ADVICE REQ: From 85% LTV to neg eq in a 5 year fixed term...

PRC89

I bought my flat in Aberdeen with a nationwide mortgage. I am just over 4 years into my 5 year fixed term but going by the equivalent flats in my block, the value has dropped by £65k. A value that is around £6k less than my mortgage. As this has happened I have been happy to ride it out and hope that the area and prices start to rise. I am not under pressure to sell but a change in circumstances mean I will no longer be living here - what options do I have?

I will be moving in with my fianc! (away from Aberdeen) she already has a flat so there are no pressures with having to sell etc. I am also changing jobs and becoming contractor so I am aware that I will then need two years of company accounts before remortgaging. With my situation I have considered the below options:

1) i spoke to my mortgage adviser about paying the fixed term exit fee (£1.4k) to get out early and still use my wage slips with current employer to secure new fixed term. He advised against this but then what does it matter to him if I have troubles next Feb for remortgaging?

2) I spoke to nationwide about consent to let but was informed if I do this before the end of my fixed term then I am stuck on the variable rate after my term finishes.

3) I then looked at the possibility of letting out my spare room but then if that mean I will still have to be council tax (increased for cohabitants) and utilies it really won’t even contribute anything worthwhile to my mortgage payments.

4) I could sell but then I really am waving good bye to my 40k deposit and probably a total of 90k invested in the property. The only positive to this being I would not be investing anymore.

5) As sure as I can be with my new job I can afford to leave the flat empty and pay the mortgage regardless - although it is never good to see a needless 1k a month continue to leave the account when the flat would no longer serve any purpose

Am I correct in my summary of each option?
Is there any other options here I have missed?
Does anyone have any further details on this scenarios that could make anything clearer?

Thanks in advance for any advice - it really is needed...

Thrugelmir

PRC89 wrote: »

4) I could sell but then I really am waving good bye to my 40k deposit and probably a total of 90k invested in the property. The only positive to this being I would not be investing anymore.

Not palatable but perhaps the best way out.

PRC89

I still think letting maybe best option but I don't know if I am less restricted if I find somebody private rather than letting agent?


If I go with letting agent do I need to be buy to let mortgage for example?


I can see the logic for selling but I really am in no rush and know if I do it will be sods law and the market picks up!

ACG

If you pay to get out of your deal in option one, you are still in negative equity so no lender will take you on anyway.

I would rent it out personally.

Its Aberdeen isnt it, so if/when our oil gas industry picks up again, house prices will hopefully go up in turn.

PRC89

Thanks ACG, This is what my original intention was but I am unsure as to what hoops need to be jumped through? I wont be able to buy to let mortgage as I don't have the equity. If I were to get a consent to let I was basically told to sit tight until my fixed term finishes to get another fixed term (with nationwide - I wouldn't be able to go elsewhere because of new business accounts and possible neg eq). Is this the best option? Or is the things that will go wrong here too - i.e. nationwide wont give me fixed term regardless?

BoGoF

What sort of rent could you get?

Remember the rent is taxable as well.

amnblog

The thinking line is:

1) There is negative equity so you cannot remortgage
2) You are looking at a £40K loss on paper. This is only realised if you sell, so why would you sell.
30) If you are keeping it, why would you leave it empty, getting cold and damp, and unattended, generating no income

which leaves.....

PRC89

BoGoF wrote: »

What sort of rent could you get?

Remember the rent is taxable as well.

The rent has also reduced considerably with 600/month reasonable I would say. Its not really the figures that are the issue (if I can take £1000 a month then I can take £400). It is more what I need to 'legally' put in place if I go to renting. For example if I had a mate that was willing to pay what do I have to declare to the mortgage company? If I look to let through agent what will they ask for - buy to let/ consent to let etc?

PRC89

amnblog wrote: »

The thinking line is:

1) There is negative equity so you cannot remortgage
2) You are looking at a £40K loss on paper. This is only realised if you sell, so why would you sell.
30) If you are keeping it, why would you leave it empty, getting cold and damp, and unattended, generating no income

which leaves.....

Its more asking the question when for renting though? If I do it now will I be stuck on variable rate? My mortgage adviser does reckon we can value it a bit higher than 135k and not be neg equity but this is still worse case scenario! Will nationwide ask for a survey for my next fix term?

BoGoF

I think the figures are an issue when it comes to working out if it is viable. Do you know what your obligations are as a landlord, what the costs will be?

ps Its never a good idea to mix friends and finances.

Typhoon2000

Nationwide will use its own index to value you property if you are looking to fix again. You can use their tool on there website to see what they think your property is worth.