If My Property Is In Negative Equity, Can I Let It?
There is a hidden housing concern in the UK, particularly properties being let by landlords who are knowingly or unknowingly breaking the law. Thirty per cent of landlords violated their mortgage agreement terms by renting.
If their mortgage was intended to provide as a home to live in, as opposed to letting out to tenants, then they're violating their mortgage agreement and committing an offence. They may not realise this is illegal, but ignorance of the law is no defence. There may be issues for professional landlords too. Letting your house 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. However, you had to move on, so you decided to solve the issue by letting, but without declaration to the lender.
As a result, two problems 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 entirely 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 a tenant generally outweighed the mortgage. However, 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 stay 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 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 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 settlement meant the landlord was 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. 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.