Bank repossess house, is debt gone?

quick question, i always believed that if you cant pay the mortgage and the bank repossess the house thats the end of it.

a friend told me thats not true, if the bank reposses the house owner still owes the mortgage.
is this true? and how could it possibly be right?

L1011

The mortgage holder still owes the residual amount (if any) after the sale of the house.

What you are thinking of is the situation in some other countries (notably the US) of non-recourse mortgages.

gaius c

MYOB wrote: »

The mortgage holder still owes the residual amount (if any) after the sale of the house.

What you are thinking of is the situation in some other countries (notably the US) of non-recourse mortgages.

Correct yes but new insolvency legislation should help people genuinely in trouble get the debt monkey off their backs.

Duckjob

bubblypop wrote: »

quick question, i always believed that if you cant pay the mortgage and the bank repossess the house thats the end of it.

a friend told me thats not true, if the bank reposses the house owner still owes the mortgage.
is this true? and how could it possibly be right?

What you're describing there are non-recourse mortgages. I believe they're the norm in the US, but they don't exist here.

pippip

You end up having to negotiate a personal loan with the bank to cover the balance.

That's if the bank lets you. They can stop the sale if they think you can afford the repayments by withholding the deeds.

camphor

bubblypop wrote: »

quick question, i always believed that if you cant pay the mortgage and the bank repossess the house thats the end of it.

a friend told me thats not true, if the bank reposses the house owner still owes the mortgage.
is this true? and how could it possibly be right?

The borrower owes the full sum. The house is just security.

Shoomac

If the house is security and that's in negative equity; isn't the loan then unsecured?

djimi

Yes, which I think is the reason why banks are so reluctant to repossess unless they really are left with no other choice. Repossessing a house means that it is only going to be worth to them what it is worth at that moment in time. Until it is sold there is always the chance that their security will increase in value. Thats how I see it anyway.

gaius c

Shoomac wrote: »

If the house is security and that's in negative equity; isn't the loan then unsecured?

Nope and don't believe anyone who tries to tell you that.

djimi

gaius c wrote: »

Nope and don't believe anyone who tries to tell you that.

Assuming we are talking about a repossession, what becomes the security once the house is repossessed and sold? Or are you just talking about negative equity in general?

gaius c

djimi wrote: »

Assuming we are talking about a repossession, what becomes the security once the house is repossessed and sold? Or are you just talking about negative equity in general?

The poster I replied to did not specify repossession in their post.

djimi

gaius c wrote: »

The poster I replied to did not specify repossession in their post.

Its a thread about bank repossessions; I took the poster to mean in the case of a repossession.

Shoomac

Yep, I was talking about repossession