Housing Dilemma: Is Bankruptcy the best way out?

silvercar

 - Rent the London flat at a loss and limit damages? Can I apply for consent to let if I've already gone interest only for 6 months? If so, how long can I get consent to let for? (I think local market will take at least 2 years to recover) - Is there anything I can do in terms of limiting the tax I would pay on the rental income?

I would do this. You cannot sell at the moment due to the EWS issues, so no point trying. You don't want to live there, so renting it out gives you some money.

 - Could I move the house into my wife's name only, to shield it from Bankruptcy? Would I also have to move the mortgage as well?

Forget this idea. It won't shield it. 

 - Is there something clever where I could sell the Flat to a cash buyer and swallow the difference into the House mortgage?

Difficult. You would have to find a cash buyer and that means crystalising your losses and having to deal with them. At the moment they are only losses on paper. Wait long enough (2 years plus) and they may not exist.

 - Can I just go to the bank and say I can't pay the mortgage, so take the flat home, or will they come for everything else too?

You could say that. It will mess your future ability to get a mortgage. The losses from when the lender sells it will become an unsecured debt. Either the lender will give you a time to sort yourselves out and then get you to agree a repayment plan - effectively an unsecured loan or they may try and force a charging order on your other home.

 - Are there any things that I can do here that I might not have thought of?

If you can't find employment, when could your wife return to work? You could then work around her hours part time? Check you are claiming all the benefits you are entitled to, these will increase once you have the little one.

Could you rent out the house and find a cheaper rental for yourselves?

gwynlas

Would the floor plan of the London flat allow you to let rooms out individually sharing kitchen and bathroom?

This might increase your income rather than letting as a 1 bed.

eddddy

Dr_Ben said:

I recently put it up for auction at £315k and had no interest whatsoever, not a single viewing. So assume nobody is looking in this area. 

Out of interest - which auctioneer did you use?

Was it one of the well-known, reputable auction houses - that would typically attract cash-buying investors?

Some estate agents run their own little "modern method of auction" schemes, which are probably ignored by most investors.


Your flat might be of interest to investors with cash who want to do the following:

• Buy a flat relatively cheaply, because there are questions about its safety certificates (and therefore isn't mortgageable)
• Rent it out for a year or 2 or 3 until the questions about safety certificates are sorted
• Then sell it (maybe it will then be mortgageable) - resulting in a nice chunk of profit for the investor

If you didn't use a 'proper' auction house the first time around, it might be worth speaking to one now, to see what they say.

Dr_Ben

enthusiasticsaver said:

kimwp said:

@enthusiasticsaver , is it worth moving this to the DFW board?

Do agents think the market will improve in the Spring for the area? 

I honestly think it's a 2-year kind of timeframe, there's an over-supply in the local area (still have new builds on for £388k, with HTB and Stamp Duty changes) and my flat is in the top 25% of prices, so people more likely choosing an older 1-bed for £300k instead, which would be way below mortgage value and not something I can compete with.

I tried Purple Bricks and Foxtons, Purple Bricks were paid long ago, so have no incentive to sell and Foxtons were essentially just faking viewings.

ian1246 said:

If your wife has a job and you can't find one, the solution will be she returns to work early off maternity and you be the housebound one raising the child. Ideally both of you will be able to find work & perhaps both work reduced hours, rather than 1 full time & 1 no hours - allowing better support of each other & ensuring no single person is "housebound".

Have you factored in the childcare fee funding and if you are going to send the child to nursery, are you on the waiting list? Some nurseries have such a shortgage of spaces you need to get on the list prior to the child's birth!

Unfortunately, my earning potential is 4x my wife (I would love to be a stay-at-home dad for a few years!) so I absolutely need to be working in some way to keep money flowing, it's mostly about finding ways to reduce the outgoings as much as possible.

Childcare all factored in - keep meaning to get them on the list, need to do that, good reminder!!

I also have a plan to max out benefits, but I've not factored that cash in yet, as it will depend on working situation.

Dr_Ben

Thank you everyone for the advice so far - I think it's boiling down to two options:

1. Rent out the flat, or both the flat and the house, for a period:
 - Both properties are 80-90% LTV, so not able to switch them to a BTL
 - I've already switched to Interest Only on the Mortgage Charter, so would this impact my ability to get consent to let?
 - I'm on a mortgage deal that is tied to the base rate with no exit fees, but could probably get a better deal if I fix for two years - would this remortgage impact my ability to get consent to let?
 - Is ANY of the Rental Income tax deductible anymore, or am I going to have to pay full tax on that?
 - Are there any good ways to get it rented without the fees? (I officially hate estate agents now)

2. Find better selling agents:
 - I put it on with Purple Bricks in Nov 2023, they sold it in Feb 2024, fell through in June 2024. (£386k)
 - I then put it on with Foxtons for 3 months in August 2024, they seemed to fake viewings and didn't get any offers. (£386k)
 - I then went back to Purple Bricks and tanked the price to £350k for a fast sale (as I've already paid their fee) - no viewings, no interest.
 - They then pushed me to Modern Method of Auction, priced at £315k, no viewings, no interest.
 - All this aligns with everyone else in the block who are struggling to get interest (Only the 2-beds are selling and then they hit ESW1 issues...)

There are a few other big agencies in the area, but they take such a massive fee and when I spoke to one of them, they said they weren't confident in selling it at £350k (which would cover the mortgage and still leave me with ~£20k in fees to pay)

Dr_Ben

Also would be interested in knowing what the length of consent to let is - e.g. Can I fix for 2 years and then consent to let it for that whole time?

silvercar

The only way to know if you will get consent to let is to ask the lender. You are going to struggle to move mortgage lenders while you are not working.

Mortgage interest costs can be put against the rental income, but is now restricted to the basic rate of tax. If your income in this financial year puts you in the higher rate of tax band it will cost you. Have a play with this calculator to see how it effects you - https://taxscouts.com/calculator/rental-income-tax/

As for estate agents, you have gone from one extreme to the other! Go to a local estate agent, who will be aware of the issues with your block, and ask their opinion.

ReadySteadyPop

Dr_Ben said:

Good evening!

Long time lurker (20yrs or so) first time poster...

I am in the privileged position of owning two properties, a Flat in London and a House in a small town, outside of London.

I have been trying to sell my London flat for 18 months with limited success - I sold it in Feb 2024, but it fell through in June 2024, I've had 3 offers and 5 viewings over that time.

The flat was bought in 2018 for £406k and when I sold in Feb 2024 it was for £386k. I recently put it up for auction at £315k and had no interest whatsoever, not a single viewing. So assume nobody is looking in this area. - Added to this complexity, I have £350k mortgage remaining, so hard to flip into a rental. (Rental income in my area is typically £1,800 pm excluding fees/income tax and the mortgage + service charge is £2,300 pm)

I have recently moved to interest only for 6 months on both properties under the mortgage charter scheme...

Adding to this, I quit my job when it was sold originally, as I had no indication that the buyer would pull out and the worst job market for what I do in history means I'm still out of work now.

My savings hit £0 this month and I have some freelance work that will cover me for maybe 3 more months - I'm working on growing this as a major priority.

My wife is pregnant and we want to bring our child up in the house outside of London. (Which is in both our names)



What are our options here:

 - Rent the London flat at a loss and limit damages? Can I apply for consent to let if I've already gone interest only for 6 months? If so, how long can I get consent to let for? (I think local market will take at least 2 years to recover) - Is there anything I can do in terms of limiting the tax I would pay on the rental income?

 - Could I move the house into my wife's name only, to shield it from Bankruptcy? Would I also have to move the mortgage as well?

 - Is there something clever where I could sell the Flat to a cash buyer and swallow the difference into the House mortgage?

 - Can I just go to the bank and say I can't pay the mortgage, so take the flat home, or will they come for everything else too?

 - Are there any things that I can do here that I might not have thought of?

I've tried with CAB and various money/debt charities - All who tell me to call them back in 12 months when I'm in life altering debt - I refuse to believe there isn't something clever I can do to either dispose of the property, or reduce the outgoings in a reasonable way...

Feel free to ask any questions or details I might not have shared...

It is not that people are not looking, it is just that borrowing costs have risen a lot since you bought the flat, you will have to drop the price more perhaps to get a sale?

silvercar

ReadySteadyPop said:

Dr_Ben said:

Good evening!

Long time lurker (20yrs or so) first time poster...

I am in the privileged position of owning two properties, a Flat in London and a House in a small town, outside of London.

I have been trying to sell my London flat for 18 months with limited success - I sold it in Feb 2024, but it fell through in June 2024, I've had 3 offers and 5 viewings over that time.

The flat was bought in 2018 for £406k and when I sold in Feb 2024 it was for £386k. I recently put it up for auction at £315k and had no interest whatsoever, not a single viewing. So assume nobody is looking in this area. - Added to this complexity, I have £350k mortgage remaining, so hard to flip into a rental. (Rental income in my area is typically £1,800 pm excluding fees/income tax and the mortgage + service charge is £2,300 pm)

I have recently moved to interest only for 6 months on both properties under the mortgage charter scheme...

Adding to this, I quit my job when it was sold originally, as I had no indication that the buyer would pull out and the worst job market for what I do in history means I'm still out of work now.

My savings hit £0 this month and I have some freelance work that will cover me for maybe 3 more months - I'm working on growing this as a major priority.

My wife is pregnant and we want to bring our child up in the house outside of London. (Which is in both our names)



What are our options here:

 - Rent the London flat at a loss and limit damages? Can I apply for consent to let if I've already gone interest only for 6 months? If so, how long can I get consent to let for? (I think local market will take at least 2 years to recover) - Is there anything I can do in terms of limiting the tax I would pay on the rental income?

 - Could I move the house into my wife's name only, to shield it from Bankruptcy? Would I also have to move the mortgage as well?

 - Is there something clever where I could sell the Flat to a cash buyer and swallow the difference into the House mortgage?

 - Can I just go to the bank and say I can't pay the mortgage, so take the flat home, or will they come for everything else too?

 - Are there any things that I can do here that I might not have thought of?

I've tried with CAB and various money/debt charities - All who tell me to call them back in 12 months when I'm in life altering debt - I refuse to believe there isn't something clever I can do to either dispose of the property, or reduce the outgoings in a reasonable way...

Feel free to ask any questions or details I might not have shared...

It is not that people are not looking, it is just that borrowing costs have risen a lot since you bought the flat, you will have to drop the price more perhaps to get a sale?

It isn’t always best to crystallise losses, particularly when there is a cause (the EWS1) that will be resolved in a couple of years. It isn’t the price that is the problem, it is the EWS1.

ReadySteadyPop

silvercar said:

ReadySteadyPop said:

Dr_Ben said:

Good evening!

Long time lurker (20yrs or so) first time poster...

I am in the privileged position of owning two properties, a Flat in London and a House in a small town, outside of London.

I have been trying to sell my London flat for 18 months with limited success - I sold it in Feb 2024, but it fell through in June 2024, I've had 3 offers and 5 viewings over that time.

The flat was bought in 2018 for £406k and when I sold in Feb 2024 it was for £386k. I recently put it up for auction at £315k and had no interest whatsoever, not a single viewing. So assume nobody is looking in this area. - Added to this complexity, I have £350k mortgage remaining, so hard to flip into a rental. (Rental income in my area is typically £1,800 pm excluding fees/income tax and the mortgage + service charge is £2,300 pm)

I have recently moved to interest only for 6 months on both properties under the mortgage charter scheme...

Adding to this, I quit my job when it was sold originally, as I had no indication that the buyer would pull out and the worst job market for what I do in history means I'm still out of work now.

My savings hit £0 this month and I have some freelance work that will cover me for maybe 3 more months - I'm working on growing this as a major priority.

My wife is pregnant and we want to bring our child up in the house outside of London. (Which is in both our names)



What are our options here:

 - Rent the London flat at a loss and limit damages? Can I apply for consent to let if I've already gone interest only for 6 months? If so, how long can I get consent to let for? (I think local market will take at least 2 years to recover) - Is there anything I can do in terms of limiting the tax I would pay on the rental income?

 - Could I move the house into my wife's name only, to shield it from Bankruptcy? Would I also have to move the mortgage as well?

 - Is there something clever where I could sell the Flat to a cash buyer and swallow the difference into the House mortgage?

 - Can I just go to the bank and say I can't pay the mortgage, so take the flat home, or will they come for everything else too?

 - Are there any things that I can do here that I might not have thought of?

I've tried with CAB and various money/debt charities - All who tell me to call them back in 12 months when I'm in life altering debt - I refuse to believe there isn't something clever I can do to either dispose of the property, or reduce the outgoings in a reasonable way...

Feel free to ask any questions or details I might not have shared...

It is not that people are not looking, it is just that borrowing costs have risen a lot since you bought the flat, you will have to drop the price more perhaps to get a sale?

It isn’t always best to crystallise losses, particularly when there is a cause (the EWS1) that will be resolved in a couple of years. It isn’t the price that is the problem, it is the EWS1.

  The EWS1 form won`t make any difference if you purchased at the wrong point in a property bubble, sometime it IS best to just accept that you overpaid (in a manic zero debt environment) and take the losses now (in a normalising debt cost environment) before the losses get worse.