Housing Dilemma: Is Bankruptcy the best way out?

silvercar

ReadySteadyPop said:

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.

Of course it will, having a correct EWS1 means that people will be able to get a mortgage, increasing your potential buyers. Selling without an EWS1 means you can only sell to cash buyers which limits your pool of potential buyers and therefore the price you can obtain. Hanging on until you have an EWS1 means you will get a better price.

Dr_Ben

No real EWS1 issue for me tbh, or pricing, with only 2 offers in 2 years and no interest at ~25% off I probably need to wait for the market to sure up a bit - I'm just not getting the interest, let alone getting to EWS1 issues

Dr_Ben

silvercar said:

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.

This is probably the best advice in about 2 years, thank you!

I still can't quite figure out the tax implications, but I have an accountant who I can run it by - looks like I'm going to end up letting it - I do need to chat with the mortgage team again though.

Dr_Ben

Sadly, all the local shops have been bought up by Dexter's, who are on a par with Foxtons nonsense.

ReadySteadyPop

[Deleted User] said:

Provided the London flat is at least 1 bed, sell the house outside of London, live in the London flat until the situation improves. Take any job in London even outside your sector. I imagine the above is by no means your ideal choice but all options should be considered. Take in a lodger if space permits.

A lodger in a one bed flat? Also the OP is married and they are expecting a baby, they need to get rid of the flat ASAP, it must be attracting extra council tax by now? Drop the price and get rid in my opinion.

ReadySteadyPop

Dr_Ben said:

No real EWS1 issue for me tbh, or pricing, with only 2 offers in 2 years and no interest at ~25% off I probably need to wait for the market to sure up a bit - I'm just not getting the interest, let alone getting to EWS1 issues

I`m confused by this statement, can you elaborate on this?

RAS

ReadySteadyPop said:

Dr_Ben said:

No real EWS1 issue for me tbh, or pricing, with only 2 offers in 2 years and no interest at ~25% off I probably need to wait for the market to sure up a bit - I'm just not getting the interest, let alone getting to EWS1 issues

I`m confused by this statement, can you elaborate on this?

No, you are just pursuing the same agenda as a decade ago. The OP has enough on their plate without your games.

BikingBud

Dr_Ben said:

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.

This is slightly disconcerting as a potential to earn 4 times your wife doesn't cover the outgoings. Also

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.

Income is income wherever it comes from. Perhaps taking any permanent job at 1/4 or even 1/3 of your aspirational wage might sustain that position for longer.

I feel that one of the early suggestions was by far the best but there appears to be some denial affecting rational decision making:

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

Whereas this would indicate you have a liability for 2 properties:

Both properties are 80-90% LTV

One of which appears to have a value way below that loan level. Bought for £406k with a current mortgage of £350k and you put it up for auction @£315!


But in general terms I do wonder if this is a problem about to bubble over; expensive house(s) based on high multiples of two wages, want to set up family, move home, interest rates increasing, so the shift in income to outgoings ratio requires more disposable income to be generated at the time when it is actually dropping due to normal life events.

Affordability coming home to roost?

To clarify, is your job in history, or is it your assertion that the job market is the worst in history? As these are quite different.

goldfinches

Following on from the suggestions to rent out one of your properties for a few years.

Have you looked at both your local borough private landlord letting support to see if they have anything like the schemes that Oxford City run? I'm suggesting this is worth a bit of research because your mortgage company might be more inclined to help if you can show there's a realistic prospect of guaranteed letting income for the next however many years.

ReadySteadyPop

BikingBud said:

Dr_Ben said:

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.

This is slightly disconcerting as a potential to earn 4 times your wife doesn't cover the outgoings. Also

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.

Income is income wherever it comes from. Perhaps taking any permanent job at 1/4 or even 1/3 of your aspirational wage might sustain that position for longer.

I feel that one of the early suggestions was by far the best but there appears to be some denial affecting rational decision making:

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

Whereas this would indicate you have a liability for 2 properties:

Both properties are 80-90% LTV

One of which appears to have a value way below that loan level. Bought for £406k with a current mortgage of £350k and you put it up for auction @£315!


But in general terms I do wonder if this is a problem about to bubble over; expensive house(s) based on high multiples of two wages, want to set up family, move home, interest rates increasing, so the shift in income to outgoings ratio requires more disposable income to be generated at the time when it is actually dropping due to normal life events.

Affordability coming home to roost?

To clarify, is your job in history, or is it your assertion that the job market is the worst in history? As these are quite different.

Unlikely that the JM is the worst in history, media seem to think worst since about the year 2000 or so, but you make a good point, having a liability on a property is very different from actually owning a property, but I think bankruptcy is very low on the likely outcomes in this case, getting the flat rented out should be a priority, shouldn`t be difficult in London?