UK buy to let property, respossession likely - live in Spain

[dave444472]

Hi,

 

First time on here, looking for some advice -

 

I have a buy to let property in the UK, my long term tenant is leaving, after witholding some of the rent and the house is in a poor state of repair, needing at least £3,000 worth of work.

 

I had the house valued 6 months ago at £100,000 (more likely £95,000 now looking at current prices) and I owe £96,800 on an interest only buy to let mortgage.

 

My problem is that I have no way of making any more payments to the mortgage company and I have no way of raising any cash to repair the house to make it rentable, so I am considering repossession.

 

I live in Spain with my partner in a property which we own outright in both our names, but itsn't completed so isn't legally classed as a dwelling.

 

My questions are -

 

What is the best way to approach the mortgage company to ensure that a

repossession can be done swiftly?

 

At present the mail for this mortgage goes to my mothers house in the UK, if I change my contact address to Spain will they accept this?

 

I understand that the mortgage company is unlikely to get the full asking price, so I will owe them the difference, Would I be liable for this debt in Spain?

 

Many thanks for any help or advice,

 

Dave

[pauperinparadise]

BTW I'm a newbie living in Spain too.

This is just the worst time to have your buy to let repossessed. You'd be much better off selling it yourself for the value of the mortgage if you can get it. If you don't, the bank could reposess and sell on to anybody for anything, leaving you with a debt almost as big as the one you have now when they add their admin and selling costs and anything else the greedy bs want to put on;-)! Or, if there's any way you can make the repayments because interest only should be quite low now if you're on a tracker. Keep paying until you can turn things around or house prices move up?

Is the work really going to cost that much? Could you find someone who's prepared to put some repairs in, in exchange for a lowered rent? Or in exchange for a share of any amount above your mortgage that you get when you do sell?

Just a couple of thoughts.

[MARTIN3030]

Hi Dave,welcome to the site.

I think it would be an idea to move this to the repo forums for some ideas.

Pauperinparadise raises some good points and also options to consider.

I will move this now.

[newstarter]

Almost anyone or any organisation with anything to do with mortgages will tell you not to hand in keys and just be repossessed(not at least without a fight anyways),and here,s why,firstly your house will be auctioned off for a very very low price,i know lenders have a duty to get the best price possible for a repossessed property but never do.Only yesterday evening i was looking at a 3 bed semi(repode property) sold at auction for a smidgin under 50k,you try looking in your local estate agents for one at that price.Secondly,they will come after you for any shortfall, for the outstanding balance, they have 12 years in which to do it.Thirdly although your lender is responsible for the properties upkeep until its sold sadly most are just left empty with no upkeep carried out. You can also bet on some hefty costs added to your account.I would hang on to this property if i could find a way to get it done up cheaply,get some short term tennants in,and if you really want rid,put it on the market for sale,although in the current climate i cannot see you moving it too quickly.

[dave444472]

Thanks for the replies pauperinparadise and newstarter, I have a few more questions if anyone can help?

 

I (foolishly) fixed the mortgage payments when rates where high so I'm paying about £480 pcm, which is far more than I can afford.

Does anyone one have any experience of negotiating a lower rate with a lender when you are unable to pay?

 

If I put the house on the market and it sold for less than is owed on the mortgage, what can the mortgage company do to reclaim the shortfall on the debt? (I dont have any cash to make up the difference)

 

If did get the property repossessed could I declare myself bankrupt in the UK to avoid being chased by the mortgage company for the shortfall ?

 

Thanks in advance for any advice, I'm just trying to understand what my options would are before I make any decisions.

 

Dave

[newstarter]

First question,you could apply to your lender with regard to moving to intrest only payments for 12 months,

 

apply for a payment holiday for 6-12 months in which you would pay no payments at all

 

apply to your lender to make reduced payments as you are putting the house on the market.

 

Second question,your lender can chase you for up to 12 years for the outstanding balance but only six years for the intrest on the outstanding balance.What usually happens is your

lender will chase you for say 12 months then they would involve a debt collection agency who would chase the shortfall for the lender on an pre agreed percentage split between them.However being as you live abroad the process would be difficult for the lender to re-coup any shortfall but it wouldnt stop them trying.

Third question,yes making yourself bancrupt would effectively end the debt however you have a property in Spain i gather and although it is joint owned,a reciever could claim your share thus enforcing a sale for your share of any equity,so be careful if you go down the bancrupcy route.

[dave444472]

Thanks newstarter, do you have any experience of applying to a lender for reduced payments or a payment holiday?

Is this best done over the telephone or in writing? The mortgage company is Mortgage Express.

 

thanks again,

 

Dave.

[sillygirl1]

Everything should be done in writing, the companies will mislead you on the phone and not pass information onto the next department. Emails are acceptable tomost companies.

 

If you do get repossessed you will be hammered for additional fees, I had £4,500 Asset Management Fee added to the alleged £500 shortfall, but as the company involved are in administration they are getting nowt... they can't explain who was appointed what was done and where in the terms and conditions they were allowed to do this.

 

It is worth negotiating with the company concerned first rather than just throw in the towel. The market is very dead at the moment and the repossession sharks are struggling to get cash to fund their purchases so are hanging onto properties longer than usual to get a better profit.

[newstarter]

Fantastic post S.G she explains fully just what pitfalls there are when a house is repossessed.Now,always always do these applications in writing,you could make one or two genral enquiries over the phone but dont go into any great detail,as S.G quite rightly says such communication can often be denied by the lender,but a phone call just to test the water so to speak wont do any harm. A word of warning here M.X are very very awkward (and thats putting it politely) when you get into arrears so act as soon as you can.Sound them out as to what options are availabe,(go for payment holiday) and dont go into too much detail and see if they offer this as an option,then come back to the forum.

[newstarter]

P.S if they sound agreeable to this option then write a formal letter applying for a 12 month repayment holiday,that should by you some time to get the place done up and get it on the market.Another word to the wise,if you do get a payment holiday you will need to look sharp over the next 12 months because a buy to let mortgage comes under the law of property act 1925,your lender can repossess after 3 months of arrears without having to go through a lenghy repo process,the first you may hear about it is when its already been sold.Even if you had a tennant or tennants in the house,your lender can what is known as over-reach and still sell,then evict the tennants.So be careful and get this dealt with a.s.a.p.

[dave444472]

All,

 

Many thanks for your advice and answers to all my questions - very useful and friendly forum!

 

I'm still considering all my options, but I think I will apply for a payment holiday, put the house on the market for a bargain price, make a small loss and then let Mortgage Express chase me for the shortfall.

 

It seems a better plan than getting it repossessed, letting them sell it for peanuts and then me owing them a lot more!

 

One thing concerns me though, can they refuse to let the sale go through if it the sale price doesnt cover the amount owed?

The post on the top of page 4, on the "calling all Mortgage Express customers" thread (sorry cant post links yet in this forum) seems to think they can.

 

Can anyone confirm if this is possible, can they stop a sale?

 

cheers,

 

Dave.

[newstarter]

Yes they could if there has been a breach of contract,and payment defaults would constitute a breach so you do need to act fast.

[Killerschick]

Hi Dave,

 

Just to add to the above posts, you will find that you cannot sell a property for less than the amount of the mortgage without the mortgage company's consent. If their loan is not paid back they will not release their charge and the property cannot be transferred to the intended purchaser. You would have discovered this when you instructed conveyancers/solicitors in the sale of the property who would have undoubtedly pointed this out. The solicitors or conveyancers have to be able to give an undertaking to the purchaser that they will obtain the property free of any encumbrances. They will not be able to give this undertaking if they do not have either sufficient funds to clear all loans secured on the property or the agreement of any lenders who are not receiving full sums to remove their charges on the property so it is passed unencumbered to the purchaser.

 

It is not necessarily difficult to get the agreement of the mortgage company but they will probably want to see evidence in the form of valuations and to correspond with your solicitor to ensure it is a genuine arms length sale at full value. People do try to pay less than the full mortgage balance by claiming negative equity then trying to sell their property at a knock down price to a relative or friend so the mortgage company will want to make sure the sale is genuine. They may even require a valuation but even then the costs would be considerably less than managing a property to sale as SG points out above.

 

The downside of having to get consent in advance is that the mortgage company are not likely to give it without some sort of proposal for the payment of any shortfall. They will want to know your whereabouts (if they don't already given we are talking about a BTL property) and some sort of offer of repayment, or, in cases of extreme hardship some evidence of why you can't pay anything (and even then they will probably keep the position under review in case things change).

 

Just want to make sure you are fully informed when you decide how to proceed.

 

KC

[dave444472]

Cheers for that newstarter and thanks for explaining that in detail KC!

 

Do you know if the Mortgage company are likely to accept a regular monthly payment to clear the shortfall, or are they likely to want it paid off as a lump sum?

[Killerschick]

Hi Dave,

 

In my experience lenders are usually willing to agree monthly payments based on ability to pay if agreeing this sort of arrangement.

 

I missed one of the points you raised about the mortgage company accepting an address change to Spain. In answer, yes, they should accept a Spanish address and this could work in your favour in negotiations. Realistically, as you live in Spain it's probably very unlikely that they would pursue you if the property was repossessed and sold with shortfall so it makes an agreed sale with a proposal for payments to any shortfall more attractive as a business case. Also, if, after the property was sold, you didn't keep up with any agreed payments it would probably make it quite unlikely that they would take any legal action as most UK lenders aren't experienced in pursuing people abroad (Santander being one obvious exception!).

 

KC

 

perty

[heliosfa]

Hi Dave, sorry to hear about your situation and being a landlord too I sympathise!

 

Yo usay that the Tennat withheld rent - have you done anything about this? and how much are you talking about?

 

The property is "run down" - is this just wear and tear or was any of the damage caused by the tennant?

 

I don't know if you have looked at the option of remortgaging (obviously dependant on house value, it might be worth getting a free valuation from an estate agent so you have an idea) with a different provider on a different deal? I've just had a look around and there buy to lets on a two year tracker with payments under £362 for Buy to Let.

 

Thanks,

H

[dave444472]

KC - Thanks for that extra information, do you know how long lenders are likely to spread the shortfall over?

For example if I had £10k shortfall, would I be able to repay over the remaining term of my mortgage (approx 17 years) or will they want it back quicker than that?

 

H - I'm short of a couple of months rent, at the moment I'm "hoping" to get it back before they leave, to be honest its general wear and tear to the property as the tenants have been in for over 10 years!

Where did you see these "buy to lets on a two year tracker with payments under £362" ? I've had a look round and struggled to find any that will offer deals at 100% LTV. I've spoken this month with an estate agent who viewed the property 6 months ago and he recommended £90k as a price for a "quick sale" so I think I'm more likely to be in negative equity.

 

Thanks again for all the replies to my questions, there has been lots of useful information and ideas given here.

[heliosfa]

H - I'm short of a couple of months rent, at the moment I'm "hoping" to get it back before they leave, to be honest its general wear and tear to the property as the tenants have been in for over 10 years!

so how much rent in total?

 

 

Where did you see these "buy to lets on a two year tracker with payments under £362" ? I've had a look round and struggled to find any that will offer deals at 100% LTV. I've spoken this month with an estate agent who viewed the property 6 months ago and he recommended £90k as a price for a "quick sale" so I think I'm more likely to be in negative equity.

I had a quick look at my current mortgage provider, RBS, and they have a buy to let for £359.20/month, 2 year tracker. Problem is you need 25% equity which is why I was asking if you had a recent valuation. It migth be worth asking for one and don't mention "quick sale".

 

Thnaks,

H

[Killerschick]

Hi Dave,

 

From previous experience (but not recent so things may have changed) lenders would be more concerned about agreeing a a level of payment that was affordable than achieving recovery within a specified time frame. However, this is on the basis that you can put the situation as a best case scenario for them e.g. (using completely made up figures):-

 

You sell property for £50k with £60k mortgage leaving £10k shortfall which you propose to pay at £50pm, it will take about 16.5 years at that rate which doesn't sound great but they are at least in contact with you and your circumstances might improve so there are benefits for them.

 

They repo property (or take it into management via LPA receivers) with £60k mortgage take 6 months to sell for £47.5k during which time with interest and costs mortgage increases to £65k they are left with £17.5k shortfall with no proposals for repayment and no up to date contact details for you. They then have to spend time and money tracing before they can even consider recovery and as you are overseas their prospects of enforcing via legal means are slim.

 

They will generally want details of your income and expenditure and to review the position on a periodic basis (annually say). If you own other property with equity they might want to take security on it but I don't know what the position would be with your property in Spain given its classification and the fact that most British lenders would not have the resources or inclination to get security on a foreign property. It might not be necessary to mention it and it might make them start thinking about bankrupting you to get the Trustee to realise the asset (unless perhaps the classification issue makes it valueless?).

 

Hope this helps.

 

KC

[patrickq1]

good post from KC , also if your living in spain it might be worthwile having an ofshore account via IOM this way you can have your mail posted ther and then sent to you from IOM ..it is also beneficial for tax purposes

patrickq1

gave you a well deserved sta KC xx

[MARTIN3030]

But the post was from January !

 

The OFT have recently been talking of regulation for this industry-I think its under consultation now.

[patrickq1]

its also being discussed with the goverment on MP is trying to have a ten minit rule and have a new statute passed in the commons that will prevent the Mortgage Co from placing properties into their hands without aggreement of the BTL clients permission and if it is placed under the receivers it must be done for the benefit of the bTL client who shall be allowed to have input into the running of this in order to stop the receivers abuse of power , but as you know Martin these things can drag on in Parliment due to their inability to see sense

patrickq1

ps the OFT are looking at it but that is as far as it goes at this moment in time

[MARTIN3030]

Yes in some sections there is currently no regulations at all.

I think there are calls for more regulation in the TDS area too.