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imelda
Starting Member
4 Posts |
 Posted - 27 March 2009 : 07:15:24
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Can anybody help?
My hubby and I have looked at every option, and bankruptcy is the only one left. Thing is we own a house which is mortgaged with Northern Rock. It is in negative equity as it is a 'Together' mtg with an element of it being unsecured. Once you 'remove' the unsecured element, there is still no (or a very tiny amount of) equity left.
I've been reading the site and have read about the BI and the possibility of a 3rd party buying this back, but would this apply if you don't live in the house?
To try and hold off bankruptcy, we have moved in with my father (who needs looking after anyway) and rented out our property. We still have to pay a shortfall to the mortgage as the rent doesn't cover it all.
We really want to keep the house if at all possible, as staying with him long term is not going to b an option. |
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John
New Member
United Kingdom
73 Posts |
Posted - 27 March 2009 : 08:21:46
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Hi
your first problem is that by renting the property out without Northern Rock's authority, if this is the case, may contravene the terms of your mortgage contract.
In bankruptcy the mortgaged home in which you reside must be dealt with by the OR within 3 years. The current market as it is, if there is negative equity the OR will likely offer your BI in the property back to you for £1 + fees. This is a judgement call by the OR. If the market was such that the OR were confident that before the 3 year period were up there would almost definitely be equity then the purchase back offer of £1 would not be made. The OR has a duty to realise as much as possible from your assets for the benefit of your creditors.
So the current market and the 3 year rule is what dictates the OR's decision to offer, or not, the BI for £1. If the 3 year rule did not apply the OR could simply place a charge on the property and wait for the equity to rise. 10 or 20 years from now that could be a substantial amount.
In the case of an investment property the 3 year rule does not apply. Therefore whilst there may be no equity now the OR can wait for as long as they choose. This of course means that, irrespective of how the market performs, until the equity in the investment property rises sufficiently to pay all of your debts, with interest, and all of the trustees fees, with interest, you will always, effectively, own a property where the equity is never likely to give you a return.
John White
England Jackman & Spacey |
Edited by - John on 27 March 2009 08:23:14 |
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imelda
Starting Member
4 Posts |
Posted - 27 March 2009 : 18:59:31
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Thanks John but still a little fuzzy!!!!!
We have got Northern Rocks permission to rent out so thats all above board.
If we moved back into the property, would it enhance our position? (IE) Allow us to buy the BI or would the OR wait 3yrs anyway?
If we didn't and the OR doesn't offer us the BI as we rent the property out, what would happen to our tenant? Would we have to let them know about our situation?
Sorry to ask so many basic questions but we're finding it really hard to get to grips with!!
Maybe we're trying to hang on to somethin we really should let go of!!! |
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John
New Member
United Kingdom
73 Posts |
Posted - 27 March 2009 : 22:08:26
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Hi
the simplest solution if you want to keep the property is to move back in. That's assuming that you have indeed lived in the property at some point and that the original mortgage was not a buy to let.
If you wanted to keep the property and continue to rent it out, provided there is no equity and you keep up the mortgage repayments there isn't an issue. Your tenants need not find out in that case. However as per my previous post the OR would place a charge on the property which would deem any improvement in the market fruitless for you.
Also if the rent exceeds the mortgage payment the excess will be included as income and will increase your prospects of an IPA.
Continuing with the mortgage and continuing to rent it out has no future as an investment.
John White
England Jackman & Spacey |
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Can anybody help?
