Birmingham Midshires Negative Equity

SingingElephant

Hello,

I was wondering if anyone had some advice please? Apologies for the length. 

My Aunt purchased a property in late 2007 for £195,000 (with a 10 year residential interest only mortgage of £170,000 with Birmingham Midshires). A few months later, the 2008 crash happened and the property practically overnight, became valued at about £80,000. She held on, hoping that the value would increase by the time the mortgage came to full term, as the intention was to sell it. However, it never did by the time the mortgage ran out in 2017. She managed to get an extension granted to 2022. The property has been for sale since 2018, starting at £135,000 and then dropped to £120,000, with few viewings and no offers. Eventually an offer has recently been accepted for £110,000. However, Birmingham Midshires have now put a halt on the sale, as the shortfall is more than £50,000 (It is £64,000). They said that if it was less than £50,000 they would have let her make a shortfall agreement, to pay a reduced amount over a set number of years. 

She hasn’t lived in the property since 2018 and had permission to let. The property is currently empty and she is still paying interest. 

To complicate matters, her husband took early retirement and purchased them a modest property mortgage free. (Her share of the equity is about £75,000). They are in their seventies and are living on pension income. She is so worried that they will take her house off her and she will lose everything. 

Has anyone any idea how to approach this please? She is making herself ill with this weighing over her. If the buyer pulls out, she is back to square one. The property had been for sale for over 5 years and she has no idea when another offer would come in. Meanwhile, she is still paying monthly interest, which is crippling her. 

We can find plenty of forums with people negotiating settlement agreements with lots of lenders, but none with Birmingham Midshires. 

Thank you in advance of any help or advice you can give. She is just desperate to not lose her home. 

grumbler

Something doesn't add up here....
It's really hard to believe that the price dropped from £170K to £80K and hasn't recovered since then.

https://www.economicshelp.org/blog/8733/housing/uk-house-prices-high/

SingingElephant

grumbler said:

Something doesn't add up here....
It's really hard to believe that the price dropped from £170K to £80K and hasn't recovered since then.

Thank you. I know it seems a lot, but it was the perfect mix of terrible circumstances. There are 3 other owners in the building in the same situation. They are younger however and have been allowed to extend longer with their mortgage companies.

Basically, it is a fairly impoverished area, but the building itself was to a very high/upmarket standard. The mortgage company had no problem valuing it at the time (this was during a property boom) but the most expensive (and largest flat) in the building has only sold for £125,000 since then. If I told you the area, you might understand more, but I need to keep this as private as possible. 

penners324

Get a mortgage on the current place for £60k to pay the shortfall?

SingingElephant

penners324 said:

Get a mortgage on the current place for £60k to pay the shortfall?

Thank you, but they can’t do that, as they are in their seventies and nowhere will do it, as they have checked. 

She needs advice about the best way to get them to agree to the sale and come to a settlement arrangement with them. 

Thank you, but they can’t do that, as they are in their seventies and nowhere will do it. 

She needs advice about the best way to get them to agree to the sale and come to a settlement arrangement with them. 

Hoenir

Offer her share of the property she is living in as security.  Presumably the BTL is generating an income that could be used to reduce the debt owed? 

SingingElephant

Hoenir said:

Offer her share of the property she is living in as security.  Presumably the BTL is generating an income that could be used to reduce the debt owed? 

The problem is that the mortgage actually ran out in 2022, so being sold is the only option. It also wasn’t a buy to let mortgage. It was a residential mortgage with a consent to let in the last few years. 

silvercar

A few options:

a) find £14,000 to reduce the outstanding amount to £50,000. Sell up and accept a repayment schedule with the lender.

b) had the keys back to the lender - voluntary repossession. Let the lender deal with the sale, then they will come after her for the outstanding amount and she can agree a repayment schedule.  Shifts the problem to the lender, but the outstanding amount will probably be greater than if she sold it herself.

c) the way you’ve written it suggests the problem property is in her name only, is the house in his name only? 

SingingElephant

silvercar said:

A few options:

a) find £14,000 to reduce the outstanding amount to £50,000. Sell up and accept a repayment schedule with the lender.

b) had the keys back to the lender - voluntary repossession. Let the lender deal with the sale, then they will come after her for the outstanding amount and she can agree a repayment schedule.  Shifts the problem to the lender, but the outstanding amount will probably be greater than if she sold it herself.

c) the way you’ve written it suggests the problem property is in her name only, is the house in his name only? 

Thanks for your reply. Finding £14,000 will be extremely difficult for her. I don’t know where the arbitrary figure of £50,000 has come from. I’d be so scared of her getting into more debt, just for them them then change the £50,000 ‘rule’ and come after her house. 

I had suggested voluntary repossession to her, but I know that they will sell for a much lower price than the current offer (which has taken 5 years to get) and interest gets added on until it is sold. I wish they would realise it is in their best interests to allow the sale to go through before the buyer walks away. 

The problem property is in her sole name and the house is joint ownership with her husband. 

JMA74

do either of them care about leaving their current property to anyone?  

They could sell the BTL and then do equity release on the residential to pay the shortfall?