Survive negative equity - Repossession Help
For those whose finances and circumstances allow, the answer is to stay put, realising that eventually house prices are likely to go back up again. We still have a shortage of places for people to live and only limited space in which to build more homes. You can also increase the value of your home through simple home improvements like decorating and sorting out the garden. Big projects - like a new kitchen or bathroom or installing central heating - will add more to the value but that may not be as much as the project costs you.
Negative equity only causes serious problems when a family comes to re-mortgage its property, is forced to move home or if the owner can no longer meet his mortgage payments. At this point the threat of repossession rears its head.
There were 156,000 home owners in the first half of 2008 that were struggling with their mortgages and had not made a payment for at least three months. This number is expected to increase in the second half of the year.
Negative Equity Repossession Help -Survival Tips
- Treat mortgage payments as if they were rent: you have to pay for somewhere to live and mortgage payments should mean you eventually own an asset Do not just walk out on the debt. Lenders can now keep records for longer than before and are unlikely to forget bad debtors. Bear in mind that the national average house price remains slightly higher than it was a year ago - and short-term setbacks are unlikely to reverse the long-term upward trend because demand for housing in Britain exceeds supply.
- Pay more off some of your mortgage if you can afford it - most flexible mortgages allow you to repay up to 10 pc of the outstanding debt. Simple home improvements, such as a lick of fresh paint, can raise the value of a home.
- Take in a lodger and use the money to reduce debt; rent-a-room allowance enables you to receive up to £4,250 this year tax-free.
Surviving Negative Equity. Repossession Help with Mortgage deal coming to an end.
You are unlikely to be able to switch to another lender for a more competitive deal because no lender is currently offering mortgages for more than 100 per cent of a home’s value. This means sticking with the same lender, potentially on its expensive standard variable rate. Try and prepare for the higher monthly payments. Find out how much extra you are likely to have to pay and start putting that difference aside in a savings account. Equally, if you are just short of negative equity, talk to your lender. If you are a good debtor, your mortgage lender won’t want your property, so bargain with them and see if you can get a deal.
Surviving Negative Equity. Repossession Help with Moving House
You may want a bigger house or need to move to a different area for employment reasons or you you need to sell because a family is breaking up. Your lender should always be your first port of call. You may be able to sell your house with permission from your lender. You will need their agreement as they can stop a sale going through if the sale price will not cover the outstanding mortgage. You will need to persuade them that you have obtained the best possible price for the property. Point out that if the house was sold by your lender they would be likely to get a much lower price as the property would be empty and could fall into disrepair.
Ask if there are any schemes they run to help with negative equity. Some lenders may have packages for their existing borrowers but usually only if you have a good payment record. For example, you may be allowed to borrow up to 125% of the value of your new home when you move. There may be a maximum amount of debt on your old mortgage that can be included in your new mortgage.
Some lenders may agree to accept less than the full amount of the shortfall debt by securing part of the debt on a new property as part of your mortgage and writing off the rest. Some schemes ask for a guarantor on the new loan (such as a relative) and may want the loan secured on their home as well as your own. Be very careful, the guarantor’s house would be at risk if you can’t make the payments.
You may be able to clear the negative equity by obtaining an unsecured loan from your bank or building society. This will probably be more expensive than a secured loan because a higher rate of interest is usually charged, but an unsecured loan does not put your new house at risk. The loan may also be over a shorter period which would mean the monthly payments are likely to be larger.
Another option is renting out your house with your lender’s permission. Some lenders add an extra percentage on to the mortgage interest rate for allowing you to rent out the property. You could ask them to waive this if it will cause you hardship. You also need to check if your buildings and contents insurance will be affected by renting the house out. You will still be liable for the mortgage when your tenants leave and the rent you get may not cover the whole monthly mortgage payment. You will also be responsible for repairs to your property.
If you do rent out the house then you will have to find alternative accommodation such as a private tenancy or moving in with relatives. This may be useful if your aim is to move to another part of the country.
Surviving Negative Equity - Repossession Help