So you own your home and are looking to keep it for years, paying off the mortgage year by year and watching as its value escalates to super high levels.
“Wow” you may be thinking “I am going to have serious net worth when my mortgage ends and I am mortgage-free”.
It sounds great. But of course for far too many homeowners those happy property days never arise.
Here are four terrible, dream-smashing things that can go wrong for you…
1. Take council tax payments lightly
If you are liable for a relatively modest council tax of say under £100 per month, it is hard to believe that non-payment can lead to the risk of bankruptcy, a charge on your property or loss of your home.
However that is exactly what can happen if you build up long standing council tax debt in excess of £1,000.
The formidable debt enforcement powers of councils include:
- Obtaining an attachment of earnings order
- Appointing bailiffs or enforcement officers to collect the debt
- Taking bankruptcy proceedings for debts of £5,000 more
- Putting a charge on your property by way of a charging order in the case of debts £1000 or more
- Imprisonment – as a last resort where bailiffs have failed.
With a charging order, a council has the power to force the sale of your property in order to recover the debt due, although often it will be prepared to wait until you decide to sell.
You could also lose your home in the event of bankruptcy proceedings.
If you get into council tax debt, the key thing is to seek debt advice long before you get anywhere near the levels of debt giving the council the power to take dangerous steps such as applying for a charging order or making you bankrupt.
2. Underestimate unsecured loans
If you take out an unsecured loan, you could be lulled into thinking it presents zero risk to your home on account of it being unsecured.
However, if you default on the loan the unsecured lender can take you to the county court, obtain a judgement and secure a charge on your property by way of a charging order.
Thereafter they could seek to enforce the order by selling your home. If you are unable to stop them – by paying the sum due – you could end up being evicted, losing your home.
Many loan companies, especially those charging the highest interest rates, are vicious in their outlook and may not be willing to wait until you move out before enforcing their charge.
IMPORTANT MORTGAGE MATTERS
Interest only or repayment? (which of these two mortgage types is best for you?)
Are you sitting on a mortgage time bomb? (the dangers of interest only mortgages)
How to deal with mortgage debt (practical systematic ways to prevent eviction)
3. Get into a muddle with joint ownership
Another way you can end up losing your home is by failing to take necessary legal steps when you purchase a property in a co-ownership context.
Where you buy a property with someone else, no matter how close or good the relationship, it is best practice for each co-owner to seek independent legal advice prior to the purchase.
The financial contribution of each party should be agreed and recorded in writing by the lawyers. The share of each owner should be set out in the purchase deed.
Further, a trust deed should be prepared confirming the property share of each co-owner and dealing with matters such as the:
- Arrangements for paying the mortgage and other outgoings
- Arrangements for carrying out repairs and maintenance
- Procedures for selling the property in the event of the death of a co-owner or the co-owners not being in agreement.
A key ingredient of a trust deed is giving a remaining co-owner first refusal to buy out the share of a departing co-owner.
Co-owners frequently fail to have a trust deed drawn up on grounds that they can’t afford the cost or it is unnecessary because they will be able to sort out everything amicable when the time comes.
This is of course an unwise, high-risk approach. If a problem occurs at a later date, in the absence of a legally binding trust deed as to what should happen, the co-owners could become involved in very expensive, acrimonious court proceedings.
The property could end up being sold, with neither party being able to remain in their home and legal costs eating up most if not all of the co-owners’ equity in the property
If you buy as a co-owner you can minimise these destructive risks by insisting on a trust deed no matter how good your relationship with the other co-owner or co-owners.
4. Fail to pay ground rent and service charges
If the property you own is a leasehold title, house or flat, you run the risk of forfeiture proceedings – termination of your lease and eviction – if you allow big ground rent or service charge liabilities to build up.
In the case of ground rent arrears alone, a landlord or freeholder can only take forfeiture proceedings if the ground rent due is more than £350 or more than 3 years in arrears.
Forfeiture proceedings are normally taken for service charge debts – where debts for a year or two can easily run into several thousand pounds.
Forfeiture of a lease is a very grave step and only granted by the courts as a last resort.
If however you allow large, unmanageable ground rent or service charge debt to build up, you run the real risk of a forfeiture order followed by eviction.
REPAIRS & INSURANCE
Don’t ignore maintenance & repairs (the first level of protection for your property)
Budgeting for repairs is smart (be prepared for surprises and big bills)
Why insurance is super important (the main do’s and don’ts you should know)
The obvious stand out point is the need to address money or debt problems at an early stage before they become large and unmanageable and put ownership of your home at grave risk.
If you address problems early enough, they should never become serious enough to result in the loss of your home.
Seek professional debt advice at the first sign of any problem.
In the case of co-ownership, if there is the hint of a problem and you don’t have a trust deed in place, seek legal advice at once.
Have you ever made any property errors? How did you manage to resolve the problem? Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com