Tips for Selling Your House with Negative Equity
One of the most common problems in the housing market in the UK is that homeowners typically have almost no or only little equity in their house. It’s not a problem when you are living in the house, but it does come back to bite you when you try to sell your house. It is not possible to sell your house for cash in case you have negative equity in your house. Negative equity simply means that you owe more money than the total worth of your house.
Also, it’s not possible for you to simply walk away from the house and associated mortgage payments as law allows the mortgage lender to come after you for a period of up to 12 years even after your house is repossessed. In simple terms, selling your house when you have negative equity is not easy, but it does not mean that you are out of options.
There is an option called a lease option that is typically perfect for people who have negative equity and are unable to pay their mortgage. This is something you should seriously think about in case you need to sell your property immediately, but you have negative equity. Keep in mind that this option also comes with certain riders and you need to be aware of the terms and conditions of the deal in order to make an informed decision.
Here is a list of some of the other options available to you for selling a house with negative equity.
One of the options available is to use your savings to bring down your mortgage. However, before dipping into your savings in order to lower the mortgage amount, you need to make sure that you won’t be losing any more money. Sometimes, mortgage providers charge a fee if you want to pay off a chunk of your mortgage in a lump sum. If the charges for paying off a lump sum are significant, this option does not make sense for you.
You should also calculate the amount of interest you are going to earn on your savings and compare that with the amount of interest you will save on your mortgage payments. Do not forget to consider any interest penalties when you take out your savings. While using your savings for paying down your mortgage in a lump sum sounds interesting but keep in mind that you won’t have any money left for an emergency. Therefore, you need to sit down and make an objective decision after carefully going through the pros and cons of such decision.
Many experts recommend sticking it out in case you have negative equity in your house. It is an excellent option in case you are not required to move out of your home. You just need to keep paying your mortgage each month and there is absolutely no need to worry about repossession. In time, you will climb out of the negative equity zone as your mortgage gets reduced slowly but steadily.
Almost all the mortgage lenders allow borrowers to make overpayments on their mortgage, but it does come with some riders. Sometimes, penalties are charged for overpayments. Therefore, you need to get in touch with your mortgage lender and find out if there are any penalties on making over-payments. If you can afford to make extra payments and there are no penalties involved, it is a great option to quickly bring down the mortgage amount on your house and get out of the negative equity zone.
One way to get out of the negative equity zone is to raise the value of your property. There are several options available for you to increase the value of your property without spending too much money. Take a close look at similar properties in your area in order to find out what makes those homes more attractive. You’ll quickly find that even simple enhancements can help to sell your property.
If you need to move out but you are unable to sell, you should seriously consider the option of renting out your home. This will allow you to continue to own the property and you can repay the mortgage using the rental income. You have the option of renting somewhere else. This will allow you to have some time until you are out of negative equity and once you are there, you can always sell your house.
The only problem is whether rental income will be enough for covering the mortgage payments and it depends on the conditions in the local market. In simple terms, consider this option and do some calculation in order to figure out whether this option is worthwhile for you.
It is also recommended to talk to your mortgage provider in order to figure out the amount of mortgage you owe and whether there are other options available for you. Many mortgage providers are flexible and allow different types of deals to the borrowers such as alternate finance options or transferring the mortgage to a new property among others. Talk to them and find out if there are any other options available to you.