Negativity Equity on 2nd property and options

TheNottocs

Looking for a bit of advice really. My husband has a an interest only mortgage on a house he rents to his parents (he bought it from them as they couldn't afford the mortgage repayments based on his dads income etc). His Mum and Dad are now nearing retirement age and it is very unlikely they can afford to continue making the rent payments once they retire. In the 6 years since he bought the house the property has devalued by around £20k. The outstanding mortgage is £108k!

We have our own house on a repayment mortgage with about £20k equity in and were hoping to move however upon reflection realised this would be irresponsible given the situation with the other house. In am ideal world we would like to sell the house and get rid of the stress / responsiblility that comes with it. I have been considering our options and come up with the following:

- Selling our own house to release the equity we have, move into the other house, switch the mortgage to repayment and use the equity we have to pay of the deficit and hold tight until we raise a big enough deposit to move again (not ideal I really don't want to move into the other house!)

- switching to a repayment mortgage and renting it out to tenants with us covering the gap in rent / repayments and sit tight for a few years in our own house (would cost us a lot of money / added stress etc.)

- trying to raise the deficit between hubby and siblings so we can sell (unlikely due the amount of money we need to raise)

Does anyone have any advice re: the options above or ones we might not have considered? Its a real mess!

Thanks

Dave_the_Ginger_Cat

Hope you're OK to answer a couple of questions

Will his parents stay in the house?
If you move in there, do you get on well enough with them to share a house?

And appreciate this is causing you stress - if you can expand on what aspects are causing this, it would be helpful in offering advice

Regards

TheNottocs

Thanks for replying...

No the plan is for them to move out. They have been informed by the Council they are not eligible for housing benefit and so they cannot afford to continue living in the house (and probably couldn't even if they could claim).

The main stressors come from a variety of factors really:

Firstly, no one had a long term plan regarding the house. My husband basically bailed them out and bought it off them for them all to continue living there (prior to meeting me / buying our own house / starting a family etc) and it seems that they have all had their heads in the sand about the situation for the last 6 years.

Secondly, the fact the mortgage is on interest-only and in negative equity with it unlikely to ever get out of negative equity even if we could keep the house on and wait for the market to pick up.

Thirdly, it seems that hubby and I are the only ones truly worried about the whole situation and it obviously massively impacts our future plans.

We currently comfortable afford our own mortgage and expenses but do not have any disposable income to sustain or contribute to the other mortgage. At the minute the only viable option I can see is us selling up to release the equity we have to pay on the deficit... which is where I'm really hoping someone might say there is another option I guess...

g_attrill

Are they ineligible because the council believe it would be a "contrived tenancy" or because they are ineligible due to other factors (eg. savings)? I could see it might get messy with you needing to make them legally homeless before the council will help.

R_P_W

This might be a secondary concern for you, but are your husbands parents going to live if you sell the house?

TheNottocs

Because it's a contrived tenancy... they have no savings! Even if they could get hb they would struggle to make ends meet in the house once they retire. They would be better off moving out, renting privately and claiming hb but it stills leaves us with a house in negative equity and a interest only mortgage

TheNottocs

R_P_W wrote: »

This might be a secondary concern for you, but are your husbands parents going to live if you sell the house?

The hope would be they would privately rent something smaller and more affordable and then they should be able to claim hb