Bought house for 137,500 now only worth 127,500

sillyspendy

15k deposit was put down. The buy to let mortgage runs out next year so does this mean we will then have to sell and loose most of our deposit?

Sorry for being thick. My husband deals with all this but is super stressed with work and I am just at work wondering and don't want to bother him.

Pixie5740

Does the rent cover, or more than cover the mortgage? If so then why sell it?

If you do sell the property for less than the outstanding mortgage then you will have to cover the shortfall.

Hoploz

I would say you'd struggle to get a btl mortgage for over 25% but you seem to have done so previously so maybe you could again. Do you have a broker? Do you want to sell or would you rather keep it? How does the rent compare?

Hoploz

... When you say it 'runs out' do you mean a deal eg fixed rate ends and you go onto the standard rate? If necessary just stick with that

bris

Yes you will lose most of the deposit, 10k plus selling costs by your figures. To get your deposit back from a sale you would need to sell for around 140k, taking selling costs into consideration.

RAS

sillyspendy wrote: »

The buy to let mortgage runs out next year so does this mean we will then have to sell and loose most of our deposit?

runs out in what way?

If you sell, you crystalise the loss.

If you continuing "owning" and renting out the property is may well (but may not) reach its previous value in a few years.

In the mean-time presumably the rent will slowly pay off the capital and your equity will increase?

Rambosmum

The mortgage company won't make you sell it.

You might find getting a different BTL mortgage on it but if that's the case just stick with the variable rate on the current mortgage.

If you need to see it then you will lose the deposit. If you don't need to sell it then don't, as long as you, or the rent can cover the mortgage.

sillyspendy

Forgive my ignorance but I am not sure what runs out next year I just have heard my father in law and husband previously say it runs out in 2016?? Ideally we want to keep it as we have a good friend who is in ill health renting it off us and we don't want her to find a new home as she is only newly diagnosed with her illness

Rambosmum

sillyspendy wrote: »

Forgive my ignorance but I am not sure what runs out next year I just have heard my father in law and husband previously say it runs out in 2016?? Ideally we want to keep it as we have a good friend who is in ill health renting it off us and we don't want her to find a new home as she is only newly diagnosed with her illness

They most likely mean the fixed term period - the time that the mortgage has fixed interest rate. When this ends you have 2 choices; keep that mortgage but pay the standard variable rate (ours is 4% above base rate, so currently 4.5%) or change to a new fixed term mortgage (which we did as we got 3% for a fixed 'term' of 2 years).

When your fixed term runs out you can just keep the current mortgage, your mortgage payments may go up, or may go down and will go up or down every time the bank of England base rate changes.

If you have less than 25% equity, as you do, you may find it difficult to get a new fixed term or a new mortgage (for BTL), but it is unlikely that your current provider will withdraw their mortgage as long as the rent covers the mortgage plus 25%

Rambosmum

And none of what you are asking is 'thick', when you don't know, you don't know and you are being responsible and finding out. This is the place for that!

G_M

If the mortgage runs out, then that means it is paid off and finished. The property no longer has a mortgage on it so if it is sold for £127K the owner will have £127K in their pocket.

However if what runs out is a fixed term discount or fixed rate on a mortgage, then the remainder of the mortgage will run on a variable basis.

No need to sell.