Negative equity on an interest only variable rate (due to end soon) plus seperated… help…

Sarastubb

My finances are a mess and I just don’t know where to turn to.
The property was bought with no deposit (new build) in 2007, we struggled to get a mortgage as my partner at the time had ccjs. We got an interest only variable rate with the view to sell and remortgage after 2 years and move up the ladder but this didn’t happen…
The value dropped almost immediately and it’s been heavily in negative ever since. So we’ve kind of been trapped here.  

Me and my husband split a few years ago now and I’ve been paying the mortgage alone ever since for me and my daughter with no financial input from my ex at all. 

I work full time with no entitlement to benefits etc and It’s a huge struggle to pay for everything as I also have ground rent / building maintenance etc to cover, the mortgage has more than doubled on the variable rate since we split plus I have debts from the relationship too, rather high and I’m trying to pay them but it’s slow along with everything else and a teenage girl etc. I’m not making excuses, they were from the relationship but are in my name so I have to just get on with it and pay them. 

Back to the mortgage, we were over paying previously, but not a lot as my partner refused to pay much extra but since our split I spoke to the mortgage company and they advised to use to overpayments as relief on payments a couple of years ago. Which was very helpful at the time  but doesn’t help in the long run. 

Ultimately I see the property being repossessed,  (the interest only mortgage end in 2027 and there’s no chance I can get a remortgage on a negative equity, along with the debts I have) but I’m also wanting to finally file for divorce. The mortgage is still a joint mortgage. 

I understand I’d need a financial order to sort the finances for the divorce , how would this work in this position, the debt would be in both of our names? I probably need an independent financial advisor but they cost, and I certainly can’t afford anything like that too.  

Sorry for the long post, it’s probably a unique complicated one and i feel it on my shoulders all time.l, although I try not to think about it too much  as it really does bring me down. I just need to see some sunshine at the end of it all. 

Thanks for any advise in advance ☺️ I’m very aware it’s a bad situation I’m in, and i take part responsibility of it I just need help of how to get out of this situation as quickly as possible. 

grumpy_codger

I don't know if it's any different for a divorce, but generally both you and your husband are jointly and severally liable, i.e. the lender can chase either or both of you for the full amount.

And you should have hugely overpaid in 2007 to be in negative equity now - the average price in UK rose 54%(!) from £175K to £270K.

https://landregistry.data.gov.uk/app/ukhpi/browse?from=2007-04-01&location=http://landregistry.data.gov.uk/id/region/united-kingdom&to=2025-04-01&lang=en 

Sarastubb

Thanks, it’s a small purpose build apartment. We paid £114,000 and it’s currently worth £90,000  it dropped not long after we bought it to around £80,000 so has increased slightly but I don’t have time in my side to wait for it to increase more. 

silvercar

A couple of points, financial advisors are usually concerned with investing your money, rather than sorting out negative equity.

Are you on speaking terms with your ex? At the end of the day he is jointly liable for the shortfall and for the mortgage payments. It seems that you have been shouldering this on your own. I hope at least he is providing some maintenance to bring up your daughter.

If there is no spare money to cover the negative equity and no way you could extend the mortgage (always worth asking as the lender won’t want to repossess), you could look for a rental and hand the keys back No need to wait for 2027 if renting is cheaper than owning in your area, especially when you have allowed for service charges etc. Eventually the lender will chase both you and your ex for the shortfall, something that may cause your ex to sit up and think of the repercussions.

user1977

grumpy_codger said:

And you should have hugely overpaid in 2007 to be in negative equity 

Well, many people did. Remember in that era people thought prices could only go up, and there were lots of ambitious valuations especially for newbuild.

Ordinary_Yet_Unique

Personally I would try to extend the mortgage to give yourself some time to sort things. If any of your debts are unsecured you should consider some type of Debt Management plan. Loads of advice about how to go about this in the best way on the Debt Free Wannabe pages.   

DullGreyGuy

grumpy_codger said:

And you should have hugely overpaid in 2007 to be in negative equity now - the average price in UK rose 54%(!) from £175K to £270K.

It was a new build so it will have been overpiced 

Averages arent a very good thing to look at in isolation as the standard deviation can be massive so whilst you say 54% on average in our neck of the woods its over 110% increase, would have been more than that 7 years ago but prices have fallen since. Therefore, particularly as average prices here are more than double the national average, lots of others places must have had much less growth or losses to drag the average down from what's happening here. 

ACG

I dont know what the answer is, it sounds like you are in a difficult spot. 
A lot of the people I see are people with bad credit. One of the things that I notice is people are either ashamed of their debt or really are not bothered (I imagine you will be the former). 

But one thing I notice is that going through what sounds like will be the next year or 2 of your life is horrendous for them. But once the repossession has gone through or the bankruptcy has happened (or both), there is like a massive weight off their shoulders. 

I dont want to say just crack on and rip the plaster off, draw a line in the sand and then you can start the rest of your life debt free, divorced and free of everything - primarily because I do not know what the alternatives are. But if you do decide to go down that route, just keep remembering that its always darkest before the light and the light WILL come. 

Hopefully someone else can offer you more helpful advice to maybe not have to go that route. 

Mr.Generous

DullGreyGuy said:

grumpy_codger said:

And you should have hugely overpaid in 2007 to be in negative equity now - the average price in UK rose 54%(!) from £175K to £270K.

It was a new build so it will have been overpiced 

Averages arent a very good thing to look at in isolation as the standard deviation can be massive so whilst you say 54% on average in our neck of the woods its over 110% increase, would have been more than that 7 years ago but prices have fallen since. Therefore, particularly as average prices here are more than double the national average, lots of others places must have had much less growth or losses to drag the average down from what's happening here. 

And the average is skewed by the renovators and doer-uppers. We bought a run down terrace in 2014 for £50k that will be marketed soon for £125k, so 150% gain, but if it was still a damp riddled uninhabitable wreck it would be more like £80-90k.

I also wonder if the now vast HMO market has caused a price hike in the big old run down sector where big margins are available after conversion work. 

The housing shortage means fewer homes are falling into such disrepair and selling cheap, and the gap between a wreck and a nice place has narrowed (I think, hard to find a worth while project now).

When you think about all the huge gains on paper made when people spent £50k+ on an extension too, the average is bound to be beyond the normal true like-for-like growth. 

Having said all that, it's still a heck of a long time to still be in negative equaity, and should serve as a warning to the next batch of zero deposit buyers as I believe the option is making a comeback. 

Sarastubb

Thanks all, I’ve booked a valuation on the property and then I think I’ll approach the mortgage company with the valuation and see where we go from there.  Ultimately I think it will be handing it back and renting elsewhere, which is technically what I’ve been doing anyway as I’ve gained nothing paying my mortgage all these years 😕. 

Ordinary_Yet_Unique

Don't be so quick to hand it back and walk away. It would be a shame to have nothing to show for all your hard work and previous payments. Investigate all options.