I have a house in the UK which is now in negative equity by about 30k. Initially the equity was to pay off any debt and to get a deposit on a house in NZ. I have paid the mortgage for the last 19 months but have come to a point where there is no interest on the house and bills to pay in NZ. Can I hand back the keys? I inquired about buy to let but the mortgage company will increase the interest by 1.5%, then want 125% of the repayment as rent. This is not realistic as it would mean that the house would have to rent for 900 per month when the estate agent suggests 600.
Any suggestions if I can just give back the house? Will the mortgage company then chase me for the negative equity?
Unfortunately what you are experiencing is happening to many people as property values have dropped across the country.
Yes, you can hand the keys back on the property, it still is treated as a repossession and would reflect so on your credit. Once the mortgage company disposes/sells the property, any shortfall would be your responsibility, and they can chase you for this shortfall.
Your options now, and even later once the shortfall is realised, will depend on a few things.
How long have you been outside the UK? You mentioned paying the mortgage for the past 19 months, but how long have you been away?
Do you have any other debt in the UK?
Shortfalls from repossessions are in essence now an unsecured debt, as the property has been sold; as an unsecured debt the shortfall can be included in bankruptcy.
So if you have not been outside the UK for more then three (3) years, bankruptcy in the UK to be relieved of the shortfall and any other unsecured debts you may have in the UK, is an option. In order for you to go bankrupt in the UK you would need to not have been outside the UK for more than three (3) years, and you can have a representative handle the bankruptcy for you in the UK, so you do not need to return.
If you have been outside the UK for more than three (3) years, there still is the possibility of going bankrupt in the UK, but you would need to return to do this yourself.
You could also consider setting up a repayment plan for the shortfall if you can afford one and the mortgage company is accepting of one.
There also is the option of doing nothing and letting the shortfall just sit out there and be owed. The mortgage company may chase you for payment, but there may be little they can do if you stay in NZ. If the mortgage company sells the debt onto a collection agency there in NZ, then the collection company can then collect the debt from you there in NZ in accord with the rules and laws of NZ.
So doing nothing may not be a good long-term solution.
I hope this helps.
Jon Emge is an experienced UK debt advisor who has helped thousands and thousands of people in the UK to deal with problem debt. Jon specialises in finding good solutions for problem debt using a variety of UK specific techniques.
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