Q: My business, which was surviving until 2012, has frankly gone down the tubes in the last year. While I’ve been able to stop the debts piling up, meaning that I’m able to initiate an orderly wind-down, that’s been at the cost of taking no salary for six months. That, in turn, has left my unable to pay my mortgage.
While I got in touch with the bank to negotiate a payment holiday, time is running out and no job offers I’ve received will put me in a position to meet the mortgage repayments. So, while the bank aren’t piling on the pressure, I’m effectively living in a house I can no longer afford. As far as I can tell, I’m in negative equity, but not substantially so. Are banks open to writing down mortgages in my situation? What are my options?
A: While you were right to advise the bank of your difficulties, your very conscientiousness may stymie your plans: while there have been reports of quiet deals and write-downs, these are being done in instances where the bank know for certain that there’s no more money to be squeezed out of a borrower. The fact that you’ve been dilligent in managing your financial affairs – indeed, the fact that you may be employed soon – will make the bank believe you have a decent chance of getting back on your feet and paying back your mortgage in full.
That’s not to say that I believe you should simply stop paying the mortgage and going into default – for one, banks are wary of giving ground to ‘selective defaulters’ who are simply refusing to engage with as a kind of negotiating tactic. Moreover, that route is more likely to result in a reposession order – you’ll lose your home and, if you’re lucky, get some write-down on the substantial personal debt you would carry.
Your conscientiousness may help you, however, if you have designs on staying in your home by negotiating a restructured mortgage. While you probably won’t get a capital write-down, going interest-only for a period while you get your career on track or extending the term of the loan are both realistic solutions.
You’ve done well to get this far in sorting out your affairs and recovering from business failure. I’d advise you to stick with what you’re doing, staying in contact with your bank, and working to get your career back on track. If this sounds a bit daunting, of course, we deal with many individuals and businesses coping with the fallout when things go wrong. For an initial, no-obligation meeting to see how we can help, simply contact us.