Negative Equity Question

[Mello]

If somebody sells their house for less than what they owe the bank/building society, and doesn't buy another property (i.e. rents), what does the bank do about it? Previously the loan was secured against the property, but the property is now gone, so it is now unsecured? How does the bank/BS guarantee it's money? Would it allow you to sell in the first place? What happens?

I'd be grateful if you say whether you are guessing/speculating, or if you know what you are saying to be the case...

Also, apologies if this is a repost...

[Neil_H]

They take your thumbs instead.

HTH

[Eric Mc]

I don't think the bank will allow you to sell without consulting with them first. They have a legal security on the property and therefore have prior rights over what happens to it.

[Tony*T3]

You cant sell a house without clearing the debts tied to it. So your stuck in a house you cant sell, unless you've got funds from somewhere else to clear the outstanding.

You also cant buy a house without clearing those debts first. even a cash buyer cant buy a house without ensuring all previous loans are paid off in full.

Theres laws out there.

[Landlord]

Eric Mc said:

They have a legal security on the property

I think it's called "first charge". Meaning they have the right to decide on what happens first, then you.

[scotal]

Landlord said:

Eric Mc said:

They have a legal security on the property

I think it's called "first charge". Meaning they have the right to decide on what happens first, then you.

Nope, first charge means they get paid first when it comes to any debts being paid off.

The lender has to release the charge before the property can be sold.

[Smirnoff]

The solicitor wont be able to complete as he wont have enough money to pay the bank off, so the sale wont go through and your purchaser can sue you as you would have already exchanged contracts.

Your solicitor won't know you are in negative equity until he requests the redemption statement from your lender. When he gets it and sees you owe more than the agreed price he will request the balance from you. If you don't have it you are screwed.

Adrian

Edited by Smirnoff on Friday 19th December 09:23

[Landlord]

scotal said:

Landlord said:

Eric Mc said:

They have a legal security on the property

I think it's called "first charge". Meaning they have the right to decide on what happens first, then you.

Nope, first charge means they get paid first when it comes to any debts being paid off.

The lender has to release the charge before the property can be sold.

Ah.

:poliovictim: <- me

[scotal]

Landlord said:

:poliovictim: <- me