Negative equity – forced to repay mortgage

by Readers Question

12:56 PM, 4th October 2013
About 5 years ago

Negative equity – forced to repay mortgage

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Negative equity – forced to repay mortgage

I have a buy to let mortgage with Mortgage Express. This mortgage finishes in April 2015. The value at present of the property is around £50000. I paid £126,000 for it 6 years ago with a mortgage of £113,500. There is now negative equity in the property in the region of £76,000.

I have paid the interest on the mortgage consistently and the property has been let at a fair rent allowing the mortgage payments to be met.

I have asked Mortgage Express for an extension of the term to allow equity to build in the apartment so as to give me a chance to sell it and redeem the mortgage. Negative equity - forced to repay mortgage

I have asked Mortgage Express to allow me to overpay and they have agreed, however I don’t want to overpay to find that I am made bankrupt due to their unwillingness to extend the mortgage in April 2015. There will be a shortfall of £45000 even if I over pay £1000 a month.

I earn a good wage and can afford to overpay by over a £1000 per month.

I have also written to the Prime Minister who has given the treasury my letter who in turn have responded. They say tackle the case with the Financial Ombudsman. My past dealings with them seem to be that they are weak to say the least.

It seems unfair that due to no fault of my own, indeed the financial crisis of the country being the cause and the disastrous dealings of the banks being responsible, I have to be responsible and accountable instead of the perpetrators.

Any suggestions?

Regards

David



Comments

Mark Alexander

13:03 PM, 4th October 2013
About 5 years ago

Hi David

My first thought is that you should definitely take professional legal advice from a firm such as Landlord Action - see >>> http://www.property118.com/member/?id=271

It may also be worth you talking to an Insolvency Practitioner. Please don't take that the wrong way, I'm not suggesting that you are insolvent, however, they are incredibly creative people and excellent negotiators in circumstances like this. If the figures you have outlined are accurate then some form of voluntary arrangement may be advisable.

The reduction in value you have quoted is startling, why such a big drop?

I'd certainly not be making any over-payments to MX if I were you, not without first cutting a deal with them anyway.

What advice have you been offered so far?

I wish you well and please keep us updated.
.

DAVID KNIPE

13:52 PM, 4th October 2013
About 5 years ago

Reply to the comment left by "Mark Alexander" at "04/10/2013 - 13:03":

I HAVE BEEN ADVISED BY MORTGAGE EXPRESS TO ALLOW THEM TO SELL THE PROPERTY IN APRIL 2015 AND TO SPREAD THE SHORTFALL.

THAT WILL CREATE A CASH FLOW SHORTFALL. THEY, HOWEVER, HAVE NOT SUGGESTED A DEFINITE TERM OF REPAYMENT.

I HAVE TWO OTHER MORTGAGES WITH MORTGAGE EXPRESS. ONE WILL MATURE IN 4 YEARS TIME AND ANOTHER IN 19 YEARS TIME.

I HAVE A HOME WHICH HAS ZERO EQUITY IN IT.

I AM AN ACCOUNTANT SO IF I GO BANKRUPT I WILL LOSE MY LIVELIHOOD.

I HAVE WRITTEN TO MORTGAGE EXPRESS INDICATING THAT THE FINANCIAL OMBUDSMAN HAS ENCOURAGED ME TO ASK FOR AN EXTENSION OF THE LOAN.

Theodore Brown Property Management

14:13 PM, 4th October 2013
About 5 years ago

It's refreshing for me to hear of someone being so incredibly responsible during a difficult financial time. Thank you.

During the last four or so months I have had a lot of interaction with Landlord Action and I couldn't recommend them more highly. A business contact (and future client) contacted me because one of his council tenants (in a property managed by a High Street chain) had stopped paying rent, the property manager wasn't doing anything to resolve the situation and he had no idea what he should do. I contacted Landlord Action who were a wealth of knowledge and provided abundant help and support.

You don't say where the property is located but the drop in value seems very large - even given the slump since 2008. Mark would know better than I but might you have some comeback against someone on the basis of it being overvalued six years ago? I also wouldn't overpay anything until MX agrees in writing that they will extend the mortgage in April 2015. Although you're being financially responsible and considerate of your creditor, these days sadly we can't rely on the banks and financiers to be likewise toward their debtors (unless 'you're too big to fail').

Good luck.

Mark Alexander

14:21 PM, 4th October 2013
About 5 years ago

Reply to the comment left by "DAVID KNIPE" at "04/10/2013 - 13:52":

Hi David

You may not be aware but typing in block capitals on internet forums is considered to be SHOUTING.

I hope you will not mind me mentioning this nettiquette.
.

Mark Alexander

14:29 PM, 4th October 2013
About 5 years ago

David - talk to Adrian Graham at Begbies Traynor - he is an expert in the field and specialises in advising professionals

Theodore - there was a no win no fee company going after valuers a year or so back. I followed them up with a telephone call a few weeks ago and they have killed off that service based on a legal ruling which basically killed their business model. Sorry, I don't recall the specific details.
.

Sally T

14:34 PM, 4th October 2013
About 5 years ago

If you bought the property 6 years ago and the mortgage ends in 2015 then the term of the mortgage is only 8 years which seems strangely short. You've said it's on interest only, how did you intend to pay it off at the end of such a short term ??? Surely whoever sold you the mortgage must of given some advice on this ???

Darrell C

14:37 PM, 4th October 2013
About 5 years ago

I don't quite understand this. You paid 126k with 90% btl? loan with an eight year term?
I thought the max loan they ever did was 85%
Can you confirm these facts please

Annette Stone

15:05 PM, 4th October 2013
About 5 years ago

The loss of value seems remarkable and I wonder if the valuation was provided by the mortgage company. If so I would try and do some comparables as to values at that time and see if the valuation was at all inflated to cover the cost of the required borrowings. If so, you might have a very good case. Also, did you not notice how much value the property had lost. This all seems very strange

DAVID KNIPE

16:02 PM, 4th October 2013
About 5 years ago

Reply to the comment left by "Mark Alexander" at "04/10/2013 - 14:21":

Thanks for pointing out about the capitals Mark. Being extremely busy I just had to get a reply going. Not too concerned what people think these days........chuckle.

I do appreciate your efforts.

DAVID KNIPE

16:05 PM, 4th October 2013
About 5 years ago

Reply to the comment left by "Sally T" at "04/10/2013 - 14:34":

Yes I intended to remortgage or sell, working on the uplift of value being the strength behind that decision. Sadly the crash came all too soon.

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