Shortfall after the sale of a property

[pynklady]

Hi All

 

I have not been on here for a lifetime and have been getting up to date with all of the mindfields associated with finance.

 

However, we all in this together so hopefully someone can answer my query:

 

My husband and I have a mortgage on our old property. We current live in a rented property.

 

Even if we have to sell on the open market we know that the property market is unlikely to change for the forseeable. Given that two other properties on the same street were recently sold for less we are worried about the negative equity. What happens when there is a shortfall ? We have no mortgage arrears so that isn't an issue. I am confused as to what lenders do/don't do.

 

I have searched the web but it only really tells me about repos and this is not the case for us ? I will never have a mortgage again as I can't afford it due to my personal circumstances - but we also are worried about what potential mass debt we could be in after the sale of the property. We assume that as we are good mortgage payers that the mortgage company will have to assist us ? We only bought the property in 2007 and I know that this was the worst time to be a buyer given the credit crunch we are in.

 

Can someone tell us what our options would be and where we would stand ? NB: we have NOT advised our mortgage co that we intend to sell as we won't do anything until we know what our rights are and what the potential of the situation is.

 

Many Thanks:?:

[ThewarstartsNOW]

Hiya, hopefully there will be more responses coming, but from the experience I have had in this type of situation, and definately if you have bought a brand new property in 2007, if you do not have any assets or savings in accounts or property elsewhere, and you are currently renting, then because the amount of the shortfall will be so huge, the easiest and less stressful route is to go bankrupt and start again. Bankruptcy is not as bad as one thinks, as long as you have not been upto crazy things, you can still operate an account etc and everything is the same apart from the fact you owe nothing and you have bad credit, probably the same position as everyone is in anyway, apart from the owing nothing part.

 

Remember this is just my opinion and I am sure there will be others, you need to find the least stressful and cost effective route out.

 

By the way, when you bought the house in 2007, did you:

 

a) Use a mortgage broker ?

b) Get an interest only mortgage with no investment vehicle setup ?

c) Any payment protection ?

d) Self Cert the income ?

 

Lastly did you get an initial disclosure document from the broker (if broker used) and did you get a key facts illustration ?

 

Lastly before lastly, do not worry, be positive and be around positive people and you will easily come out of this and carry on with life

[jankah]

I dont know if you managed to get this sorted but i thought i would tell you my personal experience. I cannot give you advice but this is what happened to us:

We had a mortgage with NR with massive arrears and also a secured loan on the property resulting in negative equity. we moved to a rented property before our credit rating went too low for us to be able to pass a credit check with landlords.

 

We managed to sell the house on open market and got good value but still had shortfall of about 25K. The funds were distributed as follows:

1. solicitors fees

2. estate agent fees

3. NR

4. remainder went to secured loan who had to put in writing they agree to the sale to go ahead and they allow us to pay the rest of the shortfall by monthly instalments based on what we can afford.

 

Its been 18 months since then and we pay regularly what we agreed and havent heard from the company since. it will take ages to clear the debt but once the default they registered with credit reference agencies get removed after 6 years, our credit rating will go back up again. So there is light at the end of the tunel.

 

The whole sale process was the same as normal non shortfall sale, it only got very complicated at the end when all agreements between the solicitors and the secured loan company had to be done to tight deadlines and be worded in a specific way.

 

Hope this helped a little bit.

[Gaston Grimsdyke]

If you don't intend to redeem the mortgage, you won't be able to sell without the consent of the lender. To get that consent you would have to come to some agreement in advance to pay the shortfall after the sale. Depending on who the lender is, they might even consider reducing the redemption figure (on the basis that the possible alternative of you defaulting, them taking possession proceedings and selling themselves will lead to a much bigger shortfall). The long and short of it is, however, that you will have to discuss it with them.

[jankah]

And that's exactly what we did. The only issue was that we couldnt get that consent until we had a buyer because the forms required detailed info re the buyer, their solicitor etc- stuff we couldnt get until we had a firm offer in place.

[Gaston Grimsdyke]

Yes that's logical. If they are going to have to give up some of their security they will need to be satisfied that it is a bona fide sale at arm's length as opposed to, say, a sale at a discount to a connected party. Sounds like they have an established procedure in place for sales at shortfalls so I would be optimistic that if you are able to find a buyer they will not unreasonably withhold consent to the sale.