Negative equity & leasehold property

continualdiamond

Not sure if this is the right place so sorry if it isn't.

I'm stuck and feel like I am in complete melt down and have no where to turn too or anyone to ask for advice or just opinions really.

Sooo situation is, bought a leasehold flat in 2006 for £82,000 on 100% mortgage. Repaying the mortgage is not a problem, can afford it and never missed a repayment.

Problem is, it's now too small as have 2 children and it's in negative equity. It was fine when we had our 1st baby as it's got 2 bedrooms and before I fell pregnant with my 2nd it was up for sale but had no offers. Issues were always the same, kitchen too small and lease too short (now has 59 years left).

We cannot afford to extend the lease (not had a quote but expect it to be around £10,000 from quick look I've done online). Flat is worth roughly £78,000 and been told to look at selling at £75,000 to a cash buyer.

Issue we have is the boiler needs replacing as it is 40+ years old, the hot water tank is separate and stopped working in Feb so the boiler has been fixed up to now heat the water as well. Both of these are located in the 2nd bedroom which is my eldest daughters bedroom.

Our credit rating is low (in the 300's) and a quote for a new boiler is £2,300. We got refused credit today and are looking at 34% credit to replace the boiler.

What on earth do we do???? The longer we stay in this property the shorter the lease gets obviously which then drives the value of the property into more negative equity, yet getting credit at 34% to get a new boiler is crazy and I feel like it's wasted money as need to move yet will then still be paying off a boiler in a property we no longer lived in.

Our 2nd daughter needs to move into the 2nd bedroom soon as replacing the boiler = more floor space and obviously the new one will go on the wall.

I'm in a complete mess about money every single day. My husband seems to just bury his head in the sand and I feel like it's just all too much for me to try and deal with, especially as on maternity leave as 2nd daughter is only 5mths old.

What would people do? Should I go to citizen advice?

AdrianC

What's the score with the mortgage?
Is it repayment? If so, how much do you still owe?
Is it interest-only? If so, do you have an endowment policy or anything else in place for saving towards repaying it?

Your best bet is to get out as cheaply as you can. If you end up owing a couple of grand once it's sold to a cash buyer to refurbish, then that's your cheapest option.

Talk to your lender asap - ask about putting any remaining debt onto some kind of repayment scheme. The lender doesn't want to be stuck with a short-lease flat with an ancient and knackered boiler, either, so they'll be quite happy to figure some kind of exit strategy.

I have to admit that I'm surprised anybody would give a 100% mortgage on a place with only a 69yr lease, even in 2006, but a lot of things about the mortgage market around then still surprise me...

economic

i think you should stop having kids until you are financially secure.

dc197

If you have a repayment mortgage, double check the numbers. To be in negative equity your balance would need to be more than 78k outstanding, which means you have only paid off 4k in 10 years. Is that right? Is doesn't sound like a lot.

continualdiamond

economic wrote: »

i think you should stop having kids until you are financially secure.

How rude.....We've got 2 kids, 2, it's hardly loads but if it reassures you we always planned on having 2 children.

I haven't given loads of information for you to judge that having children was a bad decision, things happen in life that are sometimes out of our control like redundancy whilst being pregnant.

Yet you jumped in feeling that out of everything I mentioned having children was the issue.

continualdiamond

AdrianC wrote: »

What's the score with the mortgage?
Is it repayment? If so, how much do you still owe?
Is it interest-only? If so, do you have an endowment policy or anything else in place for saving towards repaying it?

Your best bet is to get out as cheaply as you can. If you end up owing a couple of grand once it's sold to a cash buyer to refurbish, then that's your cheapest option.

Talk to your lender asap - ask about putting any remaining debt onto some kind of repayment scheme. The lender doesn't want to be stuck with a short-lease flat with an ancient and knackered boiler, either, so they'll be quite happy to figure some kind of exit strategy.

I have to admit that I'm surprised anybody would give a 100% mortgage on a place with only a 69yr lease, even in 2006, but a lot of things about the mortgage market around then still surprise me...

Part repayment, part interest only. I rang our lender last week about it who was useless, couldn't even tell me if I could sell it in negative equity, they told me I needed to go to a mortgage advisor.

Looking back we shouldn't of bought the flat, but we're 1st time buyers and desperate to get out of a caravan that we were renting as my now inlaws found us the caravan as they wanted us out of their house (no I'm not horrible I met my now husband online at aged 19 and moved from Australia when I was 21 and moved in with them, I'm 34 now).

continualdiamond

dc197 wrote: »

If you have a repayment mortgage, double check the numbers. To be in negative equity your balance would need to be more than 78k outstanding, which means you have only paid off 4k in 10 years. Is that right? Is doesn't sound like a lot.

It's right as it's part repayment, part interest only. Owe just over £80,000 as opening balance was around £85,000 as higher lending charge on it.

pathtofreedom

Are you wanting to buy somewhere else, or just get out and rent asap? As others said you need to work out just how much of a loss you can take, as if it is between pay for a new boiler, or just sell it at an auction tomorrow for x amount then have the boiler money to pay back the negative equity then that might be simplest. You'd still need a deposit to rent somewhere else, even though that won't be as expensive as to buy. Don't forget solicitor selling costs, estate agent / auction costs as well though when you're doing your sums.

Are you already on interest only or could you see if you can switch onto that because of the redundancy? Did you have any income protection / ppi which might help?

continualdiamond

AFF8879 wrote: »

You could speak to your solicitor about an arrangement where you would sell the flat at its full market value, and the extra funds would be used to extend the lease. I.e effectively buyer ends up paying for the extension. Worth a shot, though you'd need to find a buyer who loves the flat enough to go through what I hear is a lengthy process.

This was the estate agents suggestion last year. It needs a new kitchen and this is what puts people off. Every viewing people said they loved the space and garden etc but the kitchen is too small. Only positive i's as it's ground floor other the kitchen can be extended but people can't see this as just see how old and pokey it is.

TBagpuss

How old are your children? And are you and your partner both in work now?
Would it be possible for your children to share a room short term while you save to extend the lease & replace the boiler?
Do either of you have family who might be able to lend you money for a new boiler?

dancingfairy

So to summarize -house too small, 80k left on mortgage, worth approx 75k? Needs new boiler.

You think 10k to extend lease ? How much would place be worth then? Is this an option to sell and extend lease at same time?

Other than that -you could try auction with minimum reserve but would need to agree a plan to address shortfall with lender.

Could you live there for another couple of years? Could your children share a room? Is there anything else you can do to make living arrangements easier? Are there other options for a smaller, more compact boiler that don't eat into living space?

Could you rent house out and rent another place? I think you'd need to get the boiler sorted before renting though.

Df