Voluntary Repossession

[Tornadotechie]

Hi.
I've recently moved to Scotland (about 15 months ago) to find work and left my house down South rented out. However the tenant moved out a few months back and I can't get another tenant due to the RAF cutbacks in the local area and because I'm renting up here, pay maintenence and I've just had a pay cut I'm really struggling to make ends meet...I would sell the house but I'm looking at around 25k negative equity - even if I can sell it, I tried before I moved and had two viewings in 12 months.

Just wondering if anybody has been in a similar situation, pro's and con's or if there's anything else I can do. Any help will be appreciated.

Thanks

[jen_br]

Re: Voluntary Repossession

Hi, thanks for your post.. I am actually going to pass this to someone who is more experienced with the housing area... Can you just clarify a few things

1) are you in arrears?
2) When was the last time you spoke to an estate agent?
3) the renting market has been good recently maybe you could look into that again or is the house near a base is that why its RAF that you are looking to rent?

Let me do some digging for you and let me pm someone who can help.


You have come to the right place

[Tornadotechie]

Re: Voluntary Repossession

Hi,

Thanks for the reply,

1) I'm not currently in arrears, I can soak up the payments with savings - but they will shortly run out (within 2 months probably)

2) I emailed my letting agent this morning for another valuation, though it was only valued 3 or so months back so I can't imagine it having changed too much

3) The house is been advertised to let - it has been for the last 4 months and we have had very little interest. The house is in a tiny village in a farming community, and the main local employers are two RAF stations which are suffering drawdowns to manpower at the moment

[jen_br]

Re: Voluntary Repossession

What about dropping the price a wee bit just to get someone in?

[diddlydee]

Re: Voluntary Repossession

A couple of thoughts for you, although my experience in the mortgage business may be out of date as it is some years since I worked in that industry.

If you go into voluntary repossession, you are still going to owe the money that is the shortfall plus any other fees that bank may charge, so it isn't really an option UNLESS all other avenues are exhausted. (Even if there is an indemnity insurance in place - the bank can and will still want back their shortfall).

Some banks used to offer a special negative equity mortgage, whereby you buy another house of the same value, and just take the negative equity with you.

Say, for example, your house will sell for £100,000, but your mortgage is £120,000. You can buy another house worth £100,000 where you now live, and just take the negative equity over. You are no better or worse off, except that you don't have to pay rent.

Could this work for you? If so, have a chat with your lender to see how they might help you.

Alternatively, any property will let if the price is right. Consider how much rent you could afford to accept without getting into trouble, and if necessary, reduce the asking rent. Any property is saleable / lettable if the price is too tempting to resist.

[Tornadotechie]

Re: Voluntary Repossession

The problem with dropping the rent is it already doesnt cover my monthly payments, I will still pay £250 towards my mortgage on top of the rent so i'm still going to struggle if I drop the rent, but I suppose it is an option, ideally I want to be rid of the house, I'm not planning on living in it again, but I'm living in Aberdeen which is the most expensive place to live outside of London and Edinburgh and I can't afford to buy, so I'll be renting anyway for the foreseeable future until I find work that pays more.

[jen_br]

Re: Voluntary Repossession

OK what type of mortgage do you have? is it a Buy to let? Interest only?

Oh yes I don't live far from Aberdeen I know what its like eek!

[jen_br]

Re: Voluntary Repossession

I have moved this where PlanB our housing guru will see it she is aware and said she will address things a bit later today hopefully.

[Tornadotechie]

Re: Voluntary Repossession

It's an interest only mortgage, as I was in the forces C&G gave me 3 years to let the house without having to change mortgage

[PlanB]

Re: Voluntary Repossession

Some banks used to offer a special negative equity mortgage, whereby you buy another house of the same value, and just take the negative equity with you.

My first thought was a negative equity mortgage too. The lender knows that if they repossess you they won't get all their money back, but if they port the mortgage onto another property they stand a better chance of recovering it.

Your estate agent sounds rubbish to me So maybe it's time for a DIY let. If the house is in a farming community then why not appraoch the farms direct. Big one always need accommodation for their workers and will sometimes commit to 2 - 3 year tenancy agreements. Also contact Housing Associations who offer 3 - 5 year letting contracts which include all maintainance and expenses (full repairs and insurance etc) on the property and will completely redecorate it at the end of the term. They tend to pay over the market value rents too because they're subsidised by the Government and have a duty to find homes for people on low incomes. They often pay the first year's rent upfront too which comes direct from the HA and not the tenant so no worries about bad debts or empty property

You can sell a property with a tenant in situ too. Some investors find this a really attractive proposition since they'll be getting rent from Day 1 thus avoiding a void A tenancy agreement normally includes a clause allowing for this so the tenant will simply pay their rent to the new Landlord once the sale has completed.

[PlanB]

Re: Voluntary Repossession

Never ever go with a voluntary repossession. If you do the lender will sell it at auction for a lot less than you can get for it on the open market if you control the sale. You will also be responsible for all the monthly mortgage payments until it's been sold even after the repossession which could take another three months. As has been said if you're in negative equity then the lender can and will pursue you for 12 years for the shortfall. If you buy another property then the lender may try to get a charging order on that house in future to secure the unpaid debt because they will already have a possession order from the court which is similar to having obtained a CCJ.

A MIG (Mortgage Indemnity Guarantee) insurance policy only pays out to the lender to cover the shortfall even though the borrower pays the premium. The insurance providor then pursues you for the money instead of the lender. It is a scandal and there have been a lot of misselling claims against brokers for not making this clear to their clients.

Are you sure you're in negative equity to the tune of £25k? The housing market bottomed out last year and things are either static or on the up. You haven't said where "down South" your house is but if it's the south east then prices are slowly improving. Don't only listen to what your estate agent says because they may have a vested interest in selling it too low (which means it will easily sell) in order to get their commission fast. Check out what it's worth using the Zoopla website which tracks every house sale using Land Registry records which may lag two months behind the market but they are the most accurate since they record what prices were actaully paid not asking prices etc. Enter your post code and see exactly what has sold in your neighbourhood and how much for comparison. The site has fancy graphs too showing house price trends and predictions. If nothing else it's fun snooping on all your friends and family to see what they paid for their property

http://www.zoopla.co.uk/house-prices/

[PlanB]

Re: Voluntary Repossession

One final thing to consider is whether you can boost the price of your house before you sell it to lift it out of negative equity. You say you have some savings but would these be enough to make any alterations to add value. For example a loft conversion or a single-story extension 'out the back' turns a 2 bed house into a 3 bed house which adds loads to its value. The planning rules were relaxed in April this year so you wouldn't need planning permission for this sort of thing.

http://www.guardian.co.uk/money/2012...eowners-extend

If you haven't got enough capital to do the work yourself then it may be a good idea to get the plans drawn up and some builders' quotes which the agent will show to prospective buyers who can see the potential for themselves. That way a family looking for a 3 bed house will still look and maybe buy your 2 bed one knowing that they can add another bedroom themselves later Or you could ask your lender for a further advance to cover the cost of the works which may be attractive to them if it increases the value of their investment.

If you've got a big garden then get planning consent for a mega extension which could even double the value of your current home. You can then sell the basic property with the planning consent which typically adds 10% to 15% to the value even without doing any work. Buyers can be both lazy and lack vision for a property's potential.

If you've got a really really big garden consider whether one of your neighbours may want to buy a chunck of it for themselves for (say) £25k This will devalue the price of your own house a litttle but sometimes people will pay a premium for extra land next door to their own home

If your garden backs on to farmland then maybe the farmer would want to buy a strip. Farmers are exempt from Inheritance Tax when they pass land to their children so are keen to buy up everything in site

So before you throw in the towel and sell at a loss do a little more research or post up a little more about the property and see if I can think of anything else

[Tornadotechie]

Re: Voluntary Repossession

Hi, Thanks for the advice,

Sorry for the slight confusion, I have a Scottish wife and live in Scotland so 'down South' refers to England in general. The house is in North Lincolnshire - just 17 or 18 miles South of Lincoln itself(hope the link works) the property has enough land for a small extension, but I don't have enough savings to have the work done, although there is a possibility I could get an architect in to draw up plans for the extension. The Housing Association route sounds interesting, it might be worth looking into that. I've had a look on Zoopla and they value the house at £91,500 so I'm not sure where my estate agent go their figure from as they said they did 'internet research' to value the property. I don't think it helps valuations when one neighbour was repossessed and the house sold at auction and another had marital breakdown and sold the house as cheap as possible just to be rid of it.

[PlanB]

Re: Voluntary Repossession

Did the estate agent value it at more or less than £91,500

[Tornadotechie]

Re: Voluntary Repossession

They valued it between 70 and 75