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WHAT IS NEGATIVE EQUITY?
Negative Equity put simply is when the value of the property you purchased is now less that that mortgage secured against it.
Negative Equity only becomes an issue if the property is sold leaving an outstanding balance for the difference between the current market value and the value of the outstanding mortgage after sale.
If you can afford the mortgage repayments, then it will not be an issue unless interest rates rise and make repayments un-affordable.
Many people find themselves trapped in Negative Equity as the fear that they cannot afford the balance prohibits them making life plans such as moving or up or downsizing. There are options for the homeowner however and Bell & Company are experienced in dealing with a wide range of issues surrounding this area.
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An issue that we see very often is the forced sale of a property due to a relationship breakdown. If a couple have purchased a property together and for one reason or another decide to go their separate ways then in most cases the individuals will choose to sell the property and move on with their lives. If this sale forces a ‘shortfall’ or a balance left owing after sale due to Negative Equity then this will mean a debt that adds to unwanted pressure and stress to already testing situation.
Luckily, the team at Bell & Company are experts in dealing with sensitive situations and know exactly how to approach and tackle issues like this with professionalism and empathy.
A couple with a marriage breakdown sought help from our specialists after their divorce as they agreed it was beneficial to sell the property they owned together which forced them into Negative Equity.
The mortgage on the property was for £204,000.
We achieved an agreement from the lender to a consensual shortfall sale. The property sold for £70,000
The couple received a letter from a debt collection agent for payment of the shortfall of £138,000. Obviously this was not an option for the client.
Effective negotiation with the agent saw the shortfall of £138,000 settled on a full and final basis for £9,000 by our team.
The couple were delighted that they could finally go their separate ways and move on with their lives after the emotional strain of being tied together by a property with large debt owing.
If you find yourself in a similar situation then please contact our team for a friendly, confidential chat to discuss your options.
Bell & Company are advising clients concerned about future mortgage repayments to contact them today. Do not wait for rate changes to take place, you give yourself a better chance of resolving any issue if you deal with it head on and in advance.
An example of the impact on rate increases would be a typical household with a mortgage balance of £100,000 on a variable rate of 3.6%. When the base rate begins increasing repayments will rise from £506pcm to £644pcm in 2018 according to forecasts. This is a significant rise when you consider other lines and forms of credit will likely see repayments increase also.
The big picture here is that three quarters of a million people in the UK will be unable to pay their way. The issue has been the build-up of debt during the boom as wages where not high enough. National Income grew, but this was disproportionate and only highest earners benefited and the rest fed on credit. During the subsequent bust period nothing was done to address the credit burden which was instead masked by ultra-low interest rates.
Very often clients approach Bell & Company in a situation of financial distress. We always advise that the hardest part is addressing the issue and seeking help, once this is done there are always solutions to every problem.
A couple approached Bell & Company with three buy to let properties that were distressed . The rent acquired on the three properties was not even covering the mortgage repayments and the couple had been struggling leaving them with arrears. The lender had appointed a receiver when the couple sought help.
Bell & Company liaised with the receivers until the properties were sold.
There were substantial losses on all three properties after sale leaving a shortfall of £494,000. The couple obviously did not have these funds available and the debt was outsourced to an aggressive debt collection agency.
Again we liaised directly with the agent and successfully achieved a full and final settlement of £35,000 for what was a shortfall of just under half a million.
Obviously this was a massive relief for the client who avoided bankruptcy, moved on with life and could concentrate on maintaining the mortgage on their family home.
£494,000 settled for £35,000
Very often Negative Equity is considered a weight on the shoulders of clients wishing to make changes to their lives but burdened with the threat of the shortfall in mortgage. Bell & Company help clients on a daily basis to move on with their lives and provide strategies to take the debt head on in order to facilitate the lifestyle changes the client wants.
A young couple with a growing family appointed Bell & Company to proactively negotiate in respect of a shortfall on their home mortgage. Their mortgage was for £162,000.
The main breadwinner was an Architect but was suffering the effects of the downturn in the market and so found mortgage repayments a strain.
The family wanted to upgrade to a larger rented home to accommodate their growing family but unfortunately felt tied down due to the Negative equity on their home. They were worried that they could not afford to repay the difference so felt trapped like many others in Northern Ireland, UK and ROI currently.
The property was placed on the open market under the reassurance that our dedicated advisors would be able to negotiate on the shortfall on behalf of the client.
A purchaser was found and the property was sold for £120,000 leaving a shortfall of £42,000.
Laboured negotiations with the lender ensured that the negative equity shortfall was settled for £4000. The couple were able to settle the debt with the lender in Full and Final settlement and move home to a larger property.
A large proportion of our clients who own distressed property in the UK and Ireland had also purchased property at the peak of the market further afield across Europe in specific, Spain, France, Cyprus, Greece and Bulgaria. We have been involved in property debt negotiations for our clients under our sister company EU Property Solutions and have achieved some excellent results for our clients. You can view some of our success stories here.
We have a division in Spain and a legal team that we work directly alongside in striving to reclaim lost deposits on off plan or unfinished properties in Spain as a further strand to our services.
A family from South England purchased a property in the Costa Del Sol when the property market was at its peak, paying over €200,000. The complex was built and finished and shortly after the property market collapsed. The property was rented in the immediate term but the long- term promises on lettings did not materialise. The mortgage repayments ceased thus entering into arrears including community fees and IBI taxes.
Our expert team entered into an agreement with the bank and the property was sold at an auction. A shortfall of €70,000 arose, but the bank then agreed to cancel all outstanding debt for €9,000 including all fees. They also agreed to clear the family’s outstanding community fees and IBI taxes, totalling €16,000.
A SAVING OF €86,000
HOW CAN BELL & COMPANY HELP?
When a client with property debt issues calls Bell & Company assess the client’s case in it’s entirety. Our skilled team have experience in Legal, Financial and Property issues so can very quickly analyse your position and provide initial advice. We offer a free consultation to meet the team and discuss your requirements in further depth where we will detail all the options available so that you can make an informed decision. A tailored strategy will be implemented to ensure your needs and objectives are met should you decide to appoint Bell & Company. Some of the strategies that Bell & Company employ are:
Liaising with the client’s lender to ensure that they agree to the sale of the property whilst there is Negative Equity. Some lenders will not allow this knowing that the sale will create a debt however we represent clients to demonstrate their situation in order to get the lender to agree to this. This is the first step to resolving the issue.
Liaison with Foreign Creditors
This includes liaising with lenders across the world regardless where the property is. We have helped clients as far as Canada.
Help with the sale and marketing of the property
We work alongside a panel of expert estate agents and valuers to ensure that your property is fairly priced and sold.
Full and Final Settlement
Once the property is sold we will enter into negotiations with the lender to settle the outstanding debt on a full and final basis for a minimal amount. Our main aim is to ensure the best result for both parties is achieved.
NEGATIVE EQUITY SUCCESSES
The case in question was ongoing for several years. Our clients, a family of five, owed in the region of £70,000. The family had fallen on hard times with the breadwinner being made redundant and they were struggling to make payments. Bell & Company entered negotiations with the lender on behalf of the family. The…Read More...
Our client, in this case, had been unable to maintain the payments on her mortgage and had developed huge arrears in an extended period of financial difficulty. The property in question was a 2nd property, which was tenanted. Bell & Company upon initial consultation advised the client on a consensual sale however the lender in…Read More...
Our clients had found themselves in increasingly distressing circumstances and were due to be evicted from their family home. The bank had given the family 10 days to vacate their home before it was repossessed due to arrears on the mortgage. We have developed a great relationship with this particular lender over our years in…Read More...
Our client, in this instance, had been with Bell & Company for several years. They had simply invested at the wrong time, just before the property crash of 2008. He owned a problematic buy-to-let property portfolio and had a number of properties now in negative equity. The client’s lender, who are notoriously difficult and reluctant…Read More...
Our client initially reached out to us to help with issues surrounding her marital home. Her former partner had been made bankrupt, and our client could not continue to maintain payments on her own. Upon instruction, Bell & Company initially tried to negotiate a consensual sale of the property however, the lender refused. Our client…Read More...
When we first were instructed on this client’s case, their family home was up for repossession. This was an extremely vulnerable time for the family unit and they were left with a crystallised shortfall of £115,000. In this instance, the best option for the family was to opt for a consensual sale. When the lender…Read More...
Our client approached us with a crystalized debt of over £150,000, owed to a huge banking institution in the Republic of Ireland. The client had not had any contact with the said lender for almost 5 years and had relocated to England to pursue new ventures. Out of nowhere, he received letters from the bank,…Read More...
Bell & Company were recently able to assist a young couple with 2 young children facing eviction from the family home. Bell & Company were appointed and approached the lender seeking a consensual sale, which was accepted by the lender. In this instance, Bell & Company achieved savings of around £105,000, after the agreed open…Read More...
Bell & Company were contacted by a gentleman who had been left in negative equity on his home. This was the gentleman’s first time investing in property, and unfortunately, just took out a mortgage at simply the wrong time, and had the possibility of insolvency looming over him. At Bell and Company, over our years…Read More...
Bell & Company finalise successful negotiations on a buy-to-let property. An older couple based in England approached our company regarding a property they had bought to rent as a holiday home in the south of the country. The lender was known to be notoriously difficult to deal with, so this was an ongoing battle between the…Read More...