If you are to get out of negative equity, almost certainly you are going to need help.
Professional help, that of trained and qualified experts who know and understand the complexities of banking, finance and property and the rules, regulations and laws which apply in each of those fields. Its no place for well-meaning amateurs. The intricacies of the process make for a stressful, pressurised environment in which only those fully equipped to deal with it are successful. In many cases they will have worked and trained in the spheres of banking, borrowing, lending and property. In addition, they will have qualifications confirming that background and underlining their in-depth knowledge.
If you are to rely on them to guide you through the morass of debt, law, negotiation and, finally, the resolution of matters in a manner that frees you to start living again, you need to have faith in their ability to do things properly. As well as that, you want to know that they are committed to your well-being and that their integrity is unquestionable.
Knowing that your adviser is Financial Conduct Authority (FCA)-regulated is a must that should appear at the top of the list of qualities you have written down, alongside reliability and trustworthiness.
So lets start with the most basic question of all that is asked by people in your circumstances; are there negative equity solutions?
Okay, lets build from that base camp. What are the options?
Well, you can sell, let, lease or enter into a deferred sale agreement. Leasing and thereby continuing to live in your house is possible. Using that method you can still sell your property, despite the fact that it is in negative equity. Because it works on the same principle as car leasing it is easily set up and the occupier is able to remain in their home, free of the worry of the financial burdens of ownership or any tenancy problems. At the end of the lease period typically between five and seven years the process for the transfer of your home, at an agreed price, is a straightforward legal transaction conducted by solicitors.
Deferred sale agreements is another possibility. Here a company buy your property – plus any outstanding mortgage – as an all-in package, with the terms of the sale specially structured to suit your specific circumstances. Again such transactions normally are conducted very quickly because the finance to enable completion already is in place. But it is more probable that you will prefer and need – to sell. But how, given your negative equity?
The first step is a case review at which the factors taken into consideration include how the client comes to be in this position? What was the mortgage advice provided originally, where they in a relatively secure situation and then advised to enter into one that was less secure? Have their circumstances changed? Affordability of the debt is another factor to be examined; is there any realistic prospect of the client being able to repay what they now owe or is that simply impossible?
So, can it be resolved? And if it can, how? Based on income, expenditure and other assets – what is the fairest and most reasonable means of reaching agreement? Finally, what are the clients plans for the future? And what can be done to get them there as quickly as possible? Once that research is complete there is a closure meeting at which the state of play at that point compared with X months earlier is examined. If the clients hope was to move to a bigger property, or save up a deposit to buy another house, or build a home, is that still the case? If yes, what can be done to help that person achieve their goal?
Which course of action is best for you will depend on the exact nature of your problem, your non-negotiable needs, your best-case-scenario, your means, your credit-rating and the attitude of your lender.
Success depends on what the client expects. Now if they believed an adviser could brandish a magic wand, write off all their debts and wave them a fond farewell as they sailed off into the sunset, for which reason they would view anything short of that as unsuccessful, that pie-in-the-sky fantasy will have been flushed out at the initial case review, the intention of which was to set realistic parameters.
An example? Okay, Mr and Mrs Smith owe their mortgage lender/creditor(s) negative equity of £100,000. To resolve this they have undertaken to sell their property, rent for a while, save up for a deposit and get back on the property ladder as quickly as possible, clear and free of that debt. What help will they need if they are to achieve that? In other words, succeed?
Negative Equity UK (NEUK) regard every case as being a success because they will not take on if they are not wholly confident of completion.
Many of those who turn to NEUK are professional people who are up to date with their mortgage repayments but need to move for work or family reasons. However, their homes are in negative equity so what matters most to them is being able to move without being handicapped by the carry-over of a large, unmanageable mortgage. But others among NEUK's clients are in negative equity and have arrears, too. Property debt and mortgage debt in the UK are major problems for over 40% of homeowners.
And many thousands who are paying negative equity mortgages know that when the UK interest rate starts to increase and having been marooned at 0.5% for over seven years, a rise is inevitable this could see them slip deeper into the mire. Those are worrying facts.
However, NEUK have an outstanding track record when it comes to helping those in each of these categories. How do they do that? Whats the catch? There isn't a catch; they do it by virtue of their ability to successfully re-negotiate property debt on their clients behalf and usually managing to wipe out a huge percentage of what was owed. As a borrower with a problem, you want to avoid your lender taking legal action against you. Why is that so important? Because if they proceed down that path, almost certainly that will adversely affect your credit rating. And that, in turn, will make it difficult to borrow in the future, either to buy a home or for any other reason.
What you need, then, is a properly negotiated fair, full and final settlement. To get that, you are dependent on those who know exactly how to go about ensuring a result in your favour. NEUK tick each of those boxes.
Following a confidential, free-of-charge first consultation during which you and they will sit down together and look at your specific situation, they will if possible – put together a rescue plan.
Aware of your income, outgoings and overall circumstances, and the lenders policy, NEUK know what those creditors expectations are going to be – £X as a settlement in respect of that debt, be it in the form of a lump sum or else a payment plan stretching over 12 months, five years or whatever. Basically that's what you're dealing with though there are many variables, each of which will play a part in any negotiations.
NEUK will present the proposal to your lender and, acting on your behalf, seek to reach agreement with them. As professionals entrusted with acting as your representatives, NEUK spare you the stress and trauma of having to negotiate with lenders and their lawyers.
Because NEUK have highly-qualified staff whose knowledge and understanding of banking and the law, they go to the table as equals. And because they have the status of fully accredited debt counsellors, they enjoy the total respect of those they face.
Thus there is a well-established relationship based on the estimation in which NEUK's team members are held by lenders, lawyers and banks.
Between them NEUK oversee the process from start to finish, negotiating with lenders, solicitors, estate agents and any other third parties en route to a solution. On average this takes nine to 12 months – and it saves clients vast amounts of money.