Hi all,

This is my first posting on this invaluable site so please be gentle with me :-)

I have a friend who is in a spot of bother regarding a new build flat he purchased a few years back.
He is now in negative equity. The Flat was bought for £200k and is now only worth at most £130k so he is £70k down.
He is facing repossession proceedings as he cannot keep up with payments.
The property has been marketed and he has had viewings but regardless of the price he sells he cannot make up the £200k he owes to the Mortgage Lender!

I have offered to buy this place but of course not for £200k. I have been calling various Solicitors to ask if they could act on his behalf but all say they cannot as they won't be able to redeem the Mortgage upon completion unless the balance is paid too. Is there a way around this? a plea to all the Property experts out there!

I have also realised from documentation that my poor Buddy had paid for Higher Lending Charge when the mortgage was taken out. Does this not mean the Mortgage comp should let him sell the place and then claim the difference from the Indemnity Insurance it has? I mean be fair they somehow managed to value the Property at £200k a year and half ago even though it was not worth this at all even then! I do understand that the Insurance company may still chase my mate for the difference after ti as paid the Lender?

Can anyone please help. All advice will be greatly apprecitated.

Kindest Regards

BMV Man

Hi

Your friend is in the same position as many recent new-build buyers - and there is, sadly, no straightforward or easy answer. The only dim light glowing here would seem to be the recent (April) Council of Mortgage Lenders' guideline that lenders must look at all alternatives before seeking possession. The question therefore is, has your friend's mortgage lender dutifully considered the offer to dispose at below market level, even if it fails to meet the full loan amount? The borrower would of course potentially still be liable for the outstanding sum, but at least it would halt his arrears from climbing even more.

Has the mortgage company approved the open market sale of the property. If it has, they should be prepared to let the deal proceed, if it is the only one or best one on the table - unless they feel the property would attract more at auction or by placing it with a particular agent. The other question is, do you trust what your friend is telling you? As a third party, you may not necessarily be privy to the whole story. Would your friend be open to trying to arrange a meeting between him, his mortgage lender and you - where you could put proposals forward?

It is frankly unlikely the mortgage company will set aside the higher lending charge or any other associated fees. Your friend has been stung by a volitile market and that's the risk we all take when investing in property. When things go pear-shaped, we all have to pay the piper, one way or another.

Sorry this reply isn't more positive.

Tony B

Thank you Tony B for your invaluable advice.

I now find out from my friend that a 100% mortgage was arranged at the time this property ws sold to him. The valuation was arranged by the Mortgage Company, something which can be looked into!

He has a court date tomorrow to put the offer infront of the Judge. I hope all goes well. I will keep you guys posted.

Many thanks

BMV man