My House

silvercar

Can I try and explain it from a different angle.

You own your home and have responsibility for the money secured on it. So there is the outstanding mortgage amount and there is the equity remaining in which the OR has an interest. The mortgage amount is fixed, the OR's equity amount is variable and is "the rest". There is no point worrying how much this is if you want to walk away, as long as you make sure the mortgage debt is paid off.

If the house was sold and there was no equity after selling fee etc then the OR will have no money to give your creditors - not your problem. What will be your problem is if there is money owing on the mortgage.

Try not to think of it as the the mortgage company owns most of it and the OR has an interest in the rest. It doesn't work that way. The mortgage company has lent you the money, albeit secured on the house. It is still your responsibility to pay off that amount. If you fail to do so, there will be a debt. This being post bankruptcy, they could come after you for the debt at any time in the next 12 years.

What I am trying to say is that you own most of your house through the mortgage, if you don't purchase the BI that doesn't make the part you own go away - it is still yours and you are answerable for that money.

Toto

I would think if you really want to move the best thing would be to sell the house yourself. Let the OR know what you are doing and explain that you want to ensure you get a fair price (which you won't if the mortgage company sell) ask if you can use any remaining equity to cover your deposit on the rental first then allow the OR to have any equity which remains. I can't see any other way to protect yourself from a potential shortfall.

Mike_St_Helens

Thanks again guys.

One problem with selling it myself is that properties in this area sont generally sell too well you see, we have tried before and its a very stagnent slling area. Plus, I very much doubt the OR would let us keep 1500/2000 of the equity to fund a move, deposit and rent.

I completley understand your explination silver. I guess my questions are leading down the path of what of etc etc...

Over the last few days its become even more apparent to me that being on the property ladder isnt something that bothers me too much now. Its taken some thinking mind... The thought of a fresh new start in another city, we have no worries, good jobs.. its pulling me towards it you see.

In my mindset I have the thought of getting the valuations tomorrow.. if the value is 'negative' or there abouts then it makes perfect sense simply to buy the interest. If we have to then start to find hundreds possibly thousands of pounds we simply dont have, then the issue arises. I would 'like' to stop paying the mortgage, let the mortgage co start proceedings, advise the OR we have no interest in the property and they are welcome to force a sale if they so wish.

Or I could put the property up for sale now, stop the mortgage payments in order to save for a move. tell the OR that this is the case, if we sell alls well and good, its pot luck if I end up oweing or not, thats a hurdle ill have to come to if it happens I suppose.

What would you do if it were you in this position ?

Thanks again.

Mike_St_Helens

Ive just sent an email to my OR asking this :

I have a question for you. As you are now probably aware, if we have to purchase a higher than expected Beneficial Interest in this property we possibly will not want to proceed.

If I were to put the house on the market at the earliest convenience, is it possible that out of any sale proceeds we could be allocated some funds for deposit and pre rental funds on a rental property ? Obviously any funds remaining after the sale costs and what I have suggested would be the official receivers, however this way we are able to sell the property mutually and hopefully at a better price, and we have the funds to move on.

Is this sensible ?

Conor_3

If you can do it before banking, then the money you take out of the equity for a rental property will be classed as a legitimate expense.

On thing to remember when trying to work out the timing of doing all of this is most letting agents do a credit check so you're more likely to be able to get a rental property prior to banking.

This is how we're doing it with the FIL. He's just giving the keys back to the mortgage company and letting them sort it out.

Mike_St_Helens

Conor wrote: »

If you can do it before banking, then the money you take out of the equity for a rental property will be classed as a legitimate expense.

On thing to remember when trying to work out the timing of doing all of this is most letting agents do a credit check so you're more likely to be able to get a rental property prior to banking.

This is how we're doing it with the FIL. He's just giving the keys back to the mortgage company and letting them sort it out.

Thanks Conor,

Ive checked with a couple of good agents, they have agreed us with a guarentor, wich is fine. or 6 months rent !!

Conor, how is it working with your FIL.. Whats the process he has followed, any arrears, is he B, is he still there and for how long ?

Thanks

Mike

silvercar

If the OR has a BI can you sell without their agreement, or do they require you to achieve a certain price?

If the OR isn't happy with your suggestion of retaining some money for rental, will he be happy to find you have mortgage arrears and have saved some money for the rental?

Your email to the OR looks fine BTW.

If I was in your shoes I would put the house on the market now. Even if you found a buyer tomorrow, you would not be in a position to exchange for at least a month, upto which time you can back out. You need to work out the absolute minimum you need from the sale to pay off the mortgage, include mortgage redemption fees, sealing fees, legal costs and estate agents fees. Anything over that will go to the OR so you could indicate to estate agents the sort of price you need to get. Under no circumstances give any indication of forced sales, repossessions or bankruptcy to the estate agents - you will just get ripped off and the vultures will gather.

Mike_St_Helens

silvercar wrote: »

If the OR has a BI can you sell without their agreement, or do they require you to achieve a certain price?

If the OR isn't happy with your suggestion of retaining some money for rental, will he be happy to find you have mortgage arrears and have saved some money for the rental?

Your email to the OR looks fine BTW.

If I was in your shoes I would put the house on the market now. Even if you found a buyer tomorrow, you would not be in a position to exchange for at least a month, upto which time you can back out. You need to work out the absolute minimum you need from the sale to pay off the mortgage, include mortgage redemption fees, sealing fees, legal costs and estate agents fees. Anything over that will go to the OR so you could indicate to estate agents the sort of price you need to get. Under no circumstances give any indication of forced sales, repossessions or bankruptcy to the estate agents - you will just get ripped off and the vultures will gather.

Thanks silver, we are getting there slowley but surley.... I just recieved a reply from my OR with some of my other concerns. The offer to sell and get some funds back for rent was a no no btw...

Here goes...

"Once a property has been sold, all secured charges on the property will be paid, any surplus will come to the Official Receiver to pay off your creditors, if there is any surplus left after your debts have been paid, this money comes to you, however this period, once all assets have been realised can take upto 4 months after the property has been sold (may take longer - always depends on other assets, ie how long they take to realise).

When asking for an outstanding figure from the mortgage company, as stated before when we work out the Official Receivers beneficial interest, this figure is only worked out using what is oustanding (no settlement fees/redemption statements)and what the property is worth, I understand your point, however this is the way that all properties are dealt with within the Insolvency Service, one reason may be if the Official receiver was to take into account early payments fees etc, there may not be any equity at
all within the property, so less properties with equity, less money to pay out to creditors. (my thoughts only).

If the equity is even below £1,000, you will still have to pay this / make me an offer to buy back the interest.

Any arrears would be paid off with the proceeds from the sale of the property, any shortfall whether it be on the mortgage or arrears will be sent into us as a unsecured debt.

As both of you are bankrupt, if there is negative equity in the property, both of you will have to send in a £1 each, however there will only be 1 charge of £211 for the Solicitors fees.

Please note there are no other alternatives to the above information, I cannot change procedures. "

Richard_S

Hi Mike,

Sometimes there are no right and wrong answers to a problem, it's more a case of going with your "gut feeling". You're in possession of all the facts and options available to you so whatever decision you do ultimately make will be one based on your best judgement at the time.

There's an article on Radio 2 on Friday about the prospect of an imminent "crash" in house prices; that might be a little overstating things but there has to be some levelling off or price fall at some point. If what you say about the area you live in turns out to be true you could well be in negative equity anyway so that would tend to push you in the direction of staying where you are.

As you know, we faced a similar situation to yourself, and after having been served with notice to quit our rented property opted to go back to our old house when the sale fell through. The difference between what estate agents valued the house at and it's actual market value were thousands of pounds apart. If house prices do crash then we may well regret the decision to have moved back but again, we based our decision on the facts available at the time and our instincts.

It's a truly difficult decision to make and the only saving grace is that you're not under any pressure to make a decision quickly.

Rich

Mike_St_Helens

Thanks Rich, you are right.. gut feeling is normally the way you will go.. but my head proper plays tricks on me sometimes !!

Ive confirmed now with the or that :

If there is a short fall on the property (which can include arrears afterb/order date) these will be classed as unsecured upon completion - (ie sold etc), and will be added to the unsecured creditors list. This only applies
to the mortgage and will not apply top any other policy / service etc.

So yes the arrears on a mortgage will be added to the charges and paid off by the sale proceeds (as the mortgage and arrears are classed as one)upon
completion - shortfall is then lodged with us.

Which I guess is both good news and bad really...

Its just that decision thar=ts hard, and only I can make it. I have all the facts, tools and advice I need. Just wish someone could make the decison for me.

One other tiny thing playing in my head is the mortgage itself. we are on a 7% LIBOR rate interest only, around $450 per month. Im simply renting from the bank, to change this to repayment after ive bought the BI would add £100 or so to it, and that rate is very hight really. You can rent a new pad in city centre liverpool for £550 !