Mortgage Advice - Rented Property

[zedx19]

Hoping someone here can help with this as dunno what to do.

Few years back, mrs moved into my house and we rented out her property, a 2 bed semi detached worth approx 70k, mortgage is approx 80k so quite a bit of negative equity. So we took the decision to rent at £425 per month, less agency fees etc she brings in approx £380 I believe, mortgage payments are £450 approx. So all in all, loosing out every month but least someone is contributing towards her mortgage.

In the past few months, the tenants, a young couple with a kid, have gone off the rails. The blokes moved out together with the kid and the women has gone mental, missing 2 payments but agreeing to pay back so much per month, which she has been doing. Only reason we didn't evict was her payments now come direct from the council and her making payments towards her debt.

Anyway, last week we had complaints from neighbours that she has various men keep coming and going at all hours and shes been partying through the night. Yesterday we had a builder round repairing a garden wall that was leaning, builder rings us up midday saying the garden was full of dirty nappies and she was outside smoking a spliff. So we took the decision to evict and this process has started.

So we've began thinking about what to do with the property, new tenants, sell at a loss or try to remortgage somehow. If we could remortgage the house on better rates, new tenants would be the best option, however, no mortgage lender will be interested as it stands at the moment. Are there any options available to people with negative equity properties? Is there anyway to use equity in another house to offset the negative equity in another? I have nearly 20k of equity in my own property.

Any other help or advise would be much appreciated!

[Sarnie]

Re-mortgaging is not an option I'm afraid. You'd need to get the balance down to £63k to be even able to look at 90% products, of which the rates probably aren't any better than what your currently on.

You could ask to move on to Interest Only, if your not already, but they are unlikely to agree to that with you being in negative equity.

If you can't afford to sell at a loss, then new tennants is surely the only way forward?

[MitchT]

zedx19 said:

Is there anyway to use equity in another house to offset the negative equity in another? I have nearly 20k of equity in my own property.

I'd do this in three stages:
1: Get the tenant out of the rented property.
2: Refurbish the rented property to pristine condition, thus boosting its value and hopefully reducing the negative equity by more than the cost of the work that you've carried out.
3: See how much you'd have to borrow against your home to completely wipe out the negative equity on the rental property and have enough left to provide the deposit needed to take out a better mortgage against the rental property.

The main challenge I sense here is that most BTL mortgages require a deposit of 25% and, reading between the lines, I'm not sure if you're going to be able to raise that much, so you might be stuck with your existing mortgage. Otherwise you're looking at a non-BTL mortgage, but then, strictly speaking, you shouldn't be renting it out, so you'd have to sell it. Of course, you still need to clear the negative equity before you can do that.