Stalemate with EX - mortgage/want to move on

[zanna 10]

Hi guys, thank you so much for your advice. We have spoken to a solicitor this morning who has advised that our first step should be to send her a letter from a solicitor outlining all the possible resolutions available before going to court. Advise her that we will be pursuing her for costs on the basis that we have attempted to resolve the issue without legal proceedings. If it needs to go to court we can apply to force the sale at a reasonable value I.e market value (of course we would be liable for the deficit but so be it). He said it was highly possible to get this order as it is in our best interest to sell, I.e we can't get another mortgage with the current arrangement. I pray to god it doesn't come to that!!!

[Chris_Sleeps 10]

If the house is in negative equity then the mortgagee (bank/building society) may not be willing to discharge liability so easily. In layman's terms, they may not be willing to take your husbands name off the mortgage while there is still a debt in place following sale.

 

It's another factor to consider when you get back in touch with your solicitor - especially if you're looking at buying property yourselves.

 

-----

 

Relating to the £6,000 loan by parents; if the house is in negative equity than that money has gone.

 

Was the money lent contractually to the couple, or given as an aid? The parents could argue that the couple (your husband and his ex) are joint-and-severally liable, and a court may support that, but it doesn't bring the money back, and creates a problem for the parents to chase that debt through a court if it isn't paid.

 

The simple answer - parents accept the money has gone or the son pays it back himself out of obligation.

Edited June 12, 2015 by Chris_Sleeps

[zanna 10]

In terms of the deficit we would have to get a loan to pay it off, it's either that or move in To the property!!

[Chris_Sleeps 10]

In terms of the deficit we would have to get a loan to pay it off, it's either that or move in To the property!!

Just to make it clear - if your husband and his ex are joint-and-severally liable for the mortgage shortfall, the money that needs to be paid after the house is sold; paying 50% does not clear the debt. He doesn't owe half the money - the couple jointly owe it all.

 

So if the house sells and there is £10,000 left to pay - then your husband needs to borrow £10,000 to pay that. He cannot pay £5,000 and claim the other half belongs to his ex - it doesn't work like that.

[zanna 10]

Oh yes we know, we are now setting up an apt with the mortgage company to discuss 'management of shortfalls' as they call it. The crux of the matter is that she wants to keep the house. We want to move on. If £10k is what it takes then that's just the cross we will have to bare to get rid of her from our life. Or like I said we all move in together. What a fun game that would be

[ShefStealth 10]

You also need to think about your credit ratings/score with regards to all of this. You're saying about the possibility of taking out an estimated £10K loan to pay back the shortfall of the potential mortgage deficit because of the negative equity, the mortgage would not be resolved on paper for the purpose of his credit report and so he may then struggle to take out the loan (especially as this would be unsecured borrowing). You'd then have the knock-on effect of having the loan against your credit score as well as the overhanging mortgage until that is resolved, if you are able to take out the loan but in the meantime it would really tank the credit score which would then take time to recover.

 

The fact that you're thinking of having to take a loan out to make up the shortfall, on top of that you'll need to pay the parents back means that you'll perhaps not have the sort of deposit required to get your next mortgage anyway. Your new mortgage company will look at everything going back over 5 to 7 years at least, and the fact that the 'old house' issue would then only recently have been resolved on top of additional loans may then start to ring alarm bells with the potential mortgage lender.

[zanna 10]

So our only option is to let her stay there and rent for the rest of our lives???

 

---------- Post added 13-06-2015 at 11:37 ----------

 

I don't understand why the mortgage wouldn't be classed as complete on paper if the full debt is paid? Can you explain further?

[WasThatWise 10]

Hi just a question if it is a joint mortgage was it allowed for his ex to put it to interest only without his permission or did he agree to it at the time?

[zanna 10]

He didn't give permission, she also changed the price of the house with the estate agent without this permission. He took it up with both who assured him no further changes would be made without both consenting however it's all a bit too late!!!

[ShefStealth 10]

So our only option is to let her stay there and rent for the rest of our lives???

I didn't say that, but he's going to be losing a lot of money on a current asset that may still yield an appreciation in value (speculative). That action in itself may feed into credit scoring in some way but I don't know, you'd have to do some further research into this yourselves and ask your current lenders/solicitor.

 

I don't understand why the mortgage wouldn't be classed as complete on paper if the full debt is paid? Can you explain further?

The order of events that you've said you're going for would be to try and sell the property at current market value which would currently be in negative equity so give a shortfall. You then need to pay back the mortgage lender this shortfall to which you want to take out the unsecured personal loan of currently undetermined value, but the overhanging mortgage will still appear on the credit score/rating until it is actually paid off (i.e the mortgage is still outstanding at the time of the loan application) so that may then make getting the loan more difficult. If you're approaching the same bank for the loan that you took the mortgage out with, they don't usually like to take secured lending (mortgage) being replaced with unsecured borrowing - and because the property is in negative equity, may not agree to it from the outset (as Chris Sleeps appears to have already said).

 

If you are able to do this as a process i.e have a personal loan taken out to repay the remaining mortgage, this may not be an 'instant thing' (i.e conveyancing process time/paperwork) and so the time that there is an overhanging mortgage AND a personal loan outstanding to his name will then potentially have a more negative consequence on his credit score, which would then still have the negative knock-on effect of getting your subsequent mortgage on your next property. Either way, if he's still got money outstanding on the personal loan when you're applying for your next mortgage, this again may negatively affect the value of mortgage that you can subsequently get as potential lenders may consider you already over-leveraged. It may be assumed by your future lender that whatever personal loan is listed on the credit report is being used in part for a deposit towards the next property, even if in actuality this isn't the case!

 

Lenders are still being very cautious about eligibility criteria and will scrutinise your previous credit/actions closely to see how much of a risk you are and 'how often' you're looking for credit and of what types. If you stack credit request transactions too closely together for instance then this again can negatively affect your score and again would impact your future potential mortgage success. Because of this, you need to set your expectations about time frames of when you're likely to be able to move forward with an application for your next property, especially if a loan is also taken out to close the previous mortgage.

 

After all of the issues with the current property are resolved and the loan repaid, you'll still have to save up a deposit to get the next mortgage. You may be wise to consider the time it will take to resolve the loan (if it happens), the property could potentially have appreciated in value anyway and subsequently could have been sold off without the need for the loan and the additional outlay in the way of the interest on the loan.

 

At present, your stated intentions are going to substitute one outgoing payment (the current mortgage) for another (the potential personal loan) but still be losing money because of the interest on the loan but with nothing to actually show for it at the end of the process apart from a de-leveraging of an asset that just happens to be currently in negative equity.

 

---------- Post added 13-06-2015 at 14:00 ----------

 

You posted this whilst I was making my last post:

He didn't give permission, she also changed the price of the house with the estate agent without this permission. He took it up with both who assured him no further changes would be made without both consenting however it's all a bit too late!!!

 

It could be construed that her actions have also had a detrimental impact on the potential to sell the property (i.e it's been on the market already for 3 years at 10K over the asking price, according to your OP) - that her actions have been specifically to thwart the sale of the property, as you've said a few times that she doesn't want to leave. The question to ask about that is, was the price increased or decreased? If it was increased, it gives more power to this argument and may allow for an easier case for your solicitor if it comes to that.

[Cyclone 10]

So our only option is to let her stay there and rent for the rest of our lives???

 

---------- Post added 13-06-2015 at 11:37 ----------

 

I don't understand why the mortgage wouldn't be classed as complete on paper if the full debt is paid? Can you explain further?

 

I think he means, it wouldn't be complete when you were making the loan application. It would be complete afterwards, but only if you successfully got the loan and paid off the balance.

[ShefStealth 10]

I think he means, it wouldn't be complete when you were making the loan application. It would be complete afterwards, but only if you successfully got the loan and paid off the balance.

 

Yes, exactly - thanks for putting that into a more succinct summary than I could.

 

It would only be complete if they managed to get the loan and use it to pay off the remaining mortgage balance.