Negative equity and end of mortgage term?

by Readers Question

11:14 AM, 19th December 2016
About 4 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

Dylan Morris

16:51 PM, 19th December 2016
About 4 years ago

Prior to the credit crunch I think the max ltv available was 85% so you must have had at least 15% equity in your properties at such time.
If MX take possession then they can only do this through a Possession Order. I'd make sure you attend the Court Hearing and explain your position to the judge and the fact that you cannot cover any shortfall and you want to extent the term. The judge may not be able to prevent the repossession but I'd try to get him to do so even though it is a long shot. I agree MX must be crazy to want repossess given they will be hit with such large losses which they will never recover. Why crystalise a loss if you don't have to.

Ross McColl

16:59 PM, 19th December 2016
About 4 years ago

Reply to the comment left by "Dylan Morris" at "19/12/2016 - 16:51":

MX have been crystalising losses since 2008. They do not have a target to make profit. Their only target is to close out the mortgage book and 'return' the money to the taxpayer. I assume they have already written off a lot of debt as toxic anyway, so anything more than 10% of the debt repaid is a job well done. They do not act as a business in the traditional sense so don't make rational decisions as a business would. They would not need to get a possession order in court as such. You will not get your day in court. They will instruct LPA's, who they will say are your agent, then the LPA will sell the houses on your behalf at a huge loss, probably to one of their friends, who will make a tidy profit. This sounds extreme I know, but I am not a pessimist, just a realist. Just type in CAG Mortgage Express LPA Receiver into Google.

Puzzler

22:45 PM, 19th December 2016
About 4 years ago

Can you sell the properties yourself? You will get less for them if they are repossessed.

jane Rogers

6:40 AM, 20th December 2016
About 4 years ago

Reply to the comment left by "Puzzler " at "19/12/2016 - 22:45":

Yes I could sell them myself but I would have to find approx £60-70K from a private loan in order to do that as the sale won't go through unless I can pay off the mortgage.

Is that right, actually? It is an assumption I have made.

Old Mrs Landlord

8:32 AM, 20th December 2016
About 4 years ago

If you can sell one for what you owe on its mortgage you will only need to find the money for the estate agent's and solicitor's fees. Get a few estate agents to give you a realistic valuation of what each could actually sell for and which would be the easiest to sell. When the sale goes through, put the next most attractive to buyers on the market. I would also echo the advice about ring-fencing any surplus rent money as all your assets are vulnerable to seizure to pay the outstanding shortfall, even your home if you own it. Again, sorry to be the bearer of such worrying news.

jane Rogers

8:36 AM, 20th December 2016
About 4 years ago

As they are both in negative equity to the tune of £30K each, I would still have to find that £30K for just one house.

And there is no surplus rent money - it contributes to my living income each month as it is.

I am going to visit an insolvency practitioner here in Scotland, and take advice from the English guy also recommended in this thread.

Many thanks everyone, I appreciate it.

Miascot

9:09 AM, 20th December 2016
About 4 years ago

Would one of the suggestions by Mark Alexander or NW landlord to combat s24 help?

Set up a company using their suggestions and let the company go bankrupt rather than you!

jane Rogers

9:31 AM, 20th December 2016
About 4 years ago

Reply to the comment left by "mia scot" at "20/12/2016 - 09:09":

Thanks Mia, where do I find those?

Puzzler

10:08 AM, 20th December 2016
About 4 years ago

Unfortunately you would still be personally liable for the debt so the expense of doing that is pointless. Even assuming MX would permit it which is unlikely. I think your choice is bankruptcy or paying off the shortfall. You have to make that call. If you have good credit you could maybe take out personal lending, in some cases this is as cheap or cheaper than a mortgage. However they're usually not interest only so the payments might be too much.

jane Rogers

10:38 AM, 20th December 2016
About 4 years ago

Reply to the comment left by "Puzzler " at "20/12/2016 - 10:08":

Thanks Puzzler. That is what I thought. I've arranged appointments with insolvency practitioners in both England and Scotland.

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