Tenants

menageamoi

hi
I'm just beginning the process of going BR and checking a few things out.

The main reason I'm going BR is because I have a huge mortgage of £1200 pm on a property that I no longer live in. I bought the house for £285k in 2008 and now I'd be lucky to get 250k. The house has been on the market twice with little interest - it's on sale again now - same story.

I live with my ( now ) wife in her house and over the past 5 years we've been scrupulous about me not making any direct payments in relation to her mortgage which is just in her name.

I lost a well paying job in 2011 and in 2012 I defaulted on the mortgage for a while and through CAB negotiated with the building society for lower payments for a while but after 6 months they stopped that. I managed to find the money to keep paying the full mortgage from a legacy for the next two years and then 3 years ago I got tenants in the old house ( through a good agent) but their rent still only covers half the mortgage so I've been trying to find £600 a month since then. I only earn about £1000 a month but I cashed in some pensions to pay off the arrears and make the balance payment after the rent each month. But that money is all but used up now and from January I know that I can't afford the mortgage at all so I've gone to CAB again and they've advised BR. I'm relieved really - I just want shot of the thing now and I have a new life elsewhere. ( CAB have also advised that they think that the OR won't see me as having a beneficial interest in my wife's house)

So - to cut to the chase. My questions are;

* Should I leave the house the market while I'm declaring BR ? Even if it does sell I'll owe the best part of 45k.( including other debts) How would the OR view that?

* Should I give the tenants notice before I go BR? The house will eventually be repossessed anyway and I assume the building society won't want tenants in there once I effectively default again. But if I do that then, I can't show the £600 rent as income - even against far more (£1200) mortgage expenditure - I don't want the OR thinking that I've made myself deliberately more indebted. But I also want to play fair with the tenants as far as I can.

Any advice please?

silvercar

Should I leave the house the market while I'm declaring BR ? Even if it does sell I'll owe the best part of 45k.( including other debts) How would the OR view that?

If the price achieved isn't enough to clear the mortgage then you will need to lender's consent.
If you sell it, you have to pay legal fees and estate agent fees. If the lender repossesses and sells, the fees fall into the shortfall.

Should I give the tenants notice before I go BR? The house will eventually be repossessed anyway and I assume the building society won't want tenants in there once I effectively default again.

Upto you. If you give them notice or the lender, they will get 2 months+ notice. It may be kinder to let them know what is happening.

...assume the building society won't want tenants in there once I effectively default again. But if I do that then, I can't show the £600 rent as income - even against far more (£1200) mortgage expenditure -

The OR will not allow you the mortgage costs as an expense for a property that you don't live in. So you won't have enough money in your budget to pay the mortgage. If you go bankrupt you will end up without enough money to pay the mortgage, so once that decision is made, you have nothing to gain by continuing to pay a mortgage on a property you don't live in.

menageamoi

silvercar wrote: »

The OR will not allow you the mortgage costs as an expense for a property that you don't live in. So you won't have enough money in your budget to pay the mortgage. If you go bankrupt you will end up without enough money to pay the mortgage, so once that decision is made, you have nothing to gain by continuing to pay a mortgage on a property you don't live in.

Thanks. So to be clear, if I gave the tenants two months notice when I put the BR application in ( say 2 January - I don't want them to have to find somewhere before Christmas!) then I can declare both the rental income and the mortgage outgoing on the form but explain what I did and why I did it to the OR in the interview?

skintandfat

You will need £700 or so to pay BR fees


If I were in your position I would not let the tenants know until you were BR.
Stop paying the mortgage now and use the money coming in to fund the BR.


It will be next year before the tenants know and you won't spoil their Christmas

silvercar

menageamoi wrote: »

Thanks. So to be clear, if I gave the tenants two months notice when I put the BR application in ( say 2 January - I don't want them to have to find somewhere before Christmas!) then I can declare both the rental income and the mortgage outgoing on the form but explain what I did and why I did it to the OR in the interview?

My understanding is that the OR won't allow you the mortgage outgoing as an expense. So the rental income will be extra income for as long as it lasts.

If you hand back the keys (voluntary repossession) or the lender repossesses, then the lender will direct the tenants to pay the lender directly the rent, so you won't have the rental income either.

menageamoi

Thanks all - my wife and I have been discussing it this afternoon and we feel that although it's not nice to give the tenants notice before Christmas, if we do it this week then they have more than 3 months to find somewhere and then when I put in for BR in January then at least there's not the complication of people in the house when it's reposessed.

I'm also going to think about what skintandfat has advised about just stopping paying the mortgage (I'm using the last of my pension lump sum to do that at the moment) now and saving the money for BR ( inc the fee) .

Steven_from_scotland

I would just serve them notice now and tell them why you are doing it, stop paying your mortgage and any related bills and save any money that way, wait until the tenants move out then go bankrupt, when you have the or meeting there won't be any income from rent to put down and you should have been able to save a couple of months mortgage fees plus rent from the tenants to keep and spend as cash

menageamoi

Yes - thanks. That's exactly what we've decided to do.