In negative equity and on a variable rate

[Deleted User]

I was a first time buyer in 2006 and took out an interest only mortgage for the first 2 years till my finances settled after purchasing my flat. Then the housing market crashed and I also lost my job. I was unable to remortgage as my property went straight into negative equity. My lender actual told me it was overpriced and I would never get back the full value. I had to move out and rent it out.  Luckily the interest rates went down so it was manageable. 

Anyway, 17 years later the property is still in negative equity (due to a huge amount of repossessions over the years) and I’m currently out of work. During lockdown my tenant refused to pay their rent and as we were not able to evict, any money I had saved during the low interest rates diminished. When they finally left I had huge repair bills.

The interest rates are rising so fast I am unable to pay my mortgage and service charge ect. I am unable to  increase the rent anymore. I have spoken with FIVE debt companies who are unable to help me which my lender put me in touch with.

I should point out I am also now in my 50s and have 8 years left on my mortgage. 

What I am asking is has anyone been in this situation and if anyone has any advice for me as I am getting increasingly depressed as the days go on.

Thank you for reading this. 

ElwoodBlues

Sorry but your circumstances sound like a perfect storm of woe. Struggling to believe that anywhere could be worth less than it's 2006 purchase price though. Did you have 110% mortgage or have borrowed more against the propert since? And where have you been living for the last 14 years?

london21

I have no experience of this but strange that after 17 years the property is still in negative equity.

Have you actually made any repayments towards the flat or it has been interest only for the duration of the mortgage, what was the strategy you had to pay off the mortgage?

How much do you have left on the mortgage?
what was the flat valued at?

wat do you mean by huge amount of repossessions over the years? where is the property? 

Deleted User said:

I was a first time buyer in 2006 and took out an interest only mortgage for the first 2 years till my finances settled after purchasing my flat. Then the housing market crashed and I also lost my job. I was unable to remortgage as my property went straight into negative equity. My lender actual told me it was overpriced and I would never get back the full value. I had to move out and rent it out.  Luckily the interest rates went down so it was manageable. 

Anyway, 17 years later the property is still in negative equity (due to a huge amount of repossessions over the years) and I’m currently out of work. During lockdown my tenant refused to pay their rent and as we were not able to evict, any money I had saved during the low interest rates diminished. When they finally left I had huge repair bills.

The interest rates are rising so fast I am unable to pay my mortgage and service charge ect. I am unable to  increase the rent anymore. I have spoken with FIVE debt companies who are unable to help me which my lender put me in touch with.

I should point out I am also now in my 50s and have 8 years left on my mortgage. 

What I am asking is has anyone been in this situation and if anyone has any advice for me as I am getting increasingly depressed as the days go on.

Thank you for reading this. 

[Deleted User]

Thanks for being supportive!! 

ACG

I am not sure there is a painless answer. 
You either need to bring the balance down to the point where you can sell and clear the balance, muddle on, let it get repossessed. 

All of them have negative sides - it will either effect your credit report or it will affect your quality of life. 

Depending on how much negative equity, you could sell up and come up with a payment plan with your mortgage lender, but they may or may not be open to that. 

[Deleted User]

London21 I get this all the time, but it is a thing and I have seen a post about it on property118.com

I am sure with all the help to buy schemes more people will be having this conversation in years to come. 

It is an interest only mortgage so I owe the full amount I bought it for. I was due to remortgage to a repayment when the crash happened and I went to see my mortgage lender who said, sorry can not help you. 

They were new build flats, overdeveloped, the North West of England (M26).

I had to find work which took me out of the area, so I need to earn more money to pay mortgage and also rent where I was staying. I do live with someone rent free who is unable to support or help me out. 

tripled

Is there a reason for not letting the flat go? Some sort of sentimental attachment, a financial concern, or perhaps a hope that at some point in the next 8 years you'll get out of negative equity?

housebuyer143

tripled said:

Is there a reason for not letting the flat go? Some sort of sentimental attachment, a financial concern, or perhaps a hope that at some point in the next 8 years you'll get out of negative equity?

I imagine that was the hope. I suppose selling at a loss and still owing the bank money is not something people happily go into if they can help it.

No advice I am afraid and sorry your tenant was such a !!!!!!.

silvercar

Difficult one. I would expect M26 to increase in value in the long term - Radcliffe wasn't as overdeveloped as say the city centre.

How big is the negative equity? Will the lender consider some sort of arrangement to allow you to sell? I suspect that lenders are not at that point yet, though they may soon have to consider this policy.

Big question to consider is whether you want to let go and walk away or whether long term you would like to live in the flat and therefore hold on to it.

Letting go is somewhat easier, as you could literally post the keys back. Eventually the lender will chase you, but they will give you time to get on your feet and accept that if you have nothing there is little they have to gain. Or you continue to struggle to make the mortgage payments. Maybe move back in and claim SMI (Support for mortgage interest). Ironically the IO mortgage now works in your favour as the repayments are lower than on a repayment mortgage. Was there a long term plan to clear the mortgage eg pension lump sum or an endowment policy?

RelievedSheff

ElwoodBlues said:

Sorry but your circumstances sound like a perfect storm of woe. Struggling to believe that anywhere could be worth less than it's 2006 purchase price though. Did you have 110% mortgage or have borrowed more against the propert since? And where have you been living for the last 14 years?

There is an estate not far away from us that was new build in 2006-2007. Those properties now (a mixture of flats, terraced, semi and detatched houses) still struggle to sell for what they were sold for when new.

Which is strange because the slightly newer "new build" estates a little further down the hill and the ones being built now where we are have rocketed in value in the last few years.

So it does happen.

themoomins

I imagine it is similar in loss to these flats https://www.rightmove.co.uk/house-prices/sr1-1xd.html?country=england&referrer=landingPage&searchLocation=SR1+1XD  

Most sold to investors during the new build apartment frenzy. Some of them have gone for little more than a third of their original sale price but because they are all let out to less savoury tenants than the 'young professionals' they were sold as being for then they will never, ever recover in value in this area.

It is an impossible amount to lose if similar. I would have to just keep letting it out and try to see it as a long term business.