Divorce and selling house in negative equity

Weefeet1976

The ex and I have agreed that we want to sell our house, as our divorce proceedings are commencing this summer. He is presently living in it and I pay a small amount towards the mortgage.

Neither of us can afford to take the house on solely and wish to sell. However, there is a crippling amount of negative equity, possibly as much as £80k to deal with. Needless to say, neither of us have that kind of money lying about. Renting the place out in the hope that the market will recover significantly, isn't an option.

I've heard of companies who negotiate with mortgage lenders, to come up with a smaller settlement for negative equity but upon investigation, I found that these places charge a lot of money for their services and feel that I could probably do the same work myself.

What I'd like to know is if anyone out there has, or knows of anyone who has been successful in getting their negative equity figure reduced by their lender? I just want to get rid of the house so we can get on with our lives.

Annisele

I'm sorry you're in such a difficult situation.

I do know of people who've persuaded the lender to accept less than the full debt - but those people had absolutely no chance of ever paying the full amount. Lenders will sometimes be prepared to take a pragmatic view, but largely they weigh up the costs of pursuing the debtor against the likelihood of getting any money.

From the lender's point of view, it sounds as though everything is just fine for now. You and your ex are (between you) paying the full mortgage amount, and the lender hasn't made any losses. If the lender does allow you to sell for less than the mortgage amount, then it has lost its security and not got anything in return.

I think the lender's view is likely to depend entirely on your circumstances. For example, if you and your ex are both aged 40, in perfect health, and earning £200k a year, then the lender will want every penny of its money. If you're both 90, terminally ill, and have no income other than state pension, the lender may think that writing the debt off is cheaper than trying to recover it from you. I suspect your actual position is somewhere between those extremes.

Have you spoken to StepChange or a similar charity? They should be able to talk through your options with you.

Weefeet1976

Thanks Annisele. That's what I'm afraid of. Yes, we are able to meet the repayments but it's an interest only mortgage and I certainly do not want to be trying to find the money at the end of the term of the mortgage to pay the rest off in 20 years time.

It makes moving on with life extremely difficult and I've already resigned myself to renting the rest of my life because of this experience. I know there are folks way worse off but still.

I've thought of and explored all options I can think of and the only other is to just maintain the status quo, which isn't ideal because we will never get the money to cover the mortgage even if the market were to improve.

Argghhh

I doubt very much a mortgage company will just write off 80k because you want to be able to get on with your life. They will want it all back. Might be at smaller amounts but it will probably be for life and your credit history will be affected i would imagine

oldbaldman

Sorry to read that you have the problems with your property value as well as having to cope with a divorce.

Aside from the general property downturns over several years is there any reason specific to your property why you have ended up with £80k negative equity? Any local blight issue? Is the property in disrepair, in need of work?

What figure did you buy for, when? What general area?

Is there anything that you can do to enhance the value without spending a lot on it?

Would it be affordable on paper for one of you take it on if you got lodgers in? This might give you some breathing space, although it may not allow a complete and final break from sorting finances for the divorce.

Could you get outline planning permission to extend? This might make it more appealing to another buyer, might add a bit of value? Hard to know without knowing what the details of the property are?

obm

Weefeet1976

OBM, thanks for your input. The house was purchased in 2005 for 96k, just before property prices became silly in Northern Ireland. It was a time when banks were throwing money at people and I fully admit that we were extremely foolish. We didn't have a deposit, the mortgage advisor told us it was no problem so that went in to the mortgage.

The house needed new windows, doors and bathroom so of course we borrowed more on the mortgage for that. And most foolishly of all, we rolled our personal debt in with it too. We had just got married, wanted a house and were struggling so when the mortgage advisor suggested it, we thought it was a good idea at the time. Yes, I know it was VERY stupid and I regret it bitterly but at the time, I didn't anticipate divorcing. In the end, we have an interest only mortgage for £169k. At the height of the boom, it didn't worry us, as houses in the cul-de-sac were selling for over £200k. Now, they are on the market at around £100-120k.

It does need some cosmetic work done to it, which I anticipated in order to put on the market. I don't want to (nor do I have the means to) put lots of money into the house when I won't get the return I need. There is a bit of room out the back of the house to extend, if someone wanted to.

The ex lives in the house presently but cannot take in a lodger (I know it sounds daft, but there are valid reasons).

I just don't know what to do. Short of a decent lottery win, I cannot see a way out of this.

Annisele

Ex can't take in a lodger - but could you, if you lived there instead?

Could you live there with your ex? Unpalatable I know - but you might see it as the least worst option.

could you both simply stop paying the mortgage, allow the lender to repossess, and then declare bankruptcy? (That's the nuclear option, and bankruptcy would have a serious affect on your life, but it would give you a fresh start).

I still think you should speak with one of the debt advice charities. Even if they can't come up with an option you haven't thought of, it's likely to be a helpful chat.