Negative equity and end of mortgage term?

by Readers Question

11:14 AM, 19th December 2016
About 2 years ago

Negative equity and end of mortgage term?

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Negative equity and end of mortgage term?

I have 2 properties both in negative equity to the tune of about £30K each on interest only mortgages. They are tenanted and mortgage payments have always been paid.negative equity

The mortgage term ends this summer and cannot be extended. I have no assets at all having lost everything in the credit crunch and cannot see any way out of this other than be the mortgage company repossessing.

Does anyone have any advice either on a creative way out of this, or on what happens when BTL properties are repossessed?

Many thanks

Jane



Comments

Neil Patterson

11:17 AM, 19th December 2016
About 2 years ago

Hi Jane,

I know logic doesn't always prevail, but the obvious answer so neither party loses out is to extend the term of your mortgage.

Is this something you have explored with the lender yet?

jane Rogers

12:34 PM, 19th December 2016
About 2 years ago

Thanks Neil. Yes it is obvious, but they won't do it. Isn't that mad? It is Mortgage Express and they say that following nationalisation they can't extend BTL mortgages. So obviously I have to try to get another mortgage lender but so far have not been able to find one as the neg equity is so large, I presume.

Luke P

13:42 PM, 19th December 2016
About 2 years ago

Surely if it's interest only your rent is vastly more than the monthly payment, no?

Neil Patterson

13:47 PM, 19th December 2016
About 2 years ago

Ah I was afraid you might say it was Mortgage Express and you are correct that they are likely to be very inflexible.

Do you have any other property you can release equity from to cover any potential loss or even enough to bring the LTV down to a point where you can remortgage?

jane Rogers

14:02 PM, 19th December 2016
About 2 years ago

Reply to the comment left by "Luke P" at "19/12/2016 - 13:42":

I get about £175 pm from each property after expenses, assuming they are let out. They have been very difficult to let traditionally although okay at the moment.

jane Rogers

14:04 PM, 19th December 2016
About 2 years ago

Reply to the comment left by "Neil Patterson" at "19/12/2016 - 13:47":

I have no other assets at all - even my own home would only have maybe £5K in it if it was sold. As I see it unless there is a miracle they will be repossessed and I will end up owing about £60-70K which I can't see how they will get.

Do they pursue this and what do they do if there are no assets with which to pay the loan? Obviously my credit rating will be shot, but I'm not sure how awful that would be as at age 60 I am very leery now of anything to do with credit at all. I'm also self-employed with only just enough coming in to pay my outgoings. Not a great situation at all really!

Neil Patterson

14:42 PM, 19th December 2016
About 2 years ago

Hi Jane,

I think it would be worth you talking to an insolvency practitioner about your options.

We happen to have a P118 member who is one, Paul Brindley, see his profile >> https://www.property118.com/member/?id=1792

Paul's business email address is paul@midlandsbusinessrecovery.co.uk

Ross McColl

14:57 PM, 19th December 2016
About 2 years ago

This may not be the answer you are looking for, but my advice would be to squirrel as much of the rent away as possible. MX are completely inflexible, so inevitably, they will repossess and sell your houses, probably at larger losses than is justifiable. You are going to have a huge debt on your hands and the best option is likely to be bankruptcy. Think long term and start putting the money away now. Sorry to be so blunt, but I don't see another way out for you given what you have said. You are likely to get away with not paying the mortgages for 3 months before they start proceedings. All the best.

jane Rogers

15:10 PM, 19th December 2016
About 2 years ago

Reply to the comment left by "Ross McColl" at "19/12/2016 - 14:57":

Thanks Ross, I appreciate your honesty 🙂

jane Rogers

15:11 PM, 19th December 2016
About 2 years ago

Reply to the comment left by "Neil Patterson" at "19/12/2016 - 14:42":

That's great, I will contact him. I live in Scotland now so am under different laws up here, but will also contact someone here too. Really appreciate the advice.

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