Generally speaking, if I have a loan secured on my flat and sell the flat what happens if there is not enough profit after the bank takes it's share to pay off a loan secured on the property? Do repayments continue as normal but 'unsecured'? Or does the lender take as much as it can from the money left over and then work out a repayment plan for the remainder?
Thanks!
It's all negotiable, and you have to negotiate in advance of taking any steps to sell, because otherwise the lender will simply block the sale. That's what a secured loan means: You require the lender's permission to sell.
In message , snipped-for-privacy@mailinator.com writes
Or does the lender refuse to release the charge on the property and you wont be able to sell - most likely, or even guaranteed.
I think the lender over-valued the property so it's no longer in line with market value.
In message , snipped-for-privacy@mailinator.com writes
I think you will find that that is not their problem. Why dont you see if you can set up an unsecured loan with another lender, so that you can settle the secured one at completion.
You might also talk to the lender and seek their views.
Possibly - but perhaps just the result of a falling property market.
I think it's best as Richard said to talk with the lender. If the property was over-valued and I sell I can't pay off my debt to them from the profit from the sale so I would have to keep up payments on unsecured terms. If I don't sell I still have to maintain payments which would also effectively be unsecured.
If they don't allow me to sell in the hope that the market value goes up it could take longer than the term of the loan so it's still a big risk to them.
I feel the margin was too small for them to have given such a high loan. If the property had valued at double what I paid then fair enough, they are almost guaranteed to get their money. But it was much tighter than that!
I think it's best to talk with them as you say. If the property is no longer valued high enough then what secures the loan? The lender might not have a choice in deciding to let me sell as they could lose out either way. If I sell there would be insufficient funds to pay off my debt to them and I would have to keep up payments on unsecured terms. If I don't sell I still have to keep up repayments effectively unsecured.
Dialogue with the lender is usually a good idea.
The worst case scenario is bankruptcy, assuming you have insufficient assets. This is unlikely unless the Inland Revenue is a creditor. Also, bankruptcy discharge is now down to 12 months.
I think it's best to talk with them as you say. If the property is no longer valued high enough then what secures the loan? The lender might not have a choice in deciding to let me sell as they could lose out either way. If I sell there would be insufficient funds to pay off my debt to them and I would have to keep up payments on unsecured terms. If I don't sell I still have to keep up repayments effectively unsecured.
In message , snipped-for-privacy@mailinator.com writes
I would guess the threat that they may repossess your property - although I suppose you could say that some borrowers may not be bothered if they lost a house with no equity.
In principle, I would agree. There's only one way to find out if the lender does.
In message , snipped-for-privacy@mailinator.com writes
Well the value is unlikely to have fallen so much that there is only enough to satisfy the 1st mortgagee, so the 2nd mortgagee will be only partially secured, not *un*secured.
No, they have every choice
No, your debt would be repaid in part so you would then have a smaller residual debt. If you speak to the lender they may be prepared to lend the smaller amount to you on unsecured terms. Its a matter for the.
But for a smaller loan.
In message , snipped-for-privacy@mailinator.com writes
Not necessarily. I assume the loan is a 'repayment' loan so the amount you owe them is decreasing and this has the effect of reducing their risk. So at the end of the loan they dont give a damn what the property value is.
No dont go and start blaming them! It was YOU who borrowed the money and YOU who agreed to give them the mortgage!
And good reason to choose to refuse. If he wants to sell the house in order to buy a more expensive one, he is increasing his financial commitment, which as far as the lender is concerned represents an increase in risk that he may be overstretching himself to the extent of not being able to repay the secured loan. That's a good reason for them to say: "Look, sonny, we will not let you sell the house before you've reduced your balance outstanding to us to £x, so just stay put for a while."
On the other hand, he could have secured a higher-paying job but can only take it if he moves, so if he does he might be able to afford the repayments more easily rather than less easil. All relevant issues have to be taken into account.
"Richard Faulkner" wrote
But wouldn't they be bothered about still having to pay back the extra (ie difference between the selling price & the higher mortgage amount remaining)? They lose their house and still have to continue paying for it!
Sure they would, but that would not be a "no equity" situation, it would be a case of negative equity.
"Ronald Raygun" wrote
Negative equity is surely a subset of "no equity".
If someone owes more money than they actually have, then they may say "I can't afford something because I have *no* money". They *don't* say "I can't afford something because I have *negative* money"!!
Not trying to wriggle out of it by blaming them. I do intend to keep up payments as I agreed in the loan contract. I just think they want a bigger margin of safety to protect their money.
also wanted to add I'm not trying to get out of paying the money back. I just want to move house and this, for me, doesn't affect my ability to make payments.
More of a superset I'd say, it's a subset of "no positive equity".
Having no money isn't a good enough excuse to get out of spending more of it. Why not just go further into debt like everyone else? :-)
Besides, you said they "owe more than they actually have", which admits that they do in fact have *some*, so for them to claim they had none would be a lie.
They might say that as far as their spending patterns are concerned, they're in an ongoing overcommitted cashflow situation at this moment in time, and would be keeping their ear to the ground in order to focus closely on future developments, but would have to remain sitting on the fence until prospects improved, whilst getting on their bikes to leave no stone unturned on the road to improving their earning prospects.
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