgage.


Secondly......whilst the OP is intending, at some point, to vacate their property......move into the rental market [not a 'buyers market' at present, note?] and petition BR....what might be the OP's long term plans?

Would the OP likely want to re-enter the private property market again at some point?


If so, having a re-possession on their 'records' will [apparently, according to those who have tried on here?] severely limit the OP's options for obtaining another mortgage in the future, should [when??] things look up again?

As has been noted, BSs and banks don't like past re-poes....!

Maybe Silvercar's suggestion of an 'assisted' sale would prove a less harmful option for the future?

Bella_Smythe

hiya. i just meant the amount i pay in interest only mortgage is similar to what i'd pay in rent in this area, well maybe a bit more, but i think of it like rent as its not going towards paying off the capital. but no, they dont come fix my boiler!!
im 54 in May so have accepted that either way im not ever going to own my own home. im not going to be able to pay of the £117,000 i owe on this one or get a new mortgage on a new property with time to pay it off before retirement, whatever happens. add the bad credit and my not-great health into the mix and im going to end up renting eventually. its just the right way to do things in the right order and at the right time thats vexing me!