can my house be repossessed if i cant pay the mortgage on another property?
Sell and Rent Back
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January 26th, 2010 at 7:35 pm
If you used your first property as collateral possibly. You need to check with your mortgage provider. If you do default you can sell and rent back.
January 28th, 2010 at 8:36 pm
I think it would depend on whether the mortgage provider was the same, for both properties.
But I doubt if they would try to foreclose on your home ( i.e., residence) if you are keeping up payments on the mortgage for that property. What would be the point? – they are in the business of lending money , after all.
PS one of the strategies I see suggested on here is nothing short of madness, and illustrates the type of thinking which got people into trouble in the first place.
January 29th, 2010 at 2:55 pm
they would only repossess your flat since that’s all the bank is entitled to.
If the payments are stacking up and you have owned your second flat for over 3 years, have you considered refinancing it to cut down your mortgage payments?
Despite falling house prices, drawing out the equity in the property (without taking all of it out), you can pay off a substantial proportion of your property to cut down payments or length of your mortgage without too much hassle.
For instance for a £80k property 3 years ago I would guess it’s worth about £120k at the current market price. I would guess you had put down about £10k deposit on the property which means you have a £70k mortgage. That means over the 3 years you have £40k equity. If you take about £30k out and put it in your mortgage, that means you will only have £40k to pay. That’s almost half of your mortgage payments gone for the same length in your mortgage. Or likewise, you may even be able to cut the length of the mortgage in half for the same payments you are making (I know this last point is less relevant to you, but I thought you may be interested in knowing).
I would leave some money in your house price in case the market worsens – it also makes the bank think you are not the risky type who throws everything in one basket. If the equity does get less than £40k and you threw all of it in your mortgage, the bank will charge you a higher mortgage payment and they will also make your swallow the administration fee for the changes. There’s hassle, inconveience, financial losses, lack of future confidence, etc. Why do that to yourself?
I would also recommend to only put money into the property and nothing else. I have seen how large amounts of money can have an effect on people. Flamboyant and careless spending is not something the bank would consider desirable and neither would it help you in your future investments.
Hope this helps
January 31st, 2010 at 1:52 am
It will depend on the terms of the mortgage on the flat, whether you are in negative equity with it, and/or how nasty your mortgage company are.
In general terms a mortgage is a loan secured on property. Legally if you get into arrears with a mortgage the lender has the right to insist on full repayment there and then. If you fail to do this (and clearly most people can’t) they can then issue proceedings to repossess the property used as security to sell it so they can pay off the debt. If the security for the mortgage on the flat is only the flat itself, then the lender can only issue formal repossession proceedings against the flat.
But if you are in negative equity (or close to it) the sale of the flat may not be enough to cover the mortgage debt. In these circumstances the lender will sue you for the balance. If you have no other means of payment they could attempt to enforce this debt by requesting a court order for the sale of your house. This is a method of enforcement that is available for any debt awarded by a court. Obviously the mortgage on the house would get paid off first, so they are only likely to do this if you have enough equity in the house to pay the excess owed on the flat.
There is no reason why a mortgage lender has to opt for repossession first. They could choose call in the mortgage debt, then sue you for it. Normally they don’t because for most people their home is the only significant asset they have. But you also have your house. If the lender on the flat thinks that you have enough equity in the house, and that it would be much easier to sell the house than the flat in the current market they may make this choice instead. But I suspect that in practice this would be unlikely.
Btw, I’m not sure if I have missed the point, but the method advocated by ingenious is rubbish. He suggests you take £30k of equity out of your property and use it to pay off half-your mortgage. You can’t just take equity “out” by magic. You release equity by MORTGAGING. Which means you would take out one mortgage to pay off another. Overall you would have the same amount of debt with the same repayments. Actually, to get the new mortgage you would have to pay arrangement, valuation and legal fees so you would be over £1000 down on the deal.
There is only one way I can see that doing something like this might make sense. It would only apply if you have a really low interest rate and lots of equity on your house, and you are able to add to that existing mortgage without penalty, and you have a much higher rate on the flat. It may then be worthwhile to take some equity out of the house and use it to clear the arrears on the flat. You are effectively swapping some expensive debt on the flat for cheaper debt on the house. But you need to take professional advice before doing this because there will clearly be major implications if you get it wrong.
January 31st, 2010 at 8:55 pm
No but you may have to file bankruptcy to protect your home and other assests you should contact a bankruptcy lawyer to advise you on this further as i am not a lawyer. But I am right
February 3rd, 2010 at 7:44 pm
If you live in the UK then no. They can repossess the flat. If there is a shortfall in what they sell it for and what you owe, then they can get a court judgement and if you fail to make payments on that they can secure this amount on your house. If you then cant make any payments (even a few quid a month) they may consider forcing the sale of the house. But that hardly ever happens.
Dont go bankrupt, you will most likely lose both properties.