This Below question was raised by Anonymous user to our web site that has prime hits.
I need to sell my home I live in UK. But I have a 2nd and 3rd charge on my home as well as the mortgage. My house has been valued at £40,000 less than I owe for all the loans. I cant afford to rent it out as the rent wont cover the loans and mortgage I will be £600 a month short. I also have another house that I have tenants in but have no equity in that place either so cant even borrow against that. Can the mortgage or loan companies stop me from selling with negative equity? And can they take my other house if I cant pay them after the sale?
Thank you from very worried Sam.
Answers by Expert:
When you borrow money to buy a house the bank puts a lien on the title of the house. This means, legally, that the house cannot be transferred to someone new without satisfying this lien. The bank, generally, will not release a lien unless they have been paid in full.
So, yes, the mortgage company can prevent you from selling for less than what is owed. You haven’t satisfied the lien and do not have a clear title to transfer to the new owner.
The question is moot, because you can’t sell when you can’t pay the bank back what is owed. Because you can’t sell, they won’t bother your other house.
This is where it gets ugly. Some banks will agree to let you sell the house for less than what is owed. This is called a short sale (the sale of the home will leave you short of the full balance owed). This has quite a negative hit on your credit, but not nearly as bad as a foreclosure or a bankruptcy.