Negative equity - is voluntary repossession and BR the solution?

Emma1981

Hello everybody,

I'm in need of your collective wisdom to help me sort, once and for all, a frustrating situation I'm in: should I hand back the keys and go bankrupt to sort my negative equity problem?

A property I bought in 2006 with my ex partner is in negative equity (it was bought at the peak of the house price boom, on a near-prime 100% mortgage with Morgan Stanley... yeh, I know, I was young and naive!)

We split in 2009, he stopped contributing to the mortgage and I carried on paying it in full (on interest only) while I carried on living there with a lodger.

I now live with a new partner in his home (he has equity and small mortgage and we have no financial links). But I have carried on paying the mortgage on my property - there is no late payments or arrears.

Wanting to do the right thing, I have placed my empty property up for sale and have been trying to negotiate a shortfall sale agreement with the lender, but they're not being very helpful. As a result, the property has been on the market for four months with hardly any viewings, as the price is much too high as I'm trying to claw back as much money as poss to minimise the shortfall - which is probably about 25K.

I'm paying about £700 per month on the mortgage, council tax and maintenance charge on a property I'm not living in, and now, as I'm expecting my first child with my new partner in July, my resolve to 'get rid of the millstone round my neck' ie the flat, has been catalysed by the thought of my impending reduction in pay from being on maternity pay.

Plus, my ex partner isn't helping at all with the associated costs involved with any potential sale (estate agent's fees, conveyancing fees, all the stress and work involved with selling a property...)

I've run out of patience with it all - so is voluntary redundancy and then bankruptcy my best/simplest option?

If so, how should i do it? (Just stop paying the mortgage, then speak to mortgage company about voluntary reposession, then file for BR?)

Should I inform my ex partner about my plans? Seeing as he has had no interest at all in the property while I've been faultlessly paying the mortgage for the past seven years.

Do I need my ex partner's consent/signature to start voluntary repossession?

Will my repossession/BR affect my CURRENT partner at all, and his equity? I've not really been contributing to his household expenses, just bits and bobs here and there.

Sorry for long post, but hoping someone can advise. Thanks for your time.

Silvertabby

Would renting out the property be an option? You'd need to get the agreement of your mortgage lender first.

Barny1979

Bankruptcy should be the very last resort! I would look to rent out the property.

w00519772

Do you know what rental income you would get from it? Maybe you could rent it out for a few years with the aim of building equity

Emma1981

It's probably worth about £650 p/m on the rental market, but I've owned it for 10 years now and I doubt I'll ever recoup the £25k negative equity on it whilst also servicing the mortgage payments.

Plus, as it's on interest only at the moment, I definitely couldn't afford the repayments on a repayment mortgage.

And, as it's still in mine and my ex-partner's name, I couldn't/don't want to remortgage it in my own name (a - because i'd be taking on his share of the negative equity, for what? and b - because i wouldn't be able to refinance £147k in my own name.)

Durban

I would try and rent it out if you can, still on an interest only basis. Talk to a mortgage broker regarding your options. Over the years you should recuperate the negative equity. Bankruptcy is really not a good idea.

luvchocolate

Hi I have to disagree with all the posts about renting it out, I can understand you want this to be done with.
If you stop paying the mortgage they will go after you ex for payment, if you go BR and the property gets repossesed and there is a shortfall your ex becomes liable for debt, The shortfall will fall into your B.R whenever it is sold.
There are many threads on here about similar situations to you.

Read everything you can on the welcome thread and follow the links for info.
Contact a debt free charity for help and advice.

I have been in your shoes but with 3 properties and a cheating lying ex....keep strong

Barny1979

If it is £25k then your ex will be liable for £12.5k, so that could be managed with a loan, with payments less than your mortgage payments.

Emma1981

Thanks for replies... I am just at the end of my tether with it; I'm the only one who seems to care about trying to do the right thing with it - the mortgage company aren't interested in helping, and my ex definitely isn't.

Why should it be left to me to liaise with (and pay) solicitors, estate agents, and deal with potential tenants just to give him an easy ride, and also service the payments on a financial product that shouldn't have even been sold to two, young first-time buyers ?. Christ, we didn't even have a deposit! 100% mortgage and the developer paid the 'deposit'. Like I said, total naivety on my part...

I've just had enough ��

w00519772

Say you earn £200 PCM for rent. That equates to £2,400 per year. Your property could also increase in value. Best case scenario is that in a few years you may have built equity. The worst case scenario is that the property will fall more in value.

I do sympathise with you with regards to your ex. If he/she has just washed his/her hands of the mortgage (and he/she is named on the mortgage), then that is not on.

I am not a bankruptcy expert, however I do remember "Can't Pay we'll take it away" where one of the bailiffs says: "People need to realise that bankruptcy is not a joke. It cripples you".

silvercar

Barny1979 wrote: »

If it is £25k then your ex will be liable for £12.5k, so that could be managed with a loan, with payments less than your mortgage payments.

The lender can chase either party for all the debt. The debt isn't split between the 2 borrowers.