Strategic Repossession

Eponine

Hi folks,
Looking for advice on a weird one. Long story short - I moved into my house last year and have a standard variable rate mortgage. Paid small deposit- 10%.

Earlier this year an incident occurred around the property and rendered it temporarily uninhabitable. Insurance refused to acknowledge this incident as it did not happen on the property itself but on adjoining property owned by the local authority. I'm still homeless and having to pay rent on somewhere else while continuing to pay my mortgage. We're not likely to be able to return to the property before the autumn- very possibly later.

The incident has damaged the reputation of the property irrevocably and I will never be able to sell it. I had only planned to live there for a few years before selling up. Due to the incident I will never feel safe or comfortable in the property again anyway.

I'm taking care not to give away identifying details here!

Basically, if I stopped paying my mortgage, what's the worst that could happen? Is it worth it? Would any losses incurred be worth bearing for the sake of getting on with my life? Is strategic repossession ever a good idea or are the potential losses too serious?

AnotherJoe

Never is a long time.
Even if you were correct, which I doubt you are, because if you were right, why so mysterious, what's to lose, you could rent it out could you not?

Eponine

Even renting would be pretty tricky due to the nature of what's happened. Plus it's not in a very populous area.

ACG

There is nowhere near enough information.
You would assume if someone elses property has damaged yours, they/their insurance would have to put it right - ie safe and in a position where it could be sold and/or or you feel safe in there. If not, then surely it would need to be knocked down and rebuilt at their expense?

I would get legal advice as what you are suggesting will hinder you significantly for years to come, along side however much you have lost financially etc etc.

Eponine

Thanks for your reply. Yes, I've had some legal advice and will pursuing a claim against the local authority, however I'm told that it is likely to take many years and is unlikely to compensate us adequately for what's happened. I suppose I'm thinking in terms of moving on with my life as quickly as possible. Everything's been on hold (and costing a fortune) for months. It could be worth losing out financially if it means walking away from a long-term problem and being caught up with this for years. (The mystery is cos I don't want to be identified and the situation is a really unusual one that was reported in the media.)

Mr.Generous

I think your trying to say house value and desirability affected rather than physically damaged, like living next door to Fred West or something. If your thinking of a strategic repo to avoid negative equity it doesn't work.

What you have to take into account is that a mortgage is a loan secured against a property, not a hire purchase agreement. If your saying property is worth less because of what happened and is unsaleable effectively this scenario might occur.

You walk away with (say) a mortgage balance of £100k but house now sells for £70k. Mortgage company says thanks for the £70k they raised and continues to hound you for the remaining balance. You borrowed £ from the lender, its money they want back. Any shortfall and they don't just leave it.

AFF8879

Has the incident caused physical damage to the property and if so what is the cost/timeframe of making it habitable?

If it's emotional damage/distress that would prevent you going back then speak to your bank - I guarantee they would rather let you rent the property out than default on your mortgage.

It's hard to give good advice without any details but a mortgage default could potentially ruin your life for a LONG time, so please think very carefully about this.

[Deleted User]

Op - if you can't sell the property then neither can your lender. If they can sell it, then you could sell it for more. Either way, you end up worse off.

Deliberate repossession is never the right solution.

Eponine

That was my understanding too Mr G- it's helpful to have it confirmed as people have been advising me otherwise.

I'm actually not sure it would sell readily at all in the near future, not even at auction at a low price. I guess that just means I'd potentially be storing up problems for the future- for when they did eventually manage to offload it. No matter what happens, this is a long-term problem whatever way I look at it.

Mr.Generous

they wont off load it for ridiculously little money, they want repayment and they are obliged to get the best price they can if they repossess. However they also won't hold onto it indefinitely, they appoint an agent (or two) and take the agents advice over the valuation. If the market price is low because of the circumstances or history of the property then so be it, they will value it low. Next door to something dreadful / tragic has a lot less impact than being the actual house, I wouldn't be too worried people have short memories, new buyers coming into the country all the time. Ride it out if you can.

Eponine

The thing is that I will at some point in the next few months have to default on my mortgage as I can't afford to pay for two places and the property is currently uninhabitable and will be for a few months.

N.B: insurance policies don't pay out in every eventuality when a property is uninhabitable. It very much depends on the circs.

I am awaiting a response from my mortgage company re: the road ahead. There is always the chance that they'll offer a break pending resolution of the short-term habitability problem.

I guess the long term issue about living in a dodgy property or struggling to sell it/ rent it out is pretty complex. It could be worth just riding it our until the compensation claim against the LA is resolved. If the damages awarded are sufficiently decent, they might offset any loss incurred through selling very cheaply at an auction.

The other option is to ask the LA to buy the property but I'd be surprised if that's successful (the situation that has arisen is almost certainly their fault and they are aware that they'll be awarding damages of some sort but how much they're banking on is anyone's guess).

You've all crystallised the issue in my mind re: repossession and that it's best avoided. It might be inevitable but I can't see the mortgage co hurtling towards this option given the circs. Ultimately they want their money and they can't get it from someone who doesn't have any (at least in the short-term).