Mortgage - Defaulting!!
 

My wife and I moved to the US a few months ago and all is going well. We left the UK with a house up for sale and left enough money in the UK to support the mortgage and other bills for 12 months.

Since moving the housing market has crashed and despite dropping the price by over 25000 we still haven't had a nibble.

We are now considering what happens when that money runs out. If and when we get to that stage what do we do? We can't afford to send money back home unless the exchange rate changes for the better, we can't rent cause we would still be losing around $1000 per month, so for us the only other option left is to default and get repossessed. This is NOT the ideal solution and I hate to add to the problem housing market but this is the reality.

So my question is this, if we do get repossessed are we liable for the difference between what we owe and what the mortgage company finally sell the house for and if we are will they come after us in the USA (assuming they know where we are, right now they don't even know we are left the country).

All this is hypothetical, we still have a large amount of money left in our UK bank accounts to cover the mortgage but I am just getting prepared for the worst.

Re: Mortgage - Defaulting!!
 

rent it out.

Re: Mortgage - Defaulting!!
 

You want to avoid being repossessed. You may have to drop your price further. And talk to your lender. No point just waiting for things to do go wrong.

www.fool.co.uk is a good forum for getting advice on financial matters.

Re: Mortgage - Defaulting!!
 

I would if I could afford the $1000 per month loss on the rent + it is assuming that I can rent it out. The house is in a rural location and having just got off the phone from the estate agents they reackon it could take me a fair number of months to find somebody to rent it.

Re: Mortgage - Defaulting!!
 

ask the estate agent for feedback. If its the general market then you at least know that. Is it something about the specific location or house thats putting people off? ie - could be changed by you now to help?

we are in a similar scenario. We do rent out our uk house and that ONLY just covers the mortgage. The first 6 month lease ends in early june and we have no idea if the tenants will renew or move out. We already ran down our cash reserves whilst waiting for the first tenants so the last month of the tenancy will be paid from overdraft for the mortgage. If they leave and we dont find new tenants immediatly we are screwed. If they stay then we are putting it off for the time being. We are wondering if we should try and sell it - but are reluctant to do so giving we are not green card holders yet. We do have a holiday home for sale in Turkey as well but thats not selling either. If that sells then we are laughing as that gives us a cash boost to smooth out the periods of no letting etc.

Re: Mortgage - Defaulting!!
 

I have been on the estate agents back since we left, I phone them twice a week for an update and by the sounds of it, it is just the general market. My house will be more difficult to sell than most cause of its location and that is made worse by the collapse of the housing market in the UK. The estate agents I have spoken to today are telling em that they can't see any light until early next year!!

My sister has been keeping an eye on the market in her area and says the whole market has just got flat, nothing is moving and even when people do get offers, they either breakdown cause other people in the chain can't sell OR the banks won't lend the money.

It did cross my mind the other day to just cut my losses and shift the money to the US - the amount I have is a nice downpayment over here.

Re: Mortgage - Defaulting!!
 

I would start talking with the mortgage company now, rather than wait until it becomes an emergency.

Most mortgage companies don't want you to default, especially if that means selling it at auction for a loss (because they will lose). They just want to be sure you pay your mortgage.

Here's what I'd do: Call the mortgage company, explain the situation , and ask if you can move IMMEDIATELY to an interest-only loan (i.e., before your money runs out, not when it is about to run out ...). Also ask for permission to rent it out. If they squawk about it, or start talking about huge remortgaging fees, remind them that you are trying to NOT default on the mortgage, and negotiate for lower mortgage rearrangement fees.

Then cross your fingers. Good luck.

Re: Mortgage - Defaulting!!
 

cant you refinance over a longer period and rent it out?

Where is the house?

Re: Mortgage - Defaulting!!
 

I think this is good advice.

We are still in the UK trying to sell our house so we can make the move to the US. Nothing is moving and there is little interest in our house and so we have made the difficult decision to justt wait it out. We are too frightened to leave it here for sale or try to rent it out, so will just "wait and see".

Good luck

Re: Mortgage - Defaulting!!
 

I reduced to interest only about 4 weeks before we left for the US and unfortunately we only bought the house in Feb 2007 (about 2 months before the decline started). The mortgage is already at 95% and spread over 30 years (oh and I have a 9K penalty to get out of the mortgage early).

I'm a bit reluctant to rent cause it just prolongs the inevitable (in that I want to off load the property). My rental value is coming back at around 600 per month and my mortgage (with everything included) is around 1200 per month, so I hope you can see my problem. I'm basically asking the mortgage company to slash the interest by half. I'm also a bit reluctant to tell them exactly how much money I have in reserve, at the end of the day they don't care about me and just want me to pay as much as they think I can afford. If I do go into repossession I would like to have some of that money to reinvest into US property.

I will give them a call tho, thanks for the advice, and see what I can negotiate.

If anybody has any other ideas or knows legally where I stand please let me know

Re: Mortgage - Defaulting!!
 

why did you move here?

Re: Mortgage - Defaulting!!
 

The number of times people don't do a quick search (tut tut). :p

http://britishexpats.com/forum/showthread.php?t=473179

Re: Mortgage - Defaulting!!
 

Not sure why your asking the question ????

I moved here for a number of reasons, job, family, etc. What that has to do with my question I have no idea??

Re: Mortgage - Defaulting!!
 

The company I spoke about in that thread ended up offering me a job

Re: Mortgage - Defaulting!!
 

It really depends on whether UK loans are non-recourse or not. If they can't come after you for any deficiency, that makes walking away much more attractive, particularly as you now live in the US. If UK loans are recourse, you have a difficult decision to make and need to balance your monthly loss if you rent the place out versus what cash you'd have to come up with to close a sale. Of course that's a tough one as it requires a judgment as to when the hosuing market in the UK will recover enough to make a sale feasible.

Oh, and you need to do an after-tax calculation of montly rental loss, taking into consideration that rental property can be depreciated and most expenses you incur deducted from rental income. Your monthly after-tax "loss" may be less than you think.