Mortgage question

[meow2222]

Hi

Whats the situation with selling a mortgaged property for well below its purchase price? Someone is facing grim times financially, their house purchase was a serious disaster, and they need out urgently for other reasons. I assume the mortgage company would say no way to such a sale, do they get the final say? Is there any way for them to make a sale work? Anyone know more about such situations?

And before some wag makes things up, no, its not me :) I said I'd ask though. And no, theyre not interested in other solutions than selling, theyre not really workable.

cheers, NT

[The Natural Philosopher]

Well the situation is either rent the place and try and cover the mortgage, or sell at a loss.

The conversation with the mortgage company is likely to be 'look, we sell and we will try and pay, we don't sell and you end up with an asset you will sell for less in a fire sale/auction. You will get more if we sell.'

Could they afford to pay the interest on a loan covering the difference between the mortgage value and the market price?

[mark]

Presumably the mortgage is greater than the expected sale price. I don't see why the mortgage company would block the sale as it is probably what they'd do ultimately if the person defaulted on the payments.

[Roger Mills]

There's no problem per se with selling for below the purchase price. But there *is* a problem with selling below the value of the outstanding mortgage. It's not clear from your post whether this is the case or not - but I assume that it probably is.

When the house was purchased, a charge will have registered against the title deeds in respect of the mortgage. If the house is re-sold, that charge must be redeemed - so you can't sell without the permission of the mortgage company. If the proceeds of the sale are insufficient to redeem the mortgage, the mortgage company clearly isn't going to be very happy about it - but will probably take whatever action it deems appropriate to minimise its losses.

The owners should take legal advice as to what route will leave them with the least outstanding liability. It may be best simply to default on the mortgage so that the mortgage company re-possesses the house - but I'm (thankfully!) not an expert on such matters.

[Andy Burns]

I don't believe the owner's liability for the mortgage company's losses stops at that point, if the owner comes into money they can be pursued for it later. Different situation left of the Atlantic I understand.

Me neither.

[Dave Plowman (News)]

You can't sell something you don't own. And the mortgage company owns the house.

[mogga]

They can look at it as lots of different things... but if you're planning on going bankrupt and sell your house quickly then the transaction can be reversed I think - And if you're doing it to avoid stamp duty or passing assets to the family then you can be sure they'll poke a stick at you for that too.

[Mark]

Don't default on the mortgage and get it repossessed if you can avoid it. Get them to talk to the mortgagor and see if they can work out a deal.

Otherwise they can sell the house. The mortgagor will expect the full amount of the mortgage to be repaid and will chase them for it.

[Mark]

Very unlikely. Having a normal mortgage does not imply the mortgagor owns the house.

[The Natural Philosopher]

Indeed. 15 years later according to a friend, who declared bankruptcy, and is now being pursued because the value of the house he has left, had risen..

[The Natural Philosopher]

Its an interesting legal nicety. Actually the Queen owns the land...

You may own the house, but the mortgage company has the right to repossess it in an instant.

[RobertL]

Only if it's an islamic mortgage does the lender own (part of) the house. With a normal mortgage the buyer owns the house and the lender has a legal charge on it. The buyer cannot sell the house without the lender agreeing to have the charge removed.

Robert

[John Rumm]

There may be cases where a lender will permit a negative equity mortgage to be retained and transferred to a new property (if its value is sufficient)

[Invisible Man]

If it gets repossessed the mortgagor will also attempt to recover all their outlays from changing the locks to any maintenance necessary to keeping the garden in a reasonable state to any council tax or utility bills they have to pay. Plus of course the costs of sale and ongoing interest until it is sold. Contact the free national debtline or citizens advice or Shelter.

[tony sayer]

In article , Dave Plowman (News) scribeth thus

Nope.. The owner own's the gaff, the mortgage company is using it for security for a loan.

All they are interested in is their loan amount. Should the sale match or exceed that then fine as long as their paid off all should be well.

Wouldn't recommend going broke on them and being re possessed as thats screwing the credit rating you have for neigh on ever more!.

Speak to them and tell them what the situation is one thing is certain your not the only ones in that boat;(....

And try a posit to IIRC uk.finance or uk.legal

[Martin Bonner]

Actually, there are styles of non-islamic mortgage which do involve the mortgage owner actually owning the property. In fact, that used to be the absolutely standard way of doing it. In practise of course, your description of "a normal mortgage" is absolutely correct.

[Mark]

Its not possible to complete on the sale of a mortgaged property unless the charge held against it is paid in full at the time of completion.

The charge holder will not accept an IOU for the remaining balance, as the collateral for the loan would no longer exist.

They need to get professional debt advice NOW.

be a good start.

-

[Martin Bonner]

Assuming (as others) that the proposed price is less than the mortage: Is your friend planning to downsize (buy a smaller house), or to rent? As John Rumm says, a mortgage lender might be prepared to transfer a negative equity mortgage to another property.

The final thing is that somebody who sells up when in financial difficult "intentionally makes themselves homeless" so the council won't rehouse them. Someone who hangs on until the house is repossessed, doesn't (and are eligible for rehousing).

[Clive George]

Sale from reposession will probably result in less money than a normal sale. The mortgage company will still chase the outstanding amount for years, so it's in both parties interestes to get as much money as possible for the house.

[dennis]

Talk to the mortgage people!!!!

If they sell for less than the mortgage they still have to pay it. I doubt if anyone will buy it before the mortgage is cleared.

With base rates at 0.5% I doubt if they will get a rental for less than the mortgage unless its a mansion. Rents are about 5-10 times mortgage payments around here.

If they are going to claim benefits to pay the rent then they can get the mortgage interest paid.