Can we give back a house in negative equity?

Darlomum79

We have the property we are living in and a rental property. Both with interest only mortgages.

We are unable to pay back the mortgage before the end of the term on the rental property.

We are not in arrears with the mortgage and want to give the house back to the mortgage company, however we believe it will be in negative equity.

Would the company make us sell up our current abode, to pay off the negative equity?

davidmcn

You can't "give it back" (wasn't theirs to start with!) - if you mean you'd let them repossess it, you'd still be liable for any shortfall, so yes that could end up with you having to sell your other property.

Nick_C

Unless you bought the property from your mortgage company, you cannot give it back to them as they never owned it.

If you don't pay the mortgage, or the term comes to an end with a debt outstanding, they can force a sale and persue you for any remaining debt.

Talk to your mortgage company initially and explain the problem to them. Always best to be proactive in situations like this.

Are you making a profit from the rental property? If so, extend the mortgage or remortgage with a new lender. If you sell, you could be liable for capital gains tax (if the property is now worth more than you paid for it) which will add to the problem.

Have you made provision to clear the debt on your home when your interest only mortgage ends?

[Deleted User]

It will be much much cheaper for you to sell it for an ok price and then come to a deal with them over the remainder of the debt than it would be for them to reposess.

You are going to be responsible for the whole debt anyway but you have a chance to avoid thousands of pounds of legal fees added if the lender gets involved

I find it difficult to think they would be able to force repossession of your own home to repay the debt. Although that would only making an attempt to deal with the debt. If you are unable to pay they may take a charge against the property though (or they may do that anyway to protect themselves)


Always try get ahead of these things. Options become less and less the closer you get to the end of the term

silvercar

Lenders always prefer to be kept informed than to find out problems at the last minute. Approach your lender, it may be that they are happy to extend the mortgage term.

Ultimately, if you hand the keys back and walk away, they will sell the property and expect you to come up with the shortfall. Could you increase the mortgage on your other property? Worst case, they slap a charging order on your other property to cover the shortfall.