Living overseas with a property in negative equity?
Many people that have moved abroad have left a property in the UK. The reasons are varied; some could not sell and others did not want to sell in case they needed to return to the UK one day.
But many people find themselves in a situation where their property cannot be sold as it is not worth enough to pay off the mortgage. In other cases a person may have an extra secured loan against the property and finds that the second charge lender will not allow the sale, as the selling price does not cover the mortgage and their loan.
In cases such as these, many people become stuck with no clear way through the problem. Many properties are rented out without the mortgage company being aware, and in many cases that we deal with, people also have to top up the rental income to meet the mortgage payment.
In this type of situation you can be “throwing good money after bad” as property value in the UK is not rising at a fast enough pace to increase the equity in a property in a short amount of time. In fact recent figures indicate that there has not really been an increase in property value for some time.
Northern Rock (NRAM) Together Mortgages
Many of our past clients have had “Together Mortgages” with Northern Rock (now NRAM). When these mortgages were being approved, property was at its peak with regards to value. Northern Rock also offered an unsecured home owner loan (of normally around £25,000) to these mortgages which ran alongside the existing mortgage agreement.
When housing values dropped, these properties fell into negative equity, and once the unsecured loan was added to the outstanding mortgage amount, people could easily be £50,000 in negative equity.
Using UK bankruptcy to deal with negative equity in property while living abroad
Bankruptcy can be a good way to deal with a property in negative equity, especially if you are living overseas.
We deal with many clients that have moved from England to live abroad and we constantly hear about the struggle to deal with their property. It could be rented out to tenants, but many people find that they have to find money to repair the property if repairs are required. Also if you are also topping up the mortgage payment, the property can soon become a massive drain on your income if you have living costs in another Country as well.
The biggest problem is the negative equity can be very high, running into tens of thousands of pounds. To add to this issue when a property is repossessed or handed back to the lender, the property will normally be sold for less than the market value which adds even more to the shortfall. In these cases the lender will also add further charges to deal with the property disposal so it is not uncommon for a property in £25,000 of negative equity to end up with a shortfall of £35,000 or more.
When you declare bankruptcy in England or Wales the shortfall in relation to your property value will become part of the bankruptcy, even if the property has not yet been sold when the bankruptcy is filed at Court.
When we prepare a bankruptcy we will anticipate the shortfall amount and this will be shown as a debt within the bankruptcy. Even if the shortfall is slightly higher than anticipated it will still be covered by the bankruptcy when the property is eventually sold.
For further information on living overseas with property in negative equity, contact us now.