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What should you do if you're in negative equity?
You don't need to do anything.
The most important thing to do is ensure that you keep your job and so keep making your mortgage repayments.
The moment any issue arises with your income you must contact your mortgage lender at once. Lenders only repossess as a last resort but they are always more favourable in their treatment if you approach them first to discuss your financial situation.
Did You Know?
The Mortgage Conduct of Business Rules points that a lender should “deal fairly" with homeowners in arrears.
You can use insurance to guard against loss of income; there are products such as income protection insurance and mortgage protection insurance which can keep up your mortgage repayments for a specified period.
Click to get a free quote for Mortgage Payment Protection Insurance or call us on 0333 344 3234 to find out more
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What if you have to consider selling house in negative equity?
You may find yourself in a life situation where you actually have to move when in negative equity. This might be because, for example, you've found a new job or your current job requires you to relocate or something family-related requires this action.
As before, your first action should be to consult your mortgage lender. You should discuss any available schemes which might allow you to borrow more than 100% of the value of your new home should you move.
There's no hiding that risk element becomes higher - it may not be cheap because not least, you'll end up paying a significantly higher interest rate on your mortgage. Please note also that some lenders won't let you move to a new build, shared ownership or shared equity property and take your mortgage with you if you’re in negative equity.
Other strategies might include renting out your home (with your lender's permission) while, for example, living cheaply with relatives or friends. You should note, however, that your lender may impose higher interest rates on your mortgage because it becomes a buy to let product.
There are many other costs involved with becoming a landlord such as having to get an Energy Performance Certificate, buy-to-let insurance and gas certificates.
Click to read what you need to know about buy to let to find out more.
According to the Mortgage Conduct of Business Rules, you lender must "give consideration to the customer being allowed to remain in possession to effect a sale". If you simply can't afford to live in your house, your lender must consider allowing you to sell up regardless of whether the sale price covers the outstanding mortgage.
Lender refuses permission to sell? You can take them to court
You can apply to the the county court for an order for sale under the Trusts of Land & Appointment of Trustees Act 1996.
If you're successful, the court can order a sale regardless of the lender's wishes.
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What happens if you face repossession?
Being repossessed is probably the most extreme thing that can happen as a result of negative equity.
It is, however, not a rapid process and your lender has to work with you as much as possible to avoid the eventuality.
To find out more, please read our article What Happens When you get Repossessed: The 7 Stages
In Negative Equity but need to sell your home?
Our experienced negative equity sale solicitors can help and advise you.
*Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels
Want help now? Call us on 0333 344 3234 (local call charges apply)