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Secured Loan Shortfall from sale of property

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Hi Everyone,

 

I was looking for some advice on negotiating with a secured loan provider. We have a flat worth approx 80k - the mortgage is currently sitting at 70k and we have a secured loan of 23k

 

From the sale of the property there will be a shortfall of 13k left on the secured loan - we have asked if the loan company can turn this into a unsecured loan on the same terms as we don't have any other savings etc to clear it off. We plan on renting as we can't afford to buy a new house so it is not possible for us to transfer the loan onto another property. They have said this is a possibility and have sent us an income / expenditure form and asked us to confirm the valuation, sale price etc.

 

Has anyone had any experience of this before? I am just worried that they will see the 13k as too much and block any sale - if there any legal routes to go down if this does happen? I read on a previous post about going to court to get an 'order of sale'

 

i have a lot of unsecured debt (manageable) so i dont see getting another unsecured loan to clear the 13k as an option until well after the sale of the flat when my credit might improve a bit.

 

I'd imagine that there is more and more people in this situation with negative equity etc - when we got this loan they said we could have 125% of the house value - crazy! worst thing i ever done was take it out as secured :-x

 

I'm new to this so if you need any more info please let me know - thanks :-D

 

A

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Could renting out the flat be an alternative? Seems you'll have an awful lot of debt to sort out and no home. Perhaps you are thinking housing benefit for the rent on your new home. could you extend your mortgage? TAG

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hi thanks for the reply - to be honest we just want rid of the flat - rent a nice house while paying off our debts then save up a good deposit on another house!

 

we are pretty much set on that but just need it signed off by the secured loan company - i've been trawling through different posts tonight with varying opinions on whether they would be agreeable

 

one of the terms which comes up quite a bit is 'power of sale' from the 1st charge holder - so my mortgage company could basically force the sale no matter what the secured loan company says?

 

A

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your mortgage company has the first charge, the secured loan company has a second charge.

 

personally, i think that the secured loan company would not allow their secured loan to be unsecured...

i thought that paying a mortgage would be much cheaper than renting...

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yes but i have seen examples of people being in financial difficulties and the first charge company forcing the sale to get their money back and the second charge being left to come to some king of arrangement with the customer - especially when there is negative equity involved

 

im hoping they are more than open to the idea - especially after being told by them its a possibility

 

the other thing i have just thought of is the expenditure form they have sent me - do u think this is to calculate whether i can still afford to live there (i.e. we wont let u sell) or whether i can afford the agreed payments after the sale should the loan go unsecured?

 

ps the reason we are wanting to sell if we have a kid - and the flat is only 1 bedroom - so we dont have a choice - if i could afford a nice deposit on a house i would be doing it but it needs to be sell > rent > save > buy - for now anyway :)

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i am not sure about the expenditure form.

 

i know the following doesn't answer your question but i will type it anyway.

 

it is becoming increasingly difficult for someone to get on the property ladder, whilst you want to get off this ladder and sell up!

have you thought of the possibility of changing the first mortgage to a buy to let mortgage, this will enable to rent the property out to tenants. it would give you more options, - ie could provide you with small amount of cash even - and you get to keep your property! if you need to change to a buy to let mortgage, then you would need a deed of postponement from your second charge mortgage. otherwise, you could just ask the first charge if they would give you permission to rent out your flat.

 

just a thought - as this would keep your options more open - you may even make money this way...

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thanks for your reply - its a road we have looked to go down - with renting out the flat

 

unfortunately the potential income from rent would not cover the mortgage (flat across from us is rented so we know the expected income) plus moving to buy to let would likely increase our interest rate so payments would be even more - although i do think they give permission to rent for 12/24 months without changing mortgage - then there is the associated fees with being a landlord, tax returns etc etc.

 

i see what you are saying about the property ladder - and renting is really just money down the drain - but it short term until we can buy and we need the space - keeping the flat is extra hassle we could do without so i would sleep easier if it was sold :-D

 

plus it would help us get rid of this secured loan quicker - the interest we are paying on it is ridiculous!! :-x

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Sorry didn't realise that there were two different companies involved. So you have a first and second charge? Is this right?

The ist mortgagee can sell under power of sale but this involves repossession proceedings. I'm not sure that what you plan is that easy to do. If there is a shortfall from this as you won't have control of the sale, the 1sr mortgagee will come after you for that, and any new property you owned would be at risk.

The 2nd chargee will also be looking for their money. all not good for your credit and ever owning your own house again.

Surely letting a better prospect.

 

Depends on so much. could you rearrange your repayments? TAG

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yeah we have a 1st and 2nd charge - from the sale of the flat we will still owe the 2nd charge around 13k. the sale of the flat will clear the mortgage and then some

 

i would never want to go down the road of repo or damaging our credit - i have quite a lot of debt but always pay it - so im happy to pay what i owe but just want to get the flat sold and continue to pay off the 13k on an unsecured basis

 

the sooner we are rid of the secured loan the better - its been on the go now for 5 years and we have already paid 12.5k in interest - i dont know what i was thinking when i applied for it!!

 

im basically offering to pay them the same amount each month that i am just now until i can get a new unsecured loan to cover the shortfall - i just cant have them blocking any sale because of the 13k!

 

thanks again for your replies

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Hi All,

 

I have asked my secured loan company if the shortfall from the sale of my flat (around 13k) can be made unsecured - they have said this is a possibility and sent us an income and expenditure form to complete.

 

I am wary of how to fill this in - are they checking if we will be able to afford the unsecured loan after the sale (and therefore be less likely to default) or are they trying to check if we can still afford to stay in the flat and therefore block any sale.

 

We can afford the payments either way no problem but need to move due to space (1 kid and another on the way - 1 bedroom flat - not good!!)

 

Thanks!

 

A :razz:

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keep to one thread please

 

dx


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sorry - forgot i had mentioned the form in my OP the other night - thanks

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If you have sold the property and will be renting - how will they secure any shortfall ! It will automatically become unsecured.. wont it ?


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Exactly Citizen, I am in the same position, 1st charge repossess sells and just about makes a profit, pays any left over to second charge then that debt becomes unsecured. As I have borrowed over £25k it is not covered by the CCA, they will either have to accept what I can afford, ( not much ) or else I will go BR.


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