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Original poster

Crippling debbt - at the end of my tether - please help

22 replies

mixedmama · 21/08/2007 17:19

We are in the process of selling a house that we bought as an investment in oorder to clelar our debts which total £73,000 in all. This is a secured loan, credit cards, money borrowed from various people to do up thhe house to sell.

Selling the house would bring us back down to 0. We are renting a small flat at the moment and whilst we are selling there is nobody living in the second property.

This month is the final month we can pay the mortgage and the rent but that is by not paying anything else.

The sale has gone belly up and we despperately need to sell before the end of September.

I just dont know what to do. If we dont sell we will not be able to pay anything at all.

To top it all off we are expecting our second baby in december and just want to keel over under a rock at the moment.

Am considering banruptcy but some of the debts are to family and friends (at least £25,000) so we need to pay back some of these people. Please help me find a way.

OP posts:

LIZS · 21/08/2007 17:26

Will the lender give you a payment holiday to enable you to sell , perhaps adding the missed amounts to the final mortage payment ? Think you'd have to sell or be repossessed before you can be bankrupt, as the house is an asset from which you can meet your debts. Have you spoken to CAB, they may be able to negotiate on your behalf. btw the secured debts etc probably would be paid before the personal loans so your family and friends may well lose out

Original poster

mixedmama · 21/08/2007 17:27

There will be enough money for the secured debts plus others, it is just a case of getting the place to sell. If we could just complete on it it would all fall into place, things just keep going wrong.

OP posts:

noddyholder · 21/08/2007 17:30

Do you think the house will sell quicker if you drop the price a bit?Is there anything that would get your original buyers to change theri minds?

LIZS · 21/08/2007 17:31

Thats' why I say speak to the mortgage lender to give you more time. They'd probably rather that than repossess.

aloha · 21/08/2007 17:33

why are you spending on rent if you have a house?? You can sell a house more easily if you live in it anyway. Talk to the mortgage lender, ask for a payment holiday, then get the fiercest two agents in the area to market your house like buggery.

Original poster

mixedmama · 21/08/2007 17:44

That is an even more complicated story. We bought the house when my parents were desperate to sell and put tenants straight in. we lived at the time in council property with BIL. After I had our first child I desperately wanted to move due to depression issues related to DH family, plus it was council property so not really right to carry on living there.

I desperately wanted to move to the house, but DH not keen. Also by this point we already had a loan as well. His brother had just bought a flat in that area and DH said we could move there I was so desp to move I agreed, so technically we are renting.

The it became apparent we needed to sell to get all these debts cleared espp since we were expecting. So tenants moved out and property needed fixing up, but we had no money so borrowed £10,000 off a friend.

Now I would prefer to live in it whilst it is for sale, but the question is where do we live once it is sold. There will only be about £7,000 left once we have paid everything.

The estate agents insisted on over pricing. but the buyer doesnt have a deposit so was going to do a gift deposit thing and wanted to buy for £305k but £30k is a gift deposit. Surveyor came and said max they will do is £290k which mean under current arrangements we would get £260k, which would pay secured loan and said friend plus of course mortgage. Problem is estate agent is convincing hubby to carry out some damp work which will cost £4,000 (which we dont have) to make this guyts purchase feasible. I am inclined to take the £290k and pay off the two most important just to get it through quickly.

OP posts:

Original poster

mixedmama · 21/08/2007 17:45

The mortgage company gave us a one month break bfore but they said that we have a buy to llet mortgage so cant do that.

Will give them another call tho as it has to be worth explaining the situation properly.

OP posts:

aloha · 21/08/2007 18:38

Move in and change it to a normal mortgage! Much cheaper. Also I worry that if you don't live in the property you will be liable to capital gains tax when you sell. Only 'your principle private residence' is tax free.
Don't understand the 'gift deposit' but is sounds horribly and unnecessarily complicated. Don't do the damp work. Cut the price by £4K if that's what it takes. Move in and you save money straight away (on rent AND mortgage), save yourself a tax hassle, and you can move into rented accom afterwards.
Get two new shit-hot agents, put it on for £300K, and live there while it is for sale and until sale goes through.

Original poster

mixedmama · 21/08/2007 18:59

Thanks ladies.

Aloha... thanks for that. I think that is what I need. A kick up the backside by someone who knows what they are talking about. Rather thann DH who just listens to too many other people.

OP posts:

HappyMummyOfOne · 21/08/2007 19:38

I was also under the impression that if the house was not your main residence (which the buy to let mortgage shows it isnt) that you would have to pay capital gains tax on the sale. Make sure you check that out as its quite a hefty amount.

pammo · 21/08/2007 21:16

If this is the only house that you own, it is your principal private residence for tax purposes even though you may have rented it out and are renting elsewhere.

LIZS · 21/08/2007 21:25

but you do have to have lived in it for a period to establish it as such.

aloha · 21/08/2007 21:28

I'm pretty sure that isn't true. To claim it is your principle private residence you actually have to live there.

aloha · 21/08/2007 21:29

Taxing questions

Patrick Stevens, a tax expert at Ernst and Young, answers your questions on tax.

----------------

When Clare Knowles moved in 1998, she kept her previous property for letting.

She's now thinking about selling and wants to know how she will be affected by capital gains tax - the house's worth has increased from £80,000 to £150,000.

Ordinarily, a person is not required to pay any capital gains tax when they sell their home because of what is known as the "principal private residence relief".

This relief exempts a person or married couple from capital gains tax on any profit made on the sale of their home. In this case Clare is proposing to sell a property which since 1998 has not been her principal residence and as such the full exemption does not apply.

However, there is relief given for the gain on a property which has previously been her principal residence for a period of time.

This relief exempts the proportion of the gain which represents the length of time when the property was the principal residence (and additionally the last 36 months of ownership) compared to the total period of ownership.

That is, if Clare bought the property 10 years ago and it was her principal residence for four years then she would be exempt from 70% of the gain (before taper relief). The calculation is:

4 years + 3 years (last 36 months) = 70% of 10 years
Taper relief of a further 15% of the taxable gain (if sold before 6 April 2004; 20% if sold after) would apply to any gain after the principle private residence relief described.

Taper relief is given on a sliding scale dependent on the period of ownership following the introduction of taper relief in April 1998.

Before Taper Relief there was indexation, an attempt to adjust for inflation which would also apply to give a small amount of addtional relief.

CantSleepWontSleep · 21/08/2007 21:35

Absolutely agree with Aloha, on all matters.

LIZS · 21/08/2007 21:36

Agree with Aloha see here You may be exempt but because you let it out and haven't lived there yourselves you may be wholly or partially liable for CGT, regardless of whether you lived in rented yourselves.

Original poster

mixedmama · 22/08/2007 09:57

All our paperwork actually does not specify Buy to Let. I am pretty sure that it is a normal mortgage as we were plannign on moving in.

Husband is adamant to wait and see if his bro can pay for the work so we keep the original buyer. I am just stressed about the amount of time this could take.

OP posts:

Dropdeadfred · 22/08/2007 10:01

Keep the original buyer by taking the £4k off the price...?

aloha · 22/08/2007 10:12

Why are you planning to do the work? That's really unusual. What normally happens is they get someone in to quote for the cost, and you knock it off the price. I'd be concerned about this 'gift deposit' thing, which seems to indicate that you GIVE them money for moving in. If the house is worth £290 according to the surveyor and they are only paying £260, which won't even cover your debts, that seems mad.
Mind you I think you are mad to pay rent when you are skint and have a perfectly good house to live in!

aloha · 22/08/2007 10:12

aloha · 22/08/2007 10:14

Anyway buyer sound totally useless, so I'd put it back on the market with different agent today.

Original poster

mixedmama · 22/08/2007 11:00

Aloha - I completely agree with you. Husband just thinks his brother knows everything and is listening to him.

Going to give it another go tonight to make him see sense. the most important thing we need to pay is the loan as that is secured on the house, eveyrthing else iss then managable altho of course I would prefer to pay them off as well.

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