Negative equity & leasehold property

pathtofreedom

dancingfairy wrote: »

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

It might be tricky to get consent to let if they are in negative equity, my mortgage provider wouldn't let me when it happened to me. The sums would really need to add up though to do that too, especially with all the tax changes, certificates, insurances needed, let alone covering voids and more ware and tear. You don't want to have to pay to rent somewhere and still subsidies this place, you'll end up hating the place even more.

AdrianC

Way back in your original post, you said...

Repaying the mortgage is not a problem

...now you tell us that part of the mortgage is interest-only, but you have no endowment or other investment in place to repay that when it comes due?

continualdiamond wrote: »

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.

Sorry, but you did say enough for people to make at least some assumptions about the choices and priorities you have made.

Just from what you've told us - you've been living in your flat for the last decade, watching the lease rapidly diminishing from dangerously short, past the point of unsaleability, as the renewal cost rapidly rises. The kitchen desperately needs replacing. The boiler desperately needs replacing. Your mortgage is relatively tiny, yet you are still in substantial negative equity. You are nearly half way into an unrepayable interest-only mortgage timebomb. Your credit rating is borderline toxic. Your husband doesn't either care or understand the situation. Your first child isn't three yet, and your second child was born only a few short months ago.

But that's a decision you have consciously made.

Now you need to figure out how to get out of this mess as inexpensively as possible.

Given the lack of support you're getting domestically, your least-worst bet is going to be to just bite the bullet and just sell it as a project to a cash buyer, and accept the debt that comes from it. If you walk away with five grand of debt, plus legal fees, that has to be better than taking potentially £15k of expensive finance then hoping for a rapid sale at a high enough price, while the repayments kill you through stress and your husband just ignores the mess, right?

Let's assume the lease renewal can be financially tied-in to the sale. That still leaves the kitchen and boiler. With a baby and a toddler in in the house, even if your other half is competent enough at basic DIY to replace the kitchen himself, I would presume the upheaval is not going to be acceptable, and there's still the question of funding even basic kitchen units and the boiler.

AdrianC

pathtofreedom wrote: »

It might be tricky to get consent to let if they are in negative equity, my mortgage provider wouldn't let me when it happened to me. The sums would really need to add up though to do that too, especially with all the tax changes, certificates, insurances needed, let alone covering voids and more ware and tear. You don't want to have to pay to rent somewhere and still subsidies this place, you'll end up hating the place even more.

Even if CtL is forthcoming, and the lease allows it, that's a really bad plan. The kitchen and boiler would still need replacing before the flat is lettable to tenants worth having. Then there's zero buffer for late/unpaid rent, damages etc.

Pixie5740

What a pickle. I don't think it's worth borrowing money at 34% APR to try and tart the property up. Talk with your mortgage lender to come to some arrangement about selling with negative equity and then price it to sell quickly to a cash buyer or put it up for auction.

If your mortgage lender won't agree to you selling whilst in negative equity then in your shoes I'd be tempted just to hand the keys back, walk away from the property and let your lender repossess it.

AdrianC

Pixie5740 wrote: »

If your mortgage lender won't agree to you selling whilst in negative equity then in your shoes I'd be tempted just to hand the keys back, walk away from the property and let your lender repossess it.

Even just the threat of that may be sufficient. It's certainly not an option to be taken lightly.

If they grant permission to sell, they end up with a debt owed by the OP.
If they don't grant permission to sell, they end up with the hassle and expense of court hearings and repossession, then the hassle of trying to sell a place with a very short lease and a knackered kitchen and boiler, then - at the end of it all - they end up with a larger debt owed by the OP.

If the lender are that unwilling to listen to reason and allow a voluntary, controlled sale, then while the OP's credit rating can't get a lot worse, the ongoing ramifications may well include having to consider bankruptcy.

Pixie5740

You're right, handing the keys back isn't a decision to be taken lightly. It's the doomsday option when negotiating with your lender has failed. I certainly wouldn't consider asking for CTL in this case because the property doesn't sound as though it's in any shape to be let out and the OP can't afford to be a LL.

Kynthia

You can't afford to stay there any longer. In 10 years you've only paid £5k off the mortgage yet you can't afford to change the boiler, maintain the place or extend the lease. The lease dropping means the longer you stay there the more you are losing in value, as you aren't paying enough off tge mortgage to offset the lease dropping.

I think you need to do everything in your power to sell, even at a big loss, as it's only going to get worse. Although you don't appear to be in debt I wonder if any debt charities would help advise you about how to negotiate with your lender and advise you on what housing option you can afford once you have sold.

sheff6107

You need to tell us why your credit is poor. CCJs? Missed credit card payments?

Things might not be as bad as you think. If you sort out your credit reports over the next 12 months you will be in a stronger position to take positive action.

You need to sit down with a independent financial advisor / mortgage broker. I have two friends who were in a similar position and with the help of a broker they now own another house and are renting out their old one which was in negative equity.

bouicca21

But if OP sells where do they go? In my experience a mortgage is cheaper than rent - but that may be a London phenomenon.

I don't understand why the toddler and baby can't share a room. And a financial makeover via a visit to the debt free board seems more important than moving.

AdrianC

bouicca21 wrote: »

But if OP sells where do they go? In my experience a mortgage is cheaper than rent

In simple terms of monthly outgoings, perhaps.

But that's forgetting that the OP is facing £10k+ of lease extension and £5k+ of kitchen and boiler replacement, cannot finance either of those, isn't putting anything at all towards the inevitable repayment of the interest-only part of their mortgage... and the property hasn't got enough space anyway for anything beyond the short term.