Mortgage Shortfall Due To Negative Equity

K1RST1E_2

Evening All,

Has anyone sold their property when in negative equity and then ended up owing the bank the remainder?

We've sold our shared ownership property, outstanding mortgage is £79k, accepted £68k so will have a shortfall of £11k. Due to my bad credit, we're struggling to get a mortgage and our current mortgage provider rejected our joint application straight away. We're just going through our options at the moment and wondered what arrangements would be made with the shortfall until we can sort out a mortgage? It looks like my husband will have to apply on his own.

I should point out that we're moving into a house my husband has inherited so we're looking for a 56% LTV. It's also the reason why not getting a mortgage at the moment isn't a show stopper for our sale.

Thanks.

Thrugelmir

Obtain a secured loan against the inherited property to fund the shortfall caused by the negative equity.

Alternatively offer the existing lender the security of the property against a loan to clear the negative equity.

kingstreet

You need to make arrangements with your lender before you accept an offer.

If you attempt to complete when there will be insufficient funds to do so, the lender will not allow the charge over the property to be removed and you will not be able to sell.

opinions4u

Talk to your current lender.

You're not selling until they agree to it.

holly_hobby

As stated you need to obtain agreement from your lender to permit completion and free title (for your purchaser) where there are insufficient proceeds to actually redeem the mortgage.

If they agree to do so, they may be agreeable to you repaying the shortfall over an extended period (with possibly a charging order on any future owned home), and you should also be aware that the sfall is pursuable (for all mortgagors) for a period of up to 12 yrs from default, and will affect your credit status for a period of 6 yrs.

Perhaps there is a way to manage this 11k sfall from the inherited house proceeds ?

Hope this helps

Holly

K1RST1E_2

I'm speaking to the Shortfalls Team today regarding it but just wanted to know what options they may come up with.

Holly Hobby, We're not selling the inherited property. We're moving into it regardless of whether we can sort the mortgage out before our sale completes.

Once probate is finalised, my husband will receive enough money to pay the shortfall but we had hoped originally to cover the shortfall with a new mortgage leaving his cash inheritance to clear all outstanding debts bar the shortfall and to renovate the house. It may be the best option to clear it all so that when a new mortgage is applied for, there are no other outgoings apart from the mortgage payment.

Thrugelmir

K1RST1E wrote: »

Once probate is finalised, my husband will receive enough money to pay the shortfall but we had hoped originally to cover the shortfall with a new mortgage leaving his cash inheritance to clear all outstanding debts bar the shortfall and to renovate the house.

Is there an outstanding mortgage on the inherited property?

K1RST1E_2

No outstanding mortgage on the inherited property but we'll need one to buy my sister in law out. After speaking with the Halifax, they want the shortfall paying outright so that's what we'll do.

We have gone to an independent mortgage broker to help us on our mortgage hunt.