Negative equity problems

Comms69

Owain_Moneysaver wrote: »

Not necessarily. They are covering their costs at the moment. - Just about. And it's not yet clear if that includes tax. and at anyrate, there is no sinking fund. There may be opportunity to reduce costs, eg by self-managing rather than using an agent - possibly, but risky. , or by spending more in the short term on upgrading fixtures to reduce repair bills - again possibly, but better than paying off equity? . Or there may be an opportunity to increase revenue, eg by upgrading the property to attract a higher rent, or letting by the room as an HMO rather than a single house. - again, possibly, but more risky, HMOs need investment to meet standards and most places have a rent cap (unofficial) which may be where the OP is at

The concern at the moment appears to be one of potential future personal liability for business debts - This is a personal debt; it is not a business debt . Even if the business is not put into a limited company, a proper partnership agreement should be drawn up. The present informal arrangement cannot be relied upon if the other partner is financially flaky.

Like I said it's not possible at any rate to put into a ltd company. A partnership agreement only works when it is enforceable and the OP is worried that her ex will go bankrupt....

teddysmum

I feel for the OP, having been in a similar situation and my life was hell for a long time. However, 'luckily' I wasn't debtor; these beingmy husband and a greedy business partner who milked the business,then declared bankruptcy (knowing he would get a huge inheritance not long after the period ended).


As I wasn't in debt , all my savings and contributions from our parents were used so I could buy the other half of the house in my name,so saving our home, but a councillor did promise that should the worst happen, at least myself and two young sons would be rehoused by the council.


It was hell at the time, but as the bank undermanager, who'd been through similar, said, things do get better and eventually you rarely think about it unless reminded. We went from fully owning a house and substantial savings (on my part) to no savings and no other assets, with my husband out of work, followed by my losing my job because of staffing excesses, but it was 38 years ago and we are still here, even managing to build up some savings, so OP , hang in there.

BlackBird75

I'm curious how the OP was granted a residential mortgage, when she already had a share in 3 BTL properties in negative equity?

OP doesn't say how much equity she currently has in the house that she lives in.

Personally, if I was in the OP's position, I would be thinking about selling the house I live in and putting any money left safely "outside the system".

I would then rent somewhere to live. If the worst happens with the BTL houses, you could just declare bankruptcy yourself.

Does the OP have a relative she could discretely give some money to, in order for the relative to let a house to her?

Alternatively, the OP could just carry on as is. Assuming the BTL mortgages are all capital repayment, then they will eventually get back into "positive equity" - i.e. the rents charged will pay off the debts. The BTL mortgage lenders don't seem that concerned, so I don't see any real need for the ex husband to declare bankruptcy.

Sorry to say, but this just shows how debt based our society has become. Especially in the last 20 years etc. There is a generation growing up now who will only have experienced debt as normal.

Pixie5740

Owain_Moneysaver wrote: »

Not necessarily. They are covering their costs at the moment. There may be opportunity to reduce costs, eg by self-managing rather than using an agent, or by spending more in the short term on upgrading fixtures to reduce repair bills. Or there may be an opportunity to increase revenue, eg by upgrading the property to attract a higher rent, or letting by the room as an HMO rather than a single house.

The concern at the moment appears to be one of potential future personal liability for business debts. Even if the business is not put into a limited company, a proper partnership agreement should be drawn up. The present informal arrangement cannot be relied upon if the other partner is financially flaky.

1) The OP and her ex husband have the mortgages. The mortgage lender(s) is not going to allow the ownership of the properties to by transferred to a limited company when there are mortgages in the OP and ex's names secured against said properties.

2) The limited company would find is nigh on impossible to get lending in order to pay off the existing mortgages because there is no equity and by the sounds of it neither the OP nor the ex has the capital to pour into the limited company to use as deposits.

3) Transfer of ownership would trigger SDLT liability....at the higher rate of the current market value of the properties.* Where is the money for that going to come from?

*Under Section 53 of the Finance Act 2003 for transfers between an individual and their company the chargeable consideration for such transfers will be not less than the market value at the effective date, of the property transferred, irrespective of the consideration (or lack of it) actually passing. I think that's right, maybe SDLT Geek or 00ec25 could confirm?

BlackBird75

teddysmum wrote: »

I feel for the OP, having been in a similar situation and my life was hell for a long time. However, 'luckily' I wasn't debtor; these beingmy husband and a greedy business partner who milked the business,then declared bankruptcy (knowing he would get a huge inheritance not long after the period ended).

I know of a case where someone tried to pull a trick like this.
Unfortunately, the person standing to lose out decided that the legal system wasn't the one to follow.
It ended badly for all concerned.

Pixie5740

BlackBird75 wrote: »

I'm curious how the OP was granted a residential mortgage, when she already had a share in 3 BTL properties in negative equity?

It depends how long ago the OP got the residential mortgage and how tight lending regulations were at the time. Providing the rental properties are at least wiping their own faces the BTL mortgages probably wouldn't be taken into account.

OP doesn't say how much equity she currently has in the house that she lives in.

BlackBird75 wrote: »

Personally, if I was in the OP's position, I would be thinking about selling the house I live in and putting any money left safely "outside the system".

I would then rent somewhere to live. If the worst happens with the BTL houses, you could just declare bankruptcy yourself.

Does the OP have a relative she could discretely give some money to, in order for the relative to let a house to her?

Nice try. giving away assets does not protect them from creditors and could land the OP in prison.

BlackBird75 wrote: »

Alternatively, the OP could just carry on as is. Assuming the BTL mortgages are all capital repayment, then they will eventually get back into "positive equity" - i.e. the rents charged will pay off the debts. The BTL mortgage lenders don't seem that concerned, so I don't see any real need for the ex husband to declare bankruptcy.

Sorry to say, but this just shows how debt based our society has become. Especially in the last 20 years etc. There is a generation growing up now who will only have experienced debt as normal.

£5 to a charity of your choice says the mortgages are interest only. Mortgage lenders don't like to repossess properties, it's an expensive, time consuming business. As long as the mortgages are getting paid they will leave well alone. However, if these are interest only mortgages as I suspect they are, the properties will eventually need to be sold in order to repay the capital. Hopefully by the time that day comes the properties will no longer be in negative equity but it is something the OP will need to think about.

saajan_12

LatinDancer wrote: »

My ex husband and I jointly own 3 BTL properties which were purchased in 2007/8 (not great timing!) Currently they just about cover mortgage & expenses with rental incomes.- please give actual figures: note mortgage payments are not tax deductible, you get mortgage relief on mortgage interest (or a portion of it if you're higher rate) and nothing on capital repayment portions. So even if you have £0 in your bank at the end of the month, you may still make a profit for tax calcs.

We divorced and settled in 2014 however I now discover that he has 'lost' the money he got in the settlement deal and has very little income, assets or savings. After the divorce I bought a house for myself and two daughters. - why were the BTLs not included in the settlement? even if you each got 1 BTL to minimise the financial likes between you.

I'm concerned about the possibility of the expenses in the BTL properties increasing with higher interest rates, and other costs, and that my ex will make no financial contributions. Would a possible solution be to change the ownership from joint owners to tenants in common? Would this mean that he is responsible for 50% of all liabilities? - No, you're each liable for 100% of the mortgage as a joint & several borrower. There are no shares, the lender can come after either of you for the full amount. As for other expenses, unless the council forced works, its upto an owner to carry out and pay for works. You'd have to agree with ex how to split costs and what costs are necessary.

I envisage everything I've worked for being taken to cover the costs of negative equity whilst my ex husband declares bankruptcy and pays nothing. I'm sure that's his long term plan as he is very revengeful and bitter.- if he's looking at bankruptcy and this affects the joint mortgages, this may affect your credit.

How can I best mitigate me having to pay for his foolishness?

Thank you in advance 🙂

LatinDancer wrote: »

All 3 negative ... I'd love to gift them all to him. Is that even possible?

The mortgage would still be in joint names, and the lender wouldn't willingly reduce the people the can hold liable. If you and he can find enough money to overpay the mortgage

ThePants999 wrote: »

I don't understand the "sell the properties" answers.

The options on the table are to keep the current arrangement and RISK being financially crippled, or to sell them and DEFINITELY be financially crippled. Why the hell would you pick option 2!?

Because all states of 'financially crippled' are not the same. Selling means a fixed £x to find now. Keeping the properties RISKING £x or more or less negative equity, plus potential costs of essential repairs, maintaining a mortgage without rental income etc. Yes that's a risk not a definite, but there's many triggers that could get there quite easily, and the result could be MUCH worse.

SDLT_Geek

Pixie5740 wrote: »

2) The limited company would find is nigh on impossible to get lending in order to pay off the existing mortgages because there is no equity and by the sounds of it neither the OP nor the ex has the capital to pour into the limited company to use as deposits.

3) Transfer of ownership would trigger SDLT liability....at the higher rate of the current market value of the properties.* Where is the money for that going to come from?

*Under Section 53 of the Finance Act 2003 for transfers between an individual and their company the chargeable consideration for such transfers will be not less than the market value at the effective date, of the property transferred, irrespective of the consideration (or lack of it) actually passing. I think that's right, maybe SDLT Geek or 00ec25 could confirm?

Yes, transfer to a limited company would involve SDLT on the market value at the higher rates.

BlackBird75

I remember being offered a BTL mortgage by my bank back in 2005-6.
I hadn't even expressed any interest in becoming a landlord. I'd gone in for something else.

I told the bank staff member, that I was a bit concerned about taking on a debt and hoping someone else (the tenant) would pay it off for me. The bank guy looked quite surprised, as if no one had ever put it in such terms before.

Could this be a case of mis selling???

Comms69

BlackBird75 wrote: »

I remember being offered a BTL mortgage by my bank back in 2005-6.
I hadn't even expressed any interest in becoming a landlord. I'd gone in for something else.

I told the bank staff member, that I was a bit concerned about taking on a debt and hoping someone else (the tenant) would pay it off for me. The bank guy looked quite surprised, as if no one had ever put it in such terms before.

Could this be a case of mis selling???

No. Some bank products have been mis-sold and I acknowledge that; but buying property means solicitor involvement.


Receiving legal advice negates consumer rights.