Negative Equity - What are our options?

Pete Briquette

Realise our situation is far from ideal but just wondering what our options are??

Basically myself and my brother bought a house in late 2006, close to the peak of the property bubble. The house was in need of some work, rewire, heating/plumbing needed updating, and a fair bit of cosmetic stuff...

Long story short, none of this has been done although we still have money set aside that would cover a lot of it..

Got into a bidding war on the house and ended up paying over the odds, even in that inflated market...

If we were to sell the house now it would be worth a lot less... if we were to carry out the nesscessary work it would still be worth a fair bit less..

Both of us are now looking to move on, have partners and would probably be looking at getting our own places with them over the next while...

So what are our options??

Carry out the refurb, sell at a loss and try to come up with the extra money that will be owed to the bank ?

Dont carry out the refurb and hope the money we have set aside will cancel out the extra loss we incur?

Carry out the refurb and rent out the house (rent would probably only cover 75% of the mortgage)? How would this affect our individual chances of getting another mortgage with each of our partners?

Any other options??

Sorry i'm clueless about all this but fully aware we've made some bad decesions on this one...:o

Thanks,

Pete

gurramok

Why did you buy in the first place?

You could rent it out long term(10+yrs) and be aware of any stamp duty clawback to be paid OR just cut your losses and realise your big mistake.

Whatever you do, don't default on your debt and try not to overstretch yourselves as it will make life harder down the line.

jackal

Pete Briquette wrote: »

Dont carry out the refurb and hope the money we have set aside will cancel out the extra loss we incur?

This one. If you do go for it, then take a serious look at the price. Setting it at what you "need" to sell it for will make the whole exercise futile. The property is below par, based on you description, so it will need to be priced accordingly - i.e. a good chunk less than the price of a decent property in the area.

You bought at the worst possible time, the peak of the bubble, for a price that was excessive even at that time. You have made a huge mistake, try and cut your losses and get out, even if you end up owing money. Sitting on it will simply make those losses bigger and bigger as time goes on and prices go down.

You are not going to get out of this situation without taking a hit, and my advice is to take it and move on, lesson learned. You are far from the only person in this position, but lots of them are compounding their error by deciding stubbornly that they wont sell for less than the property is "worth", which is a fantasy value that they should never have paid in the first place.

You have identified the problem, and a number of solutions, so you are in a better position than a lot of others. Good luck to you.

faceman

OP its not easy to give you advice without knowing your own personal circumstances. Are you and your partner in secure employment? Are you in a positive cash position with your disposable income?