Scottish Property magazine

If you are in negative equity and need to move home, here are your options:

1. Use savings to reduce your mortgage. The first option you should consider when you're looking to move out of negative equity is whether you could use any savings you have to reduce the amount you owe. It's important to look at whether this course of action makes financial sense before pressing ahead.
2. Stick it out. Staying put and waiting it out is often the best and cheapest option if you find yourself in negative equity. As long as you continue to pay your mortgage each month you don't need to worry about repossession and will begin to climb out of negative equity as you reduce the size of your mortgage and house values rise. This will only be an option if you don't need to move, of course. To speed things up and enable you to move sooner, you could start making overpayments on your mortgage. There is also a good chance that that house prices will recover in the future, increasing the equity you hold in the property.
3. Boost the value of your property. If you find that the amount you're likely to raise through the sale of your property is falling just short of what you'd need to break even on your mortgage then there are several ways you can increase the value of your home without spending a small fortune. You may find that there are some enhancements that you can incorporate into your own home to add value at an acceptable cost. If you're stuck for ideas then you can always contact your estate agent for ideas.
4. Rent out your house. If you can't sell and have no option but to move renting out your home may be an option worth considering. This would mean you'll continue to own your home and repay your mortgage using rental income while you rent somewhere else until your home comes out of negative equity and you're able to sell.
5. Speak to your lender. Speaking to your mortgage provider about your options is a good idea regardless of which course of action you are considering - it will give you a clear idea how much you owe and if you can move the mortgage to another property. When faced with negative equity your options will largely be restricted by how flexible your mortgage provider is when it comes to letting you transfer your mortgage to a new property, re-mortgage to a different deal, or accept alternate finance options.
6. Borrow the difference. Depending on the difference in value between your home and outstanding mortgage you could look into borrowing the money you need to clear the short fall on your mortgage and buy yourself out.
7. Sell up anyway. If you've reached the point where you're struggling to meet your mortgage repayments but are stuck in negative equity, selling your home may be your final option. It's possible that your mortgage lender would be willing to accept the amount you'd be able to raise through the sale of your property as settlement on your mortgage - providing it's more than they'd receive if your home was repossessed.

Debt Arrangement Scheme (DAS)	DAS is a government-run debt management tool which allows someone in debt to repay their debts through a debt payment program (DPP). The DPP will allow a debtor to pay off their debts over an extended period of time while giving them protection from their creditors taking action against them to recover the debt in the DPP. The DPP can last for any reasonable length of time and, if approved, will freeze all interest, fees and charges on the debts, resulting in them being written off if the debtor fully completes the DPP. The DAS ignores any assets already owned by the client including property.
Trust Deeds	A Trust Deed uses government legislation to enable people living in Scotland, who are struggling with unmanageable debts, generally £5000 or more, to manage their debts within a realistic timeframe. The duration of the repayment period is typically 48 months and you will pay an agreed monthly contribution based on your affordability, and once completed, all of your remaining debts are legally written off. This is set up as a voluntary agreement between yourself and the people that you owe money to (your creditors) and is best suited for people who have a regular income and who are able to commit to a repayment schedule which will become legally binding. The added advantage is that once it is agreed (becomes Protected) this prevents your creditors from adding further interest and charges and also from taking any further action against you. The process, from start to finish is handled by your trustee (an insolvency practioner), who organises the paperwork , deals with the creditors on your behalf and manages the process to completion.
Sequestration (Bankruptcy)	Sequestration is the Scottish term for Bankruptcy. In 2008 the laws relating to Scottish Bankruptcy were changed allowing debtors to apply for their own bankruptcy, rather than having to wait for a creditor to do so. If you owe £1500 or more, you can apply for your personal bankruptcy. The process is similar to that of a Trust Deed and is handled by a trustee. In both Trust Deeds and Sequestration existing assets such as your property are taken into account by your trustee (the person who administers your Trust Deed or Sequestration) and a valuation is sought prior to going ahead with the solution. If after the valuation is carried out there is little or no negative equity then your trustee will confirm in writing that they have no interest in your property and it will be unaffected by the Trust Deed or Sequestration.

Contact: rosswalker@pf-solutions.co.uk / 0845 302 4628