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  • Debt & Negative Equity

    Redeeming part of a portfolio mortgage

    Hi John,

    If you are selling properties with negative equity and are worried about your other portfolio mortgages with the same lender my advice would be to make sure you clear the balances in full on the sale of the properties.  The reason is that the solicitor will be receiving the funds from your purchasers and passing that to the lender – BM Solutions.  If the solicitor has the funds (from your reserves) to clear the redemption figure in full at that time then they are likely to simply close that mortgage account as you have settled the debt in sale – as per normal.  Lenders do not tend to worry about whether or not those funds came from the purchaser or from your resources.  Therefore I honestly would not expect them to commence investigating your other mortgage accounts.  Even if they did, so long as you are maintaining the payments on them within the terms and conditions then there is little they can (or would want to) do.

    Problems will likely happen should you not clear the balances in full on the sale of the properties.  If that happens then they will probably look at the other mortgages as well as they could face risks there.  What they do then depends on the terms and conditions they actually have.  Some lenders can call in the loans but that is a genuine last resort as it does not really benefit anyone.  But the biggest problem would actually be for you as leaving an outstanding balance on a property that is sold would be viewed as a type of default on the loan and be on your credit file for several years – which you should look to avoid if you want mortgage funding in the future.

    I hope this helps,

    Cat

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    Call the PT Broker Hotline on 0333 363 6507 or email us at ptbrokers@johncharcol.co.uk


    Thanks Cat, you being a broker gives me a little confidence that as long as I make sure the loan is fully paid off, I stand a good chance of not stirring a hornet's nest!

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    Thanks Vanessa, your comment was helpful.

    The T&C's don't mention "right to consolidate" specifically, but to my untrained eye there is wriggle room for them with this:

    "If the borrower owes any money to the Lender (including money which is not secured by the mortgage), the Lender may require the borrower to repay that money before the mortgage debt is discharged and the mortgage released."

    I'm also concerned that they notice that I don't have much equity, they will find a reason to convert the mortgage from an interest only to a repayment mortgage.

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