The nature of any country’s economy is that it can either ‘boom’ or ‘bust’, and the UK is currently home to thousands of home-owners in negative equity: that is, their mortgage is greater than that of the value of their home. Why is this important? Well, it means you can’t sell your home as you owe more than your house is worth. But, at iSell we’ve put together a useful guide to enlighten those who want to sell their home but are in negative equity. Let’s take a look at the options below.
Can’t walk away? Consider a lease option
Trying to sell in negative equity is difficult, but not impossible. Unfortunately, as someone who owes their mortgage lender the difference between the house sale price and the remaining mortgage cost, your lender will want to come after you for the difference in cash. A ‘lease option’ is a viable way to unshackle yourself from a particular property and from the impending debt and costs of negative equity. You simply pass on the mortgage payments to a property investor who leases out the property and potentially purchases it after a set period of time. However, this is a more risky option: the investor has all the responsibility of finding paying tenants for your house, but ultimately you’re still responsible for paying the mortgage even if your investor defaults.
Reducing your mortgage with your savings
This is one approach to reducing debt – use savings to reduce your mortgage repayments or the money that you owe. Make sure this is financially sensible for you – look at the interest you’d earn on these savings, check whether you are charged by your mortgage lender for lump-sum payments, and think about the ‘rainy day’ fund and whether you should really keep some cash for an emergency.
Rent now, sell later
Another option is to rent out your property and become a short-term landlord. Use the rent to cover mortgage payments, whilst at the same time it could be possible for you to find somewhere cheaper to rent yourself. Use this time to ‘wait out’ the negative equity on your house – the economy or local house prices are always changing, and yours may change favourably to you whilst you rent it to a private tenant, at which point you sell and pocket the profit. Of course, you’ll have to make sure the property is suitable for a tenant to move in – luckily, there are fantastic services in Northampton that can help you out with that process.
Appeal to your lender
While asking your mortgage lender for help might seem like the last thing you’d want to do, there are a number of options here that can be explored. You may be able to transfer your mortgage to another property, or remortgage with a different deal, potentially letting you add the negative equity on to your existing mortgage. It adds to your mortgage debt, but makes up the immediate shortfall and may stop you having to use savings or rent the property out.
Try to sell – and we’ll help
Selling may still be an option for you if your lender agrees that you can command a higher sale price than one through repossession – and iSell’s team of property experts are more than able to take you through this process and get the best possible price for your property. Negative equity isn’t the end of the world, but carefully a carefully considered ‘escape plan’ is your best bet – and iSell are here to help.