Rent/Default + Equity

[Strepsi]

Good evening.

Was wondering if anyone could offer some advice?

We have nightmare neighbours that rent next to us, unfortunately we can't see them ever moving as they are the owners son and partner.

I was wondering if you can rent a property if you credit is none existent (myself and wife). We have a long list of defaults!

Also we were thinking, I know it is a matter of opinion, but we think we have 35k of equity in our property. If we were to rent would it be an idea to sell our property and use the equity to pay off our debts (well at least make f and f offers), we have debt of around 80k. Although I have been informed that about 10k of that is not enforceable! And then start again ...

All advice welcome.

[cymruambyth]

Re: Rent/Default + Equity

Hi planb is our housing specialist and should be able to give help on rental stuff. I believe that credit checks for rental are different from other checks. Why are your neighbours so bad? Certain behaviour can result in council enforcement.

As for selling your property to settle your debts, are you up to date with your mortgage payments?

[Strepsi]

Re: Rent/Default + Equity

Hi planb is our housing specialist and should be able to give help on rental stuff. I believe that credit checks for rental are different from other checks. Why are your neighbours so bad? Certain behaviour can result in council enforcement.

As for selling your property to settle your debts, are you up to date with your mortgage payments?

Thanks. I thought there may have been a more suitable thread.

[PlanB]

Re: Rent/Default + Equity

We have nightmare neighbours that rent next to us, unfortunately we can't see them ever moving as they are the owners son and partner.

I was wondering if you can rent a property if you credit is none existent (myself and wife). We have a long list of defaults!

I wouldn't let rotten neighbours drive you out of your home.

You haven't said what they're doing to make your life miserable, but is there a faint possibility that they don't even know they've upset you or have you had rows with them over various issues?

It's sometimes possible to settle neighbour disputes through free Mediation provided by the Local Authority.

http://england.shelter.org.uk/get_ad..._and_mediation

In the past I've let my daughter and her bloke use a property I own and I was blissfully unaware she was being noisy with all-night parties and leaving rubbish strewn over the front garden (she failed to aim at the dustbin) so rats came for dinner at night. One day I got an email from the neighbour to politely make me aware of the situation. I instantly gave my daughter a slap (not literally) and harmony was restored. Do you know the owner or where to find him/her?

Selling up and moving home would be the last resort.

If you do decide to move then defaults on your credit file shouldn't be an obstacle since lettings agents and tenant referencing companies can't see them.

What matters most is whether you have a provable income to cover the rent. If you plan to sell your home and you say you have equity then you can always pay the first six months' rent upfront so a financial reference would not be necessary.

Plan B x

[PlanB]

Re: Rent/Default + Equity

we think we have 35k of equity in our property. If we were to rent would it be an idea to sell our property and use the equity to pay off our debts.

This is a different issue from your hellish neighbours.

A property is an appreciating asset. It earns you money while you are asleep

You can only sell a property once. When it's gone it's gone and you will no longer get the benefit of capital appreciation for doing nothing more than simply living there for years.

If you have debts and defaults you will not get another mortgage until they've fallen off your credit file. Stepping off the property ladder when you have equity is not something I would do.

Besides it costs a lot to sell a house with the agent's commission, solicitor's fees and removal costs etc.

I've no knowledge of your financial situation or your age (what stage in life you've reached) so I can't comment further except to say a wise clairvoyant once looked into a crystal ball and said to me "put your money in bricks and mortar my dear". It's been the best piece of advice I have ever been given.

Plan B x

[Strepsi]

Re: Rent/Default + Equity

This is a different issue from your hellish neighbours.

A property is an appreciating asset. It earns you money while you are asleep

You can only sell a property once. When it's gone it's gone and you will no longer get the benefit of capital appreciation for doing nothing more than simply living there for years.

If you have debts and defaults you will not get another mortgage until they've fallen off your credit file. Stepping off the property ladder when you have equity is not something I would do.

Besides it costs a lot to sell a house with the agent's commission, solicitor's fees and removal costs etc.

I've no knowledge of your financial situation or your age (what stage in life you've reached) so I can't comment further except to say a wise clairvoyant once looked into a crystal ball and said to me "put your money in bricks and mortar my dear". It's been the best piece of advice I have ever been given.

Plan B x

I am in my mid 40's. At the moment we are paying interest only. We own another house that we rent out,which is also interest only however at the moment we are making £250 a month on this property. We would be looking to get this on repayment (possibly). So I suppose in a way we do have 'bricks and mortar'. The other thing is where we are is too small for us in regards size of daughters bedroom.

[PlanB]

Re: Rent/Default + Equity

we are paying interest only. We own another house that we rent out,which is also interest only however at the moment we are making £250 a month on this property. We would be looking to get this on repayment (possibly). So I suppose in a way we do have 'bricks and mortar'. The other thing is where we are is too small for us in regards size of daughters bedroom.

I don't, can't, won't give advice but I have been 'in property' for over four decades and touch wood it's not gone wrong for me yet.

Why would you want to change an interest only mortgage into a repayment one unless this means the interest applied would decrease each month. Many lenders only 'adjust' interest once a year. Who is your lender ?

Secondly, if your living space (a bedroom too small for your daughter) isn't ideal then consider whether alterations to the property's layout are a cheaper option to selling up. Do you have room for a loft conversion etc?

What about the house you rent out? Would that be an alternative? You could rent out where you live and move into that if the living accommodation was more suitable (there could be tax advantages too).

Or is this all about the need to move on with your life and associated debts which is totally understandable?

Plan B x

[Strepsi]

Re: Rent/Default + Equity

I don't, can't, won't give advice but I have been 'in property' for over four decades and touch wood it's not gone wrong for me yet.

Why would you want to change an interest only mortgage into a repayment one unless this means the interest applied would decrease each month. Many lenders only 'adjust' interest once a year. Who is your lender ?

Secondly, if your living space (a bedroom too small for your daughter) isn't ideal then consider whether alterations to the property's layout are a cheaper option to selling up. Do you have room for a loft conversion etc?

What about the house you rent out? Would that be an alternative? You could rent out where you live and move into that if the living accommodation was more suitable (there could be tax advantages too).

Or is this all about the need to move on with your life and associated debts which is totally understandable?

Plan B x

Basically we made a big mistake a couple of years ago that meant us having outstanding credit rating to us now being 80k in debt. My business also went belly up. I lost about two stone in weight, my wife had to quit her study to go back into work - she has basically saved us ( & me).

We have an issue with our neighbours and past neighbours all of whom have been tenants. So as we see it this is never going to end!

My wife is savvy, she thinks we should rent a decent property for a few years,in that time get our debts sorted. Having a chunk of equity from one house should help!

The other house we have is too small and wrong location for schools and we have considered making our daughters room bigger.

But we would have spent more money on the house and would be always stock with lousy neighbours!

I think ultimately we just want a fresh start...

Can you explain why it would be a bad idea to convert from an interest only mortgage?

Cheers

[PlanB]

Re: Rent/Default + Equity

I sense you've fallen out of love with your house. However selling it might not give you the quick fix you crave.

On the other hand I'm inclined to agree with your savvy wife now that I know you have another property which will continue to give you capital appreciation.

If you sell your main home you limit your Capital Gains Tax issues when you come to sell the other one since you'll not have a "second home". You may need to inform the tax office that your other house is your PPR once your current one has been sold.

To answer your last question, I don't see the point in changing from an interest only to a repayment mortgage if you plan to sell soon, unless this will significantly decrease the interest charged each month. Changing to repayment would increase your monthly repayments so consider whether the money could be better used to settle the debts which are enforceable especially if any of those are still charging you interest which will probably be much higher than your mortgage rate.

Most mortgages allow you to make overpayments although some restrict it to 10% of the capital outstanding per year etc. Check the terms of your loan. Instead of changing to repayment you could make random overpayments if your objective is to reduce the loan size. That way you won't run into problems if you have a drop in income and can't manage the higher repayments caused by a formal commitment to a repayment mortgage.

If you do go ahead with the sale then think twice about using the equity simply to pay off debts especially the ones which are unenforceable.

You won 't have any problem renting with defaults if you are in a position to pay six or twelve months rent upfront.

Plan B x

[Strepsi]

Re: Rent/Default + Equity

I sense you've fallen out of love with your house. However selling it might not give you the quick fix you crave.

On the other hand I'm inclined to agree with your savvy wife now that I know you have another property which will continue to give you capital appreciation.

If you sell your main home you limit your Capital Gains Tax issues when you come to sell the other one since you'll not have a "second home". You may need to inform the tax office that your other house is your PPR once your current one has been sold.

To answer your last question, I don't see the point in changing from an interest only to a repayment mortgage if you plan to sell soon, unless this will significantly decrease the interest charged each month. Changing to repayment would increase your monthly repayments so consider whether the money could be better used to settle the debts which are enforceable especially if any of those are still charging you interest which will probably be much higher than your mortgage rate.

Most mortgages allow you to make overpayments although some restrict it to 10% of the capital outstanding per year etc. Check the terms of your loan. Instead of changing to repayment you could make random overpayments if your objective is to reduce the loan size. That way you won't run into problems if you have a drop in income and can't manage the higher repayments caused by a formal commitment to a repayment mortgage.

If you do go ahead with the sale then think twice about using the equity simply to pay off debts especially the ones which are unenforceable.

You won 't have any problem renting with defaults if you are in a position to pay six or twelve months rent upfront.

Plan B x

I think my wife would want to use all the money to pay off debts, why do we need to 'think twice'. At the moment I am slowly getting the ball rolling with regards 'enforceability'.

I think the only mortgage that we could convert would be our second home. However I didn't realise that you could make over payments.

We would be looking to sell the property whilst we are renting, so probably won't be able to pay months in advance for rent.

Why don't you think it would give us a 'quick fix'?

Cheers

[PlanB]

Re: Rent/Default + Equity

I think my wife would want to use all the money to pay off debts, why do we need to 'think twice'. . .

. . .Why don't you think it would give us a 'quick fix'?

I think this is probably a conversation you should be having with your wife since I don't now the 'ins and outs' of your personal situation.

Plan B x

[nanna58]

Re: Rent/Default + Equity

We rented in the last 6 mths and all went well x

[Strepsi]

Re: Rent/Default + Equity

I am sat on the settee having a glass of wine. Worrying that we maybe making the wrong decision - it is so hard to know what to do...

Going to see a property in the morning... my wife really wants to do this... I see in her face that she needs to do this.

But once we have sold our house that's it - we can't just buy another one!

[cymruambyth]

Re: Rent/Default + Equity

It's a difficult decision for you, but one you must both sit down and agree on or there could be 'discussions on ' later on! We can help discuss ideas, but can't make any decisions. Post here if and when you want to bounce ideas as a different perspective can help. Does your wife know that you are posting here and if so could her reading on AAD help her?

You often find posts at 1 or 2 am when people can't sleep.

[MrsD]

Re: Rent/Default + Equity

I think my wife would want to use all the money to pay off debts, why do we need to 'think twice'. At the moment I am slowly getting the ball rolling with regards 'enforceability'.

I think the only mortgage that we could convert would be our second home. However I didn't realise that you could make over payments.

We would be looking to sell the property whilst we are renting, so probably won't be able to pay months in advance for rent.

Why don't you think it would give us a 'quick fix'?

Cheers

I would sell first then do what Nanna did and rent then

I wouldn't be spending the money on the debt though, I'd be squirrelling it away for emergencies and peace of mind. I'd get your wife to have a read through some of the diaries and the one year in threads

but of course, you have to decide whatever is best for you