Voluntary Repossession feels like a burden lifted

Jessopm1

Hi all,

I have a mortgage on an old Victorian property which has a history of subsidence. A claim was made by previous owners to fix and as a result my insurance has a caveat to exclude subsidence or any "preexisting condition".

The foundations of the house are in ruins and like a naive person, when I bought the house 5 years ago I didn't get a survey done.

In essence, I fell in love with a big old house, didn't get it checked thoroughly and its got a foundation made of soft digestives. 

With any old house the cost of maintaining is significant and the house loves to move in the winter. The subsidence is showing signs or returning and I can't claim on my insurance due to the exemptions. To get the foundation repaired with costs estimated at £550sqm, it woudk cost £60k to remedy. 

The house is currently on the market and I'm hoping it will sell, but anyone who has a survey on the house will quickly run away.

I'm seriously considering handing the keys back and trying to get away from the house by any means necessary which minimises the amount I need to pay.

Financially I'm in good stead, with no arrears and a good credit score and a comfortable amount of free income after bills etc, which makes bankruptcy a difficult one as I could pay an IPA for more than my current mortgage.

Voluntary surrender seems like an option that could work for me (gets me away from the house), I'm looking at rented accommodation to move to and will be able to afford the rent and mortgage with limited funds after that. 

I've got no desire to be a homeowner again! 

I want to have a definite date when I'll be free from the burden and I don't really care about the impact on credit score etc as I'm hoping to move to rented and spend the next few years taking it easy and enjoying the lack of homeowner responsibility! 

I've got a call with CAB tomorrow to discuss my options. 

If anyone has got any experience of handing keys back, being bankrupt with a regular income and being solvent, please let me know. 

Thanks! 

Sonic101

Hi there

The CAB should be able to give you some good advice, and there are some really knowledgeable people here, but here are my thoughts in the meantime. I've also sent you a private message. 

What would the value of the house would be assuming there wasn't a problem with the foundations?
For example, if the value were significant (let's say over £600k),  would a secured loan to pay for the fix be a possibility? In normal circumstances I would never advocate anyone taking on such a large amount (and I doubt any debt advisor would!) - but if the long-term value outweighed the cost it could be worth it. 

The impression I get is that you'd rather just be rid of it, and I couldn't blame you, tbh. Check out the information about voluntary reposession on Debt Camel (really useful site) - basically it can be a good solution, but don't sign anything!
https://debtcamel.co.uk/repossession-deed-of-acknowledgement/

Minkym00

So have I got this correct... you don't have the £60k and don't want to / can't afford to borrow it and you want to have the property repossessed and have the shortfall on the mortgage written off by going bankrupt?

Wouldn't it be easier to sell the property as it is at a reduced price (preferably enough to cover the mortgage) rather than impact your credit worthiness and have your spare income claimed for 3 years?

Some more information would be helpful:

- What's the current asking price and does it take into account the remedial works? 
- What the current mortgage balance and how long do you have left on it?
- How much other debt do you have?

Jessopm1

Thanks Minky,

Sadly I don't have £60k, I think if I hand back now, I'll save spending additional money on the property and, depending on the shortfall decide whether to pay or BR. 

The property is valued at 340k and currently listing at 80% the value.

The mortgage is pretty much 70% and is for the next 20 years. If I sold at asking price it would clear my mortgage  plus early repayment fees etc.

I've got a small loan (10k) that's unsecured, but that's it. 

JCS1

Jessopm1 said:

Thanks Minky,

Sadly I don't have £60k, I think if I hand back now, I'll save spending additional money on the property and, depending on the shortfall decide whether to pay or BR. 

The property is valued at 340k and currently listing at 80% the value.

The mortgage is pretty much 70% and is for the next 20 years. If I sold at asking price it would clear my mortgage  plus early repayment fees etc.

I've got a small loan (10k) that's unsecured, but that's it. 

So property worth £340,000, on market for £272,000.  Is mortgage 70% of the £340k or £272K?

What I am getting at, is are you insolvent?  if you do assets, less mortgage, less other debts, what is the bottom figure.  If you are not insolvent, that you would not be allowed to go BR.

Jessopm1

70% of 340k is the mortgage. if the house cannot sell due to the issues, the house will be sold at auction at a significantly reduced price. I suspect auction would reach less than 270k at auction.

If I don't have to BR, then great, as long as I have the means to pay the shortfall if there is one. 

TVAS

You might not be able to rent as your credit would be adverse with voluntary repossession. The dilemma is that the lender will want to get their money back i.e.  £238,000, they will sell at auction but that will take time depending on the next auction date and a month to complete if it is sold in the auction. 

Meanwhile you have vacated the property. So you need to rent first before you do the voluntary repossession thing if you decide to go down that route. 

You say you will never buy again. Renting is not as hassle free as you think. You may have a brilliant, fair and decent landlord. He drops down dead and the children/spouse do not want to continue renting they want a capital sum.

RelievedSheff

How urgent are the repairs needed? Is it something that needs doing right now to make the property stable or is it something that can wait until you have saved the money for the repairs? 

As others have already pointed out. You will still need to rent somewhere to live if you hand the property back. Would you not be better paying off your own mortgage and saving for the repairs?

Jessopm1

TVAS said:

You might not be able to rent as your credit would be adverse with voluntary repossession. The dilemma is that the lender will want to get their money back i.e.  £238,000, they will sell at auction but that will take time depending on the next auction date and a month to complete if it is sold in the auction. 

Meanwhile you have vacated the property. So you need to rent first before you do the voluntary repossession thing if you decide to go down that route. 

You say you will never buy again. Renting is not as hassle free as you think. You may have a brilliant, fair and decent landlord. He drops down dead and the children/spouse do not want to continue renting they want a capital sum.

Thanks TVAS, I'm looking into rented accommodation as we speak. I appreciate the rental option isn't entirely plain sailing, but woudk hopefully give me some time without the homeowner stress.