Voluntary Repossession Query

CharlieR1008

Wonder if anyone can offer some advice, or has been in a similar situation

My partner owns a house that we have been renting out as we couldnt sell due to negative equity. We have since bought another house, which is a shared ownership mortgage. Renting only just covers the mortgage on the house my partner owns, on an interest only mortgage - we cant afford to pay any more, and the house is in an awful area where prices are just going down, and is just costing us more and more money for repairs and upkeep. The current tenants have moved out so we now have no rental income to cover the mortgage. Carrying on renting is an option, however we didnt change the mortgage over to buy to let as the interest rates were going to increase so much, so we feel its risky for us to carry on doing this, especially when our local authority has introduced landlord licensing in the area and the mortgage company could find out we are renting it out..

We need to get rid of this house, its a constant worry and debt and we have a baby on the way, so we are considering voluntary repossession, and seeing if we can come to some arrangement on the shortfall (which is about £35k!) however I am worried how this will affect this shared ownership mortgage. There will be no, or very little, equity in the shared ownership property.

Any advice appreciated (sorry for the long post.....)

Mortgage_Adviser

I presume you already own that other shared ownership property? Why would anything affects it, unless you plan to staircase in a near future?

Also. the rental property... Hav you considered to rent it on a romm by room basis to increasethe income from it? Unless it is a sudio.

CharlieR1008

Hi

We have a shared ownership mortgage so i wondered if we could be forced to sell that property at some point to repay the shortfall on the other house as its in joints names. The negative equity property is just in my partners name.

Renting out as studios wouldnt be an option.

armchaireconomist

Feel for your situation, unfortunately they're going to want to recover that £35,000 one way or another. If they repossess they'll sell at auction which likely won't make as much as it's worth, and then they'll chase you for the outstanding balance,


Have you considered selling the shared ownership and moving into the offending property? You could then switch to a regular mortgage and pay down the balance.


Otherwise I'd continue renting and hope the prices go back up. I understand why you want to "cut your losses" and be done with it, but without the cash you're going to cause more worries I think.

CharlieR1008

Moving back to the other house isnt really an option at the moment, but we could just continue renting it out and run the risk of the mortgage company finding out. The area is so bad now that getting decent tenants is a nightmare, but at least we would be covering the mortgage payments for now..

Getting rid of the house is ideally what we want to do - we know we we will need to pay the shortfall, and have also considered speaking to the mortgage company to see if we can try to sell for less than we owe, and making arrangements with them for the shortfall. Maybe this is a better option than voluntary repossession if we can get more for the house, but I know they dont have to agree to that.

Thrugelmir

CharlieR1008 wrote: »

Getting rid of the house is ideally what we want to do - we know we we will need to pay the shortfall, and have also considered speaking to the mortgage company to see if we can try to sell for less than we owe, and making arrangements with them for the shortfall. Maybe this is a better option than voluntary repossession if we can get more for the house, but I know they dont have to agree to that.

Bite the bullet before the whole situation spirals out of control. If your are struggling now while interest rates are low. Then the future may hold little respite. Speak to your lender.

National_Debtline

Hi Charlie,

CharlieR1008 wrote: »

Hi

We have a shared ownership mortgage so i wondered if we could be forced to sell that property at some point to repay the shortfall on the other house as its in joints names. The negative equity property is just in my partners name.

Renting out as studios wouldnt be an option.

If you hand the keys back, or it is repossessed, the shortfall owed is an unsecured debt. You can make offers to clear this gradually based on what you can afford, and sometimes do a deal to pay a set amount over 5 years with the lender and then ask them to write the rest off, but all of this is at the lenders discretion.

The lender can consider taking county court action to sue for the money owed, resulting in a CCJ and that can be secured against the shared ownership property as a charging order. Charging orders are very common and mean the debt will 'sit' on the house until it is paid or you sell - whichever is first. It does not mean you will lose your home. As long as you partner gets involved in any court process and pays instalments, she can prevent the lender attempting to apply for an order for sale on your home (which is very rare anyway).


Your partner could try speaking to the mortgage lender about the situation. If they give permission for you to let the property (even on a residential mortgage) that could be another temporary solution. Good luck,


Laura
@natdebtline

CharlieR1008

Thank you, thats helped a lot - we will speak to the lender and see what we can do

silvercar

How did you manage to buy a shared ownership property when one of you already owned another home?

CharlieR1008

At the time we had a rental income to cover the mortgage on the property my partners owns

silvercar

CharlieR1008 wrote: »

At the time we had a rental income to cover the mortgage on the property my partners owns

I thought the rules of shared ownership meant you weren't eligible if you owned another property.