Unable to afford mortgage on rental property

B

BigWhale

Guest
Hi

At the moment I have a property with a mortgage that has interest only on it. The rental income only covers 75% of the of the interest payment.
After 5 years of being able to make up the difference, I am no longer able to do this.

I was wondering if anyone had advice as to what to do? I am thinking of taking the following steps.

Stop direct debits from my account
Start defaulting on my payments
Start talking to the bank about my situation and ask them to reduce my rate of the mortgage.

Any advice would be very welcomed.
 
Is the property in negative equity? By how much?

I would talk to the bank immediately, don't stop the direct debits before that.

Whats the rest of your financial situation like? Can you make up the shortfall in negative equity if you want to sell (guess not?).
 
The property is currently worth more than the mortgage about 40k in equity. I have a another property with the same problem only make up the payment on that property as well. I have never missed a mortgage payment.
 
Why would you want to stop the payment and start accruing penalty interest etc. If you cannot afford to make up the difference between the rent and new mortgage payments then you should seriously consider selling.

Keep in mind interest rates will rise over the next few years which will put you under even more pressure. Even if the bank agrees to lower your rate (and they won't) then you will still be in trouble and if you go into negative equity then you are in bigger trouble.

Sell, take the profit. Move onto something else. Easy decision.
 
Its not that easy. i dont believe that the property would actually sell even if i marked it down 30-40% the number of properties on the market in the area is very high.
 
BigWhale said:
Its not that easy. i dont believe that the property would actually sell even if i marked it down 30-40% the number of properties on the market in the area is very high.
Click to expand...

Earlier you said that their is 40 grand equity in the property. Now you are admiting their is not.

Your only solution is to talk to the bank and explain your situation. They cannot take blood from a stone and will be only to happy to negotiate based on your new circumstances. Be brave, bite the bullet talk to the bank. Good luck.
 
I heard something along the lines that the bank will only talk to you if you are in arrears on the mortgage? I am also working with EBS.
 
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