Negative Equity

scriblesvurt

Just a quick question:

If you had a mortgage for 100K and your property dropped in price to 80K and was then repossessed, what would happen with the 20k deficit>? Would you still owe that to the bank? Trying to solve an argument at work!

~Beanie~

Yes, you would still owe the Bank the shortfall of £20K.

scriblesvurt

Thanks

So if property does slip like the banks seem to think it is going to do. There are going to be alot of people who loose their house and still have a large debt. What would the options be then?

Troubled_Joe

Come to an arrangement with teh bank about repayment. They are generally open to offers as they realise that the borrower is unlikely to be able to pay the full amount.

neas

So long as you can keep up with the repayments there should be no problem .

sarah_elton

scriblesvurt wrote: »

Thanks

So if property does slip like the banks seem to think it is going to do. There are going to be alot of people who loose their house and still have a large debt. What would the options be then?

Only those people who can't afford their repayments. No matter how much negative equity you're in, if you keep paying your mortgage and don't want to sell there's no problem.

In the case of your example, the person would probably declare themselves bankrupt rather than work out a repayment plan. :mad:

Conrad

One of my brothers owed over £50k following a repo in the last crash. His lender settled for £2,500! Mind you they did leave it 10 years before they bothered to let him know there was a £50k shortfall.

Dick_here

sarah_elton wrote: »

No matter how much negative equity you're in, if you keep paying your mortgage and don't want to sell there's no problem.

There IS a problem if you've got an endowment mortgage and that is predicted to give you a shortfall too...

Kez100

But we've known about shortfalls for years. I went on repayment for the difference about two years ago and that was only after ignoring the issue for a couple of years.

MissMoneypenny

!!!!!!_here wrote: »

There IS a problem if you've got an endowment mortgage and that is predicted to give you a shortfall too...

Or an interest only mortgage and are not saving to pay off the capital.

Dick_here

Kez100 wrote: »

But we've known about shortfalls for years.

That doesn't make it irrelevant and unworthy of comment though. And adding it to the negative equity equation is new.

Someone now could be struggling to pay their endowment mortgage, unable to move as their property is worth less than they paid for it (and dropping in value still further), and they owe as much now as they did when they took it out - the key problem with endowment mortgages, aside from shortfalls of course. If rates continue to go up, they'll be completely boogered. At best they're facing a shortfall upon maturity.

So saying 'just keep paying the mortgage and there's no problem' is not always true, is it ?