Is bankruptcy necessary to deal with negative equity?
At Negative Equity UK, we find many of our clients worry that dealing with their unmanageable property debt might force them to go bankrupt, with all of the implications this can have for their financial future.
In most cases, however, we are able to reassure our clients that there are other options available to them and that bankruptcy isn’t usually necessary.
| Informal settlement.
One of the most common solutions we offer is a negotiated settlement with their lender. With a debt write down, also known as a shortfall sale or an informal arrangement, the borrower typically sells the property and we will negotiate with the lender to write off as much of the shortfall as possible, with our client paying an agreed, affordable sum.
Some people are sceptical that a bank would agree to write down debt, but there are good reasons why they would do so. Repossessing a property and then paying someone to sell it for them is a long and expensive process for the bank and they rarely get the full market value for the house, so agreeing a settlement is often the best option for both parties.
It isn’t usually a good idea to try to resolve debt problems by taking on more debt, however in some cases it can be possible to deal with problem property debt by remortgaging.
While not suitable for everyone, restructuring your mortgage is an option that we might pursue with clients who are struggling financially due to unexpected changes in their circumstances. We have successfully negotiated with our clients’ lenders to extend their mortgage term, allowing them to stay in the home they had worked so hard to secure.
How is home equity calculated?
Home equity is calculated by subtracting the amount you still owe on your mortgage from the current market value of your home.
Can you have negative equity?
Yes. With standard loans, your home equity will increase over time. With negative-amortizing loans — a loan with monthly payments less than the interest rates — your equity decreases over time as your owed balance increases.
| An IVA.
An individual voluntary arrangement (IVA) is a legal agreement between you and your creditors. IVAs are a possible solution we would consider where a borrower owes money to multiple creditors.
Most, though not all, types of debt can be included in an IVA, including mortgage debt, credit card debt, unpaid council tax or money owed to HMRC. An IVA might also be worth discussing if you own multiple properties with mortgages from different lenders, or you have unsecured debt from several creditors.
Once a settlement is agreed with your lenders it can be paid as a five year payment plan, known as a contribution IVA, or, if you can afford it, as a single lump sum.
We have successfully negotiated hundreds of cases every year where we have arranged the sale of our clients’ homes and reached an affordable debt settlement with the lender. In September alone we were able to write off a total of £1,287,323 in unaffordable mortgage debt.
Whatever the situation we will offer you a bespoke solution based on your own personal circumstances.Whatever your circumstances, the first step to dealing with your property debt is to contact Negative Equity UK for an initial free, no obligation consultation with one of our advisors.Take a look at our reviews and call us on 028 9018 3223 or go to our website and arrange for us to call you at a time that suits you.