Morgage - should I hand the keys back?

[pepperami]

Sorry if this is the wrong forum but I searched around... I guess mortgages are business and this is what this is about.

Due to decline in the economy I have had to endure a decrease in business and subsequently my money has dropped 25%.

I previously reborrowed to stay afloat and am in negative equity on my home by now 45K, my mortgage went up by £400 a month earlier this year.

As a self employed person I know I will be insolvant at the end of the year and risk loosing the house anyway.

At 40 years old with no children, my estate will go to the government. For one months mortgage payment here, I can rent a house in Spain for 5 months that is bigger and in the sun, 20 minutes from a beach. All I need to do is move out and hand the keys back to the building society. Frankly, a nice home but the mortgage is a bad debt through no fault of my own. I can't see me gaining anything in the next 20 years.

I work from home via the internet and Spain has a good service. My building society has treated me like dirt even though I've been a good customer.

Does anyone see the major problems with this?

Thanks

P

 

[obscure]

Handing back the keys won't get rid of the debt. You will still owe the mortgage so better to sell the house (even at a loss) in order to reduce the debt.

 

[Tom McClelland]

Handing back the keys won't get rid of the debt. You will still owe the mortgage so better to sell the house (even at a loss) in order to reduce the debt.

That's my understanding too. If you give them the keys back they sell the house and you still owe them any shortfall. But they don't like foreclosure if they can avoid it so it is probably odten best to talk to them. I've heard amazing stories of portions of the debt being waived.

But I'm not sure if you can sell the house for below the debt when it is being used to guarantee a mortgage. That would open up all kinds of potential for fraud. They've got the deeds usually so you'd have to have their approval to sell up. They may prefer for example to take control of the house off your hands and try to get a higher price than you found.

 

[deniser]

First, my commiserations.

Could you cover the mortgage costs by renting the house out and move to Spain anyway until things recover a little? You don't know how things might change in the future and how a repo might affect furure plans. It is best avoided if at all possible.

Have you spoken to the BS and gone through any alternative options such as extending the term, swapping to a different rate, having a payment holiday etc?

 

[pepperami]

So bottom line is I have to file an IVA to shift the debt?

Sounds irresponsible but I definitely didn't start it! I think greed did: Banks and oil companies and credit cards with their PPI policies that few of us wanted.

 

[Write My Site]

How many bedrooms does your house have? Could you take in a lodger or two to help you pay the increase in your mortgage? Or even rent the whole property out if you're going to Spain?

 

[The Panda]

Go see the building society.
I too have hit problems. Not as bad as yours. I have positive equity and only 3 years left to go but have hit problems with little work coming. Unlike you, I have 2 small children to consider.
Had no problem putting the mortgage on holliday for 12 months. If things have not improved by then there are other options still open to us.
Do not just hand the keys back. Go and speak to them. You will be surprised how helpfull they can be especially in this financial climate.
Good luck and remember, there is always a way if you stop worrying and think rationally. Most people will help only those who help themselves in the first place.

 

[robertt]

If you hand back the keys the institution will often sell the house cheaper than if you did it yourself.

It is worth exploring all avenues - good luck with it.

 

[stevesolo]

Hi pepperami

Step 1: contact your lender and see what they can do to help. If they cannot or will not, contact Payplan (www.payplan.com) or cccs (not sure of url). They won't charge you anything and are pretty well clued up. You could also try your local CAB but I think they'll tell you to contact one of the other two. You can also look at a debt specialist forum where you'll find loads of advice and probably people in the same boat as you. Try www.debtquestions.co.uk for starters.

Best of luck.

 

[phil knight]

Some good advice here I think, firstly speak to the B/Soc - they may have treated you badly but maybe ask to speak to a more senior manager. Make them listen and offer up solutions.
Secondly, think seriously about renting out all or part of the property. Even if this doesn't cover all the costs of the mortgage it will perhaps enable you to continue to trade and not have to cover quite so many costs. If you want to preserve your credit status I'd be careful of a move to Spain - certainly if the lender finds out they will assume you're going to do a bunk but in principle if your business is web based then Spain sounds like a good possibility when you UK issues are resolved/under control.

Also try speaking to citizens advice and check if any of your insurance policies (private medical or protection plans often have this) or credit cards have any kind of legal advice cover - free legal/debt counselling could help you with planning and alternative solutions less radical than an IVO.

Lastly, don't just concentrate on your mortgage issues. Could other debts or loans be re-scheduled or deferred to take off the pressure.

 

[Estimator]

Sounds irresponsible but I definitely didn't start it! I think greed did: Banks and oil companies and credit cards with their PPI policies that few of us wanted.

So you're not a little bit responsible yourself?
The bank didn't force you to lend so much money, although they have been giving self cert and 120% mortgages to all and sundry in the past few years. All fine if the house prices keeps going up like crazy, but now they are falling.
Maybe greed was a factor, like you say.

 

[amanda1111]

I empathise with your situation being a home owner myself. Im paying a repayment mortgage as a single parent and my ex wont allow me to switch to interest only. Thats besides the point though. If I were you I would rent it out for now and let the rental income pay the mortgage. Go to spain (the weather is better over there! ) The way this country is going at the moment I might consider it myself. Life's too short!

I wish you good luck

 

[telemax]

Hi

In agreement with most of the other posters on here.

I know somone who kept their house in the early 90's by filling the spare rooms with lodgers, if I didn't have kids and was in your situation I'd do that.

Then speak to the building society, someone who is decently senior.

Also can you get a job, even if it's part time to give things a boost and make enough money to suplement your income, even if it's delivering pizza's. It sounds crap but you do what you have to do!!

If you can weather this for a while things will improve eventually, in a few years negative equity will be gone. I think of my parents who brought a house in 1988, for 135k, it went down to 80 k in the last crash, if they would have panicked and sold they would have been ruined. They hung on and sold it last year for 420k, and therefore have a decent retirement

 

[debtloopholes]

P,

Some good advice has been posted.

Are you on repayment or interest only mortgage? Switching to interest only, if possible, could significantly reduce your payments.

Are you on a fixed rate or have you reverted to SVR? If you are not sure you need to find out, as the rate can make a huge difference to the monthly payment.

As previously mentioned, you are only in negative equity because of the poor state of the market at the mo. If you can manage to ride it out you could soon be back in profit - nobody knows.

When considering renting out, if you are in a location that supports HMO (multiple occupancy) you can get a lot more renting rooms individually. You can check demand on spareroom.co.uk. You might be surprised by how much you could achieve.


Don't give up P, where there's a will there's a way.

 

[BusinessIdeas]

So bottom line is I have to file an IVA to shift the debt?

No! dont file for an IVA. You can come to an agreement with debtors without it. The Consumer Credit Counselling Service (CCCS) will help for free. They dont charge a penny and can often help you deal with your creditors without the need for an IVA

 

[north.penny]

Hi,

I am a mortgage adviser, and maybe this is something I can have a look at for you, you can PM and we can chat about your options.
As was said, even if you hand the keys back you are still liable to the debt, declairng yourself bankrupt will stop you from setting up a business, they would possibly take your car, pension home and anything worth something.
An IVA could be the answer but as your loans are secured, that are not applicable? I may have a good solution for you though, please PM me and we can chat.
P

 

[Mister B]

To be fair, I think that the OP is probably on a beach after such a long period of time since he posted....

Mister B

 

[north.penny]

Bloody hell!!! lol lol lol!!! I never look at the date!!! hahahahahaha hopefully he is on the beach, doesnt anyone tidt up this site after, oh lets say, 2 years?!?!?! lol SO FUNNY!

 

[Chippie]

How many bedrooms does your house have? Could you take in a lodger or two to help you pay the increase in your mortgage? Or even rent the whole property out if you're going to Spain?

Don't forget that to rent the property out you would have to change your mortgage to a buy-to-let mortgage which at best will get you an 85% LTV, probably less at the moment. So would imagine that would be a non-starter. It's risky but I think the only way you would get away with that would be if you said nothing to your lender and just did it anyway. I know it's risky but if you tell them you want to do it, I would think it highly ulikely that you would get the necessary BTL mortgage anyway. :|