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Renting out Properties that are in Negative Equity

  • Renting out Properties that are in Negative Equity

    If My Property Is In Negative Equity, Can I Let It?

    There is a hidden housing concern in the UK, namely properties being let by landlords who are knowingly or unknowingly breaking the law.

    We all hear and read about landlords who don’t carry out minor repairs or desperately needed repairs, but this isn’t such an article.

    Instead, it’s an article regarding 30% of landlords who violate their mortgage agreement terms by letting. Their mortgage was intended to provide a home for them to reside as opposed to letting out to tenants and therefore being guilty of an offence. They may not realise this is illegal, but ignorance of the law is no defence.

    They may be issues for professional landlords too!

    Letting your home without the lender’s permission, knowledge or authorised agreement violates the mortgage terms. How did you end up in this situation?

    The Pinnacle Of The Property Boom

    Perhaps it was impossible to sell the property due to negative equity. In other words, the property’s value following the collapse in 2008 was, or is less than the amount required to clear the mortgage. But you had to move on, so you decided to solve the issue by letting, but without declaration to the lender.

    As a result, two issues arise; not only is the property in negative equity, you are in breach of the mortgage terms. Bearing in mind what was happening to house prices between 2004 and 2008 in the UK – the pinnacle of the property boom – the lure of opting to let was or is completely understandable.

    Making Additional Money Through Lean Times

    Renting your home out to tenants seemed to be a sure-fire way of making additional money through lean times. Rental income from tenant’s generally outweighed the mortgage. But didn’t and doesn’t compensate for the loss due to the extreme fall in house prices. So as well as having committed an offence in your bid to remain in the black, you also remain in negative equity.

    You are not alone. Many landlords’ nice little earners have turned into a loss-making liabilities. This is not only true of amateurs but also the pros who make their money via buy-to-lets.

    A True-Life Case Of A Professional Landlord Who Had Numerous Rental Properties, All Of Them In Negative Equity.

    When this landlord contacted Landlord Debt Advisory for urgently needed help, three properties in his portfolio were losing significant amounts of money every month, and he had tenants letting them. His issues arose from using interest-only mortgages he bought in 2007 when prices were rocketing, but then they tumbled during the crash, leaving him with properties valued at a lot lower than he paid, therefore he was unable to sell them.

    Yes, he had a rental income, but no profit on his investment. He was, in fact, losing more and more with every passing month. The total amount he borrowed to buy these properties in 2007 was just shy of £560,000 and their market value plummeted to just £276,000, in desperation, he came to Landlord Debt Advisory

    Our knowledge of debt management and the law, plus being a Financial Conduct Authority regulated and monitored service, with a high-reputation as negotiators, recognised and trusted by all the major banks, we were able to come to a solution.

    Landlord Debt Advisory successfully negotiated the sale of the three properties via a one-off settlement. This meant the landlord paying the bank £28,000, with the balance of £253,000 written off.

    If you’re a landlord currently in negative equity, contact Landlord Debt Advisory. Likewise, if you are someone to whom rent is paid. It could be the most valuable phone call you ever make. We offer a FREE consultation and our friendly, experienced team are ready to help you.

    This article was posted in Negative Equity and tagged in Landlord Debt Mortgage Debt