What happens when things go wrong or not quite to plan?

What happens when things go wrong or not quite to plan?

Not paying your mortgage & getting repossessed

It’s not a quick or simple process of repossessing a property but you do have plenty of opportunity to rectify the issue should you fall behind on your payments. Should this happen, once the mortgage and related costs have been repaid the remainder goes to the individual. Unfortunately, the costs incurred can be high, so its best avoided where at all possible. Lenders will typically try and force a sale first as this keeps the costs down. These 2 are ultimately the worst-case scenario should you fail to keep up your repayments.
Before you get to this stage, should you fail to make the payments on time, the lender will typically write to you to let you know so you can bring the account back up to date as soon as possible. They will then log the missed payment against your credit record which will damage your credit score and will leave a mark for the next 6 years. A missed payment on a secured loan is very much a cardinal sin in the eyes of lenders, lenders look very harshly on this so its best avoided where at all possible.

What is Negative Equity?

Negative equity is where the value of the property is less than the balance of the mortgage. Lenders don’t want this scenario to happen but it’s not always possible to prevent entirely. For example, like with the credit crunch of 2008 where the housing market crashed and put many people into negative equity.

What happens if there is a problem with the valuation?

If the valuation isn’t ok, this is where the fun begins. Depending on the issue you will likely have to go back to the estate agent and renegotiate. The estate agents don’t always like this as they can end up looking stupid. If the surveyor down values the property, the vender (the person selling) often doesn’t want to take the reduced price. If there’s damp or a structural issue, they often don’t want to pay for inspections or repairs. The surveyor could have got the issue wrong, but it’s extremely rare. Some lenders will let you challenge a valuation, but on a purchase, it is very difficult to have one overturned, even when its blatantly obvious. To give you an idea, we once had a valuer call a 4-bed semi a 3-bed terraced. How a “professional” could have gotten it so wrong is beyond comprehension, must have been a bad day. It took around 2 weeks to have that overturned and they still wouldn’t agree to change the comparables, and obviously comparing the price of a big 4 bed semi to a 3-bed terraced is clearly worlds apart.

If after negotiations, you decide to pay more than the surveyor has said its worth the lender will base the application on the purchase price or the valuation, whichever is lower. You will still need your minimum deposit of that figure. So, if you were to have an offer accepted on a property for £200,000 and the surveyor said it was worth £180,000 but you agreed to pay £190,000. You would need to make up the £10,000 difference with your own money and still need the minimum deposit for the £180,000. So, say you wanted a 10% deposit deal (£18,000) you would actually need £28,000. The extra £10,000 you’ve paid wouldn’t benefit you, other than the fact you get the house (if you can afford it). You should also consider that when you come to sell you likely will only get what the house is worth, so if it hasn’t gone up in value you might only get the £180,000 back.


Contact Financial Options Selby


Financial Options (Selby) Ltd
24, Finkle Street, Selby, North Yorkshire, YO8 4DS


Call: 01757 709888