Mortgage debt shortfall and effect on own property

movilogo

It has not happened to me but just in case....

Suppose I own a BTL property on mortgage. For some reason, I wish to off load it (or for whatever reason bank repossess it). If the sold price is less than outstanding mortgage, I understand there will be a mortgage debt shortfall for which bank can pursue me.

However, if I own (mortgaged) another property for my own living, can the bank/lender force me to sell that property to recover the debt?

Assume there is no arrears in own residential property.

silvercar

If you took out a second loan on the residential home to cover the shortfall and then fell behind on that, they could go for repossession of your residential home.

They could put a charging order on your main home, so they get the money when the home is sold - but that wouldn't force the sale.

The only time I would think your main home would be at risk would be if both mortgages were with the same lender, then there is generally something in the mortgage small print that allows them to pursue outstanding debt through any charge (mortgage) they have.

That is why it is a good idea to avoid having any loans or mortgages on other properties with the same lender as you have your main residential mortgage.

agrinnall

It's unlikely that the value of a BTL property will be lower than the outstanding mortgage amount because lenders generally insist on the LTV being no higher than 75%. So unless there's a large crash in property prices or there has been a significant structural issue with the property they'll get their money back.

AdrianC

If you owe £100k on the mortgage, and sale only allows you to pay off £80k of it, then why would you think that you wouldn't have to do whatever is necessary to cover that other £20k you still owe...?

CLAPTON

the debt will be like any other unsecured debt.

a creditor can apply for a bankruptcy order for any debt over £500:
it would up to the court to decide : however it's likely that the court would order a monthly repayment.

maninthestreet

The mortgage company would not allow the sale to proceed if the agreed sale price is less than the outstanding mortgage debt and you have no other funds available to make up the difference.

G_M

as maninthestreet says, you can only sell the BTL if the Charge (mortgage) is removed from the Land Registry Title.

No buyer will proceed with the Charge in place - they don't want to take on your mortgage!

And the mortgage lender will not remove the Charge till the debt is cleared.

So you cannot sell without the lender's consent, unless you find the full amount of the outstanding mortgage.

Jeff_Djevdet

It is unlikely they will force a sale but they may put a charge on the property instead. Avoid getting into arrears if at all possible, there are lots of unpleasant repercussions.