Negative Equity - a problem?

Dublin8Girl · 19-02-2008 3:26pm #1

Hi - I'm a newbie and have a quick property question - there seems to be a lot of knowledge on here! Bought a house in Dublin 8 in June 2007, (cost 300k, mortgage 265k). monthly mortgage repayments between my boyfriend and i are 1160 (i.e. 580each). we're repaying capital and interest. i'd never even considered that we might be in negative equity (probably clueless) but some of the posts worry me. am i right in thinking that once we can meet the repayments (which we can easily, they're about 20% of after tax income for us both) and don't need to sell quickly, it's not a problem? or am i living in dreamland and in reality our house will be worth much less for years to come?

prior to buying we were living separately paying 550 each in rent so it seemed like a good purchase!

jdivision · 19-02-2008 3:28pm

Dublin8Girl wrote: »

or am i living in dreamland and in reality our house will be worth much less for years to come?

Nobody can predict this unfortunately. Your house at present however is worth less than you paid for it because you bought it at the peak of the market.

Dublin8Girl · 19-02-2008 3:33pm

it would seem that way alright! on a positive note however, im only paying 30euro more a month for my own mortgage instead of someone else's which is why the whole thing didn't bother me until recently! a crystal ball would be nice!:D

SkepticOne · 19-02-2008 3:34pm

Dublin8Girl wrote: »

i'd never even considered that we might be in negative equity (probably clueless) but some of the posts worry me. am i right in thinking that once we can meet the repayments (which we can easily, they're about 20% of after tax income for us both) and don't need to sell quickly, it's not a problem? or am i living in dreamland and in reality our house will be worth much less for years to come? prior to buying we were living separately paying 550 each in rent so it seemed like a good purchase!

Negative equity is only a problem if you have to sell. Then you need to make up the shortfall.

Dublin8Girl · 19-02-2008 3:43pm

righty oh then, looks like i'll be a city dweller for the forseeable future then! feel a bit better now! thanks!:)

jdivision · 19-02-2008 9:48pm

you're comfortable paying the mortgage, it'd be different if you were struggling to be honest. You're just going to start worrying over something that doesn't affect you unless interest rates jump significantly or you're forced to sell for some reason.

Smoggy · 19-02-2008 9:52pm

I have to ask - how does 300k buy a house in Dublin 8 ? - that wont get much way out in Tallaght / Clondalkin.

gurramok · 19-02-2008 10:08pm

Smoggy wrote: »

I have to ask - how does 300k buy a house in Dublin 8 ? - that wont get much way out in Tallaght / Clondalkin.

I didn't reply earlier on this part out of sensitivity to the OP.

I suspect a 1bed maybe 2bed apt in that area OR one of the old 1bed houses off patrick street direction which might have gone for that price?

iguana · 19-02-2008 11:57pm

There are several reasons that negative equity could start to become a very big problem for you.

1. You and your partner split up and are unable to sell the property. Which means you are both tied to one another on a financial level until the sale price can cover the mortgage.

2. One or both of you loses your job and needs to move in order to get a new job. You will be unable to move as you can't sell the house.

3. Due to job loss, wage cuts or interest rate rises you start having trouble paying the mortgage and the house is repossessed. The sale price won't cover the mortgage and you are left owing the remainder. Your future income can be garnished by your debtors, and other money you come into (inheritance, prize money, etc) will be taken to cover the debt as can your pension fund.

4. And without any of those scenarios coming to pass, you lose the ability to trade up. Which means that if you may be starting a family in an unsuitable property or holding off on having children.

I don't want to upset you, but I think you are probably better off being aware of what could happen in the future so you can try to prepare for the possibility.

Dublin8Girl · 20-02-2008 9:23am

gurramok wrote: »

I didn't reply earlier on this part out of sensitivity to the OP.

I suspect a 1bed maybe 2bed apt in that area OR one of the old 1bed houses off patrick street direction which might have gone for that price?

Nope - its a 2 bed house with relatively large back garden so we could extend if needs be. it needed work done and we've refurbished it now which didn't cost us much due to help from family members etc. so no need to feel sorry for me!!:p
im not too bothered about the splitting up comments etc - the reason we bought in the first place is cos we're committed - in any event my question was simply whether negative equity is a problem if we don't want to sell and can afford the repayments!!

Dublin8Girl · 20-02-2008 9:30am

Thanks for the comments by the way! I think once I view my house as a home and not some investment property that needs to be generating money, i'll be happy!!

Paulw · 20-02-2008 11:20am

Dublin8Girl wrote: »

I think once I view my house as a home and not some investment property that needs to be generating money, i'll be happy!!

That's exactly the right way to look at it. As a home, it shouldn't matter what the market value of the property is. It will only come in to play if circumstances change and you need to sell.

I have no idea what the market value of my property is, and to be honest, I don't care. It's where I live. I bought it for that reason, and not as an investment.

Victor · 20-02-2008 2:48pm

Dublin8Girl wrote: »

im not too bothered about the splitting up comments etc - the reason we bought in the first place is cos we're committed - in any event my question was simply whether negative equity is a problem if we don't want to sell and can afford the repayments!!

Best of luck, but things happen. Make sure you have good income protection and an agreement on what happens if there is a break-up, remember "there seems to be a lot of knowledge on here!".

dazberry · 20-02-2008 3:08pm

Smoggy wrote: »

I have to ask - how does 300k buy a house in Dublin 8 ? - that wont get much way out in Tallaght / Clondalkin.

2 Bed Inchicore. The asking price is directly inverse to the amount of linoleum furnishing the house

.

D.

Dublin8Girl · 20-02-2008 3:25pm

Victor wrote: »

Best of luck, but things happen. Make sure you have good income protection and an agreement on what happens if there is a break-up, remember "there seems to be a lot of knowledge on here!".

Argh!! Am I getting relationship advice?! but thank you, for the well meaning comments! next I'll be on asking about a pre-nup before the wedding!

Victor · 20-02-2008 3:48pm

Dublin8Girl wrote: »

Argh!! Am I getting relationship advice?!

Sorry, not wishing to intrude. But seriously, we've had a few people over the years, where one way or another something has gone wrong.

Dublin8Girl · 20-02-2008 4:04pm

I wasn't a bit insulted don't worry! It's just that I started the thread wondering about negative equity and 10 posts later the status of my relationship is a major factor! i better get him down that aisle quicksharp!

Radharc na Sleibhte · 20-02-2008 4:06pm

Dublin8Girl, negative equity only becomes a problem if you need to sell.
If you are happy in your home, who cares what its worth as long as we can afford the repayments. Thats what I tell myself anywho.

seamus · 20-02-2008 4:12pm

Victor wrote: »

Best of luck, but things happen. Make sure you have good income protection and an agreement on what happens if there is a break-up, remember "there seems to be a lot of knowledge on here!".

Yes, in terms of income protection, remember if you get stuck that your life assurance will pay off your entire mortgage, and your boyfriend has been leaving the toilet seat up a lot lately...

Only messing...

Negative Equity - a problem?

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