www.iva.co.uk

Hi,

We have just started a DMP and we are really wanting to move from our flat to rent a house as we have two young kids.
Our mortgage is roughly 250k, and we have a secured loan with nemo of 30k, so we would need to sell for 280 to clear it all. The flat is very difficult to sell as it has a 67 year lease so i am not confident we could sell it for 280, and it would not be a simple process i don't think. Would repossession be an option? i understand i have to miss 3 monthly payments then hand over the keys, then any shortfall in the sale after that would become unsecured debt which could be added to the DMP.
What should i consider in this process? what are the main disadvantages of being repossessed in my case?

thank you

Jon

Hi Jon,

After the property has been repossessed you would be liable for any subsequent shortfall plus costs. You should speak to an estate agent and get the property valued and then speak to Nemo who are the lender most likely to suffer the shortfall. They may be prepared to allow the sale to proceed and agree not to pursue the shortfall if you keep paying the charges and attempt to achieve the best possible price.

In the event of repossession it will make it very expensive to get a mortgage in the next six years if you can source a mortgage at all. Speak to Nemo and if they do not agree to a voluntary sale and write off, speak to the main mortgage company to see about a voluntary return of the property. If it is repossessed the shortfall could be substantial and bankruptcies or IVAs may be better options than your current DMP. You could seek advice from an IP to discuss these options.

Thanks Michael,

i do have a few more questions sorry!!
How does the DMP and potentially the Repossession affect my credit score for renting a property, i know it has a very negative affect on my credit score, but will this cause us problems in renting somewhere?
I spoke with Nemo who said they would almost certainly approve a negative equity sale.
Thanks
Jon

It is possible that you will find it difficult to rent via an agency but if you are upfront they may accept you. However, if you use a private landdlord it is unlikely they would run a credit check so that may be a better option.

Good to hear that Nemo are taking a pragmatic view and this would help you in the long term as although there would be a shortfall to them it would not show up as a repossession.

You don't have to wait three months if you want to voluntary surrender the property - this could be done straight away if you manage to find somewhere suitable to rent - but you could end up with a substantial shortfall taking account of the lenders' charges for dealing with this.

This debt could also be included into an IVA if you wanted it to.