Mortgage Shortfall 50k Can I offer Full and Final Settlement

Hi Everyone.

Not sure if post is in the correct location.

New member to this website and looking advice please.

I purchased a house with a friend as an investment back in 2007, 4 or 5 months before the house market crashed. When market crashed approx 100k was wiped of the value of the house. Took out and interest only mortgage for 15 year term and approx 4.5 years left.

First one or two years rent was covering the mortgage, but since then we have always had a shortfall on mortgage and been paying shortfall ourselves every month of about £200.

We were always hoping that the house would rise to the mortgage value, but that is not the case or will be the case even at the term end date, we will still have a shortfall of 30k/40k. We thought we would keep and pay the mortgage with hope of the rise in value as our way to get out of it. Approx shortfall now is 50k/60k.

I do have my own house, with some equity and have two dependent children and been recently divorced in the last year, (which has been going on 4 years or more) one of my children live full time with me and the other 50% of the time.

I am in full time employment and my mate who i bought house with is self employed and always has money problems and sometimes cannot even afford to put extra money into account to cover shortfall in mortgage.

Am i delaying the inevitable and just kicking the tin down the road, as i do not have the shortfall or will be even close to it?

I was wondering about this full and final settlement that someone has advised me to do.

Speak to the mortgage lender, who does not exist any more as they were a sub prime lender (i think). We have asked owner of debt to give us a better deal, give us a new mortgage or extend the term and all the answers are "No"

We are not in arrears at the minute, but we did miss a few payment 3 years ago, but we are up to date. I do have some credit card debt and a car loan, which i always pay and never miss.

Recently tenants have moved house and house is a complete mess, needs new kitchen, new doors, new bathroom, new everything and it is just putting money into a bottomless pit. Be better burning money as i would at least get heat from it.

Q. Do i approach lender now and look for full and final settlement, or do i have to be in arrears and house repossessed before i do this.

Q. What happens at the end of the mortgage term and i dont have the shortfall?

Like i said earlier, am i just kicking this tin down the road and eventually going to have to for full and final then. Any help or advice would be brilliant. The stress of this house have been worrying more for years.

I have never missed a payment on anything in my life (except this house), always paid for everything and never lived above my means, would only buy what i could afford to buy.

Thanks in advance.

G
«13

Replies

  • [Deleted User][Deleted User] Forumite
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    Newbie
    Presumably the property is in joint names wiuth your mate ?

    I'm not sure banks go for full and final settlement, why would they.

    You or they will sell at a loss and chase you for the difference. They may also put a second charge on your existing residential property to protect the shortfall so in the event you sell they get their money.

    Its not a great situation all round tbh. If I was you I'd get mate and do the repairs to the property yourselves and put it back on the rental market until things are better price wise,
  • Thanks for reply.

    House is still going to be approx 30k shortfall when mortgage expires in 4.5 years.

    You're right it is not a good position to be in and i have been for the last 10 years.

    not sure what my options are, i will not have 30k in 4.5 years or even 15k if i split with my mate.

    It was advice i got from a mortgage adviser and CAB to offer the full and final settlement option and see what the bank says. The lender does not even exist now.

    Its a nightmare that just keeps getting worse
  • StopItStopIt Forumite
    1.5K Posts
    What lender is it?


    Please don't say Northern Rock because the chances of an F&F with NRAM are...well, Bob Hope comes to mind.


    Otherwise yes, once the house is sold, the debt becomes an unsecured debt like any other, and depending on the creditor, would be possibly settled with an F&F.


    One to get advice on once the sale goes through.

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  • Lender is TMB

    What is NRAM
  • National_DebtlineNational_Debtline Has MSE’s permission to post for company Organisation Representatives - Private Messages may not be monitored
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    Hi Genoff13 and welcome to MSE,


    I think it is unlikely the bank will consider full and final offers on a mortgage - it is not something I hear of really, especially when it is up to date, so no risk of repossession and 4.5 years left on the term. I think it may be worth speaking to an independent mortgage broker (be careful of fees). You could discuss whether switching it onto a repayment mortgage for the last 4.5 years, to minimise the shortfall, would be worthwhile and affordable.


    If you cannot do anything and the mortgage term ends and you have no ability to pay the shortfall/ re-mortgage then the property would be repossessed and sold. You and your friend will then be liable for the shortfall (as BBH123 said). You could try and negotiate a full and final offer then - if you have a lump sum - or negotiate monthly repayments. You could consider other options as well but need to be careful how much you risk your residential property. Good luck,


    Laura
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
  • StopItStopIt Forumite
    1.5K Posts
    genoff13 wrote: »
    Lender is TMB

    What is NRAM


    Northern Rock Asset Management. The company that picked up the old NR mortgages when they went bust.


    Also, http://www.t-m-b.co.uk/


    Is this the company? They're not bust. They were a brand of HBOS, now owned by Lloyds Banking Group. Once the shortfall is realised, it'll be Lloyds/Halifax asking for the money.

    In debt and looking for help? Look here for the MSE Debt Help Guide.
    Also, If you need any free and impartial debt advice, the National Debtline, Stepchange, and the CAB can help.
  • Cheers StopIt

    I was under the impression that they dont exist and are unable to offer any deals or options, becasue TMB dont do mortgages any more.

    What are Lloyds llike to deal with.

    Does not look like there is any light at the end of this tunnel.

    Nightmare just keeps getting worse
  • StopItStopIt Forumite
    1.5K Posts
    genoff13 wrote: »
    Cheers StopIt

    I was under the impression that they dont exist and are unable to offer any deals or options, becasue TMB dont do mortgages any more.

    What are Lloyds llike to deal with.

    Does not look like there is any light at the end of this tunnel.

    Nightmare just keeps getting worse
    They no longer offer mortgages under that umbrella.


    You can however apply for a Re-mortgage with Halifax or Lloyds and switch over to them.


    Read the site link I gave you, there's an overview there.

    In debt and looking for help? Look here for the MSE Debt Help Guide.
    Also, If you need any free and impartial debt advice, the National Debtline, Stepchange, and the CAB can help.
  • How can i apply for a re-mortgage when the house is valved at 60k and mortgage is 120k?

    Thanks
  • silvercarsilvercar Forumite, Ambassador
    44.8K Posts
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    genoff13 wrote: »
    How can i apply for a re-mortgage when the house is valved at 60k and mortgage is 120k?

    Thanks

    So not only 60k shortfall, but that represents 100% of current property value!

    Whereabouts in the country is this?

    Short answer is that you don't have many options.

    Either wait till the mortgage term is up and hope property has increased in value or negotiate at that time or hand the keys back and walk away now.

    I'm not sure I would be willing to spend any money on the property without feeling confident that it will increase in value.
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