Negative equity and getting another mortgage

Rebelheart

Well, the girlfriend was one of those suckers who followed the crowd and bought a pad at the height of the boom.

She met with her financial advisor over the weekend. She was on to me afterwards sounding very bleak indeed. Her advisor was saying she is better off not paying off the principal on her loan. I never heard of such a thing, but apparently it is quite common. (don't understand it either)


More to the point, ever since she bought the house she had been told clearly that as long as the mortgage was covered it would not impede her ability to finance her part of our mortgage for our own place when we get married. However, last night her advisor was saying that this is no longer the case and the environment has changed dramatically. He further said that Ireland will be moving towards a situation where people buy long leases to apartments à la continental Europe (Is this probable?). Moreover, he said they she would not be able to get another loan while her current house remains in negative equity. Is this true? She is feeling terribly guilty about this now, really bad, as we had been planning on being able to buy our own house for years.

I, on the other hand, refuse to believe her purchase of that house could ruin our ability to buy our own home if both of us are earning a decent salary. If it is true it will confine us to renting - paying "dead money" - for years to come. Furthermore, she should have little trouble renting her house as it's in a relatively solid location. Is the advisor guy on the ball or overly pessimistic about the property market? What are our options now?

Thanks.


PS: I'm still at home with my parents/ have no mortgage.

CiaranC

No lender will touch her if she is in negative equity unfortunately.

Victor

Rebelheart wrote: »

She is feeling terribly guilty about this now, really bad, as we had been planning on being able to buy our own house for years.

Why can't you live in the property she has?

I, on the other hand, refuse to believe

Too snobby or have you been away from the news for the last two years?

paying "dead money"

And negative equity isn't dead money?

Furthermore, she should have little trouble renting her house as it's in a relatively solid location.

REnt if for how much?

Is the advisor guy on the ball or overly pessimistic about the property market?

Sounds about right.

What are our options now?

Live in the existing property. Sell the existing property and buy somewhere else. You get a mortgage on your own.

Duckjob

It sounds like her advisor is advising her to switch her mortgage to interest only. She can only do that with approval from her lender, which I doubt she would get.

The banks want to see their debts paid down as much as possible and they're unlikely to cut much slack for the ordinary Jo Soap.

btw rent hasn't been dead money for 2 yrs now, and won't be for the next couple of yrs either.

As Victor pointed out, negative equity is the new "dead money".

Sponge Bob

She cannot remortgage if in Negative Equity and the bank will not even let her sell the place unless she clears the mortgage in full .

If on Interest Only she would be getting FURTHER into Negative equuity , she should in fact overpay the mortgage to try to get it down .

This advisor sounds like the person who sold here the first mortgage and wants to sell her another . If she is on a tracker mortgage she should run a mile from him/her .

Repeat After Me

Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money
Negative Equity is Completely Dead Money

DTrotter

Rebelheart wrote: »

Well, the girlfriend was one of those suckers who followed the crowd and bought a pad at the height of the boom.

She met with her financial advisor over the weekend. She was on to me afterwards sounding very bleak indeed. Her advisor was saying she is better off not paying off the principal on her loan. I never heard of such a thing, but apparently it is quite common. (don't understand it either)


More to the point, ever since she bought the house she had been told clearly that as long as the mortgage was covered it would not impede her ability to finance her part of our mortgage for our own place when we get married. However, last night her advisor was saying that this is no longer the case and the environment has changed dramatically. He further said that Ireland will be moving towards a situation where people buy long leases to apartments à la continental Europe (Is this probable?). Moreover, he said they she would not be able to get another loan while her current house remains in negative equity. Is this true? She is feeling terribly guilty about this now, really bad, as we had been planning on being able to buy our own house for years.

I, on the other hand, refuse to believe her purchase of that house could ruin our ability to buy our own home if both of us are earning a decent salary. If it is true it will confine us to renting - paying "dead money" - for years to come. Furthermore, she should have little trouble renting her house as it's in a relatively solid location. Is the advisor guy on the ball or overly pessimistic about the property market? What are our options now?

Thanks.


PS: I'm still at home with my parents/ have no mortgage.

Whereby paying interest on a higher principal (which can be lowered by saving while renting) isn't dead money. How many 100% mortgages were taken out years ago over priced houses/apartments on the belief that rent=dead money?

PullOutMethod

She was not a sucker.
She was just unlucky enough to have been born in the 1970s.
Therefore she had not a deposit saved when the property bubble took off in Ireland in 1996.
This property bubble saw unprecedented (in the OECD) 11 year increasing property prices until 2007.
Now, given the human biological clock limits the fertility window, most women have children in their 30s.
Unfortunately all but the most irresponsible of parents want somewhere to raise their child (a 1-bed shoe box in the commuter belt is not appropriate)
Therefore if you were born in the 1970's you were probably sucked into the property bubble.
This property bubble has destroyed the lives of countless now 30 somethings who are now living in inappropriate accommodation and in Negative Equity.
They cannot move house, they cannot even move mortgage.
They cannot have children.

Thank you very much Bertie Ahern and Charlie McCreevy.
I hope one day you reflect on the affect your actions have had on Ireland.

eamonnm79

CiaranC wrote: »

No lender will touch her if she is in negative equity unfortunately.

Dont you mean fortunately.
3 years ago they would and this couple would be in a whole lot more of a mess.

Original poster. Go live in the property with her or live in your parents for a while and rent it.

Any other option is going to lead to more pain for you medium to long term.

you said you both have ok salaries so its not a case that you dont have options. Its just you dont like any of em!

nesf

Moved from Irish Economy.

Honestly, if you're really stuck live with your parents and rent the place out. Sucks, but there you go.

johnnyskeleton

Victor wrote: »

Live in the existing property.

Good advice.

OP, after seeing what happened to your girlfriend, you might want to think twice about buying in the short-medium term.

Nesf - maybe Accomodation & Property would be more suitable (sorry, that's all my back seat modding for the day).

nesf

johnnyskeleton wrote: »

Nesf - maybe Accomodation & Property would be more suitable (sorry, that's all my back seat modding for the day).

You're quite possibly correct. I can't move threads outside of the forums I mod though.

Toots

I'll leave this one up to the OP, if you want this moved to Accommodation and Property just say the word

Dabko

PullOutMethod wrote: »

Thank you very much Bertie Ahern and Charlie McCreevy.
I hope one day you reflect on the affect your actions have had on Ireland.

Bertie Ahern & Charlie McCreevy NEVER put a gun to the heads of any individual ADULTS in Ireland. People have their own chioces to make, grow up and take responsibility. If you make a bad decision, deal with it. The second everyone (vast majority of Ireland) stops blaming the bankers/developers/politicians, bye bye recession.:mad:

LouOB

Negative equity is just another phrase of the times

Options
1. live in property and over pay on mortgage while interest rates are low
2. live in property and save like hell in high interest rate account for next property
3. her - rent out property and you get mortgage for own gaff
4. rent out property and rent out seperate property together while saving
5. both live abroad and rent out her house
6. she gets 'in the family way' can take a year off work and try to chip away at principal off mortgage i.e. overpay. You live in gaff 'helping' i.e. pay off mortgage

ta dahhhhhhhhhhhh

or phone a friend
you have already asked the audience (and a professional)

sofireland

jesh the scare mongering these days.
Negative Equity would only be a problem if the partner had to sell the house.
I'm guessing the plan is to buy the new one together and rent out the old one to cover the mortgage there.
Mortgage's a mainly based on ability to repay.
If the lady can demonstrate that, negative equity surely isn't an issue imo.

And as for paying interest only in a negative equity situation, thats crazy. As others have said, over pay where able to drive down the principal quicker.

Fighting Irish

Rebelheart wrote: »

Well, the girlfriend was one of those suckers who followed the crowd and bought a pad at the height of the boom.

She met with her financial advisor over the weekend. She was on to me afterwards sounding very bleak indeed. Her advisor was saying she is better off not paying off the principal on her loan. I never heard of such a thing, but apparently it is quite common. (don't understand it either)


More to the point, ever since she bought the house she had been told clearly that as long as the mortgage was covered it would not impede her ability to finance her part of our mortgage for our own place when we get married. However, last night her advisor was saying that this is no longer the case and the environment has changed dramatically. He further said that Ireland will be moving towards a situation where people buy long leases to apartments à la continental Europe (Is this probable?). Moreover, he said they she would not be able to get another loan while her current house remains in negative equity. Is this true? She is feeling terribly guilty about this now, really bad, as we had been planning on being able to buy our own house for years.

I, on the other hand, refuse to believe her purchase of that house could ruin our ability to buy our own home if both of us are earning a decent salary. If it is true it will confine us to renting - paying "dead money" - for years to come. Furthermore, she should have little trouble renting her house as it's in a relatively solid location. Is the advisor guy on the ball or overly pessimistic about the property market? What are our options now?

Thanks.


PS: I'm still at home with my parents/ have no mortgage.

For the next few years at least, renting is not dead money

Fighting Irish

PullOutMethod wrote: »

She was not a sucker.
She was just unlucky enough to have been born in the 1970s.
Therefore she had not a deposit saved when the property bubble took off in Ireland in 1996.
This property bubble saw unprecedented (in the OECD) 11 year increasing property prices until 2007.
Now, given the human biological clock limits the fertility window, most women have children in their 30s.
Unfortunately all but the most irresponsible of parents want somewhere to raise their child (a 1-bed shoe box in the commuter belt is not appropriate)
Therefore if you were born in the 1970's you were probably sucked into the property bubble.
This property bubble has destroyed the lives of countless now 30 somethings who are now living in inappropriate accommodation and in Negative Equity.
They cannot move house, they cannot even move mortgage.
They cannot have children.

Thank you very much Bertie Ahern and Charlie McCreevy.
I hope one day you reflect on the affect your actions have had on Ireland.

There was this chocolate bar i saw in the shop yesterday for €6000, i really really wanted it but i didn't get it

seanybalywaly

First of all dis is me first post on here...Wuhu. Now heres why, tryin to find out as much as I can about the above topic. Sorry for the thread hijack but its a similar situation and topic. Heres our story, Me and the missus bought a house in the country as the city houses just wernt worth the money. So we bought a 4 bed new bungalow for 317k 100% mortgage, there has never been a problem with our repayments. Now we have noticed house prices in the city have dropped a bit more than country houses especially in the subarbs. So we got our house valued at 265K =50k negative equity. Now luckily enough we are on a tracker mortgage, but we really want to move back to the city for a number of legitimate reasons, work,first child etc! Anyway The houses in the city we are after are selling in the region of 265K so I thought we could just sell the house for that and happy days. But that doesnt seem to be the case, and I really cant understand why. I have no problem payin off the negative equity if I move to the other house, well il be payin regardless.Im not asking for any more money, am I asking too much? Im meeting with the bank next week, could I use coming off the tracker as a bargaining tool as they are not making anythin from it? The way I see it I owe 317k anyway thats my problem and they should not be able to stop me move house up to the same value I sell mine for. Plus the houses wer looking at at one time were on the market for 370K so when things get better so will the equity on the new mortgage. Im obviously a joe soap and have no qualifications in this area. Any advice would be apreciated...

stepbar

You have no bargaining tools. You're still in negative equity no matter what way you try to view the suitation. The bank has the security of the property and as such call the shots.

Duckjob

seanybalywaly wrote:

First of all dis is me first post on here...Wuhu. Now heres why, tryin to find out as much as I can about the above topic. Sorry for the thread hijack but its a similar situation and topic. Heres our story, Me and the missus bought a house in the country as the city houses just wernt worth the money. So we bought a 4 bed new bungalow for 317k 100% mortgage, there has never been a problem with our repayments. Now we have noticed house prices in the city have dropped a bit more than country houses especially in the subarbs. So we got our house valued at 265K =50k negative equity. Now luckily enough we are on a tracker mortgage, but we really want to move back to the city for a number of legitimate reasons, work,first child etc! Anyway The houses in the city we are after are selling in the region of 265K so I thought we could just sell the house for that and happy days. But that doesnt seem to be the case, and I really cant understand why. I have no problem payin off the negative equity if I move to the other house, well il be payin regardless.Im not asking for any more money, am I asking too much? Im meeting with the bank next week, could I use coming off the tracker as a bargaining tool as they are not making anythin from it? The way I see it I owe 317k anyway thats my problem and they should not be able to stop me move house up to the same value I sell mine for. Plus the houses wer looking at at one time were on the market for 370K so when things get better so will the equity on the new mortgage. Im obviously a joe soap and have no qualifications in this area. Any advice would be apreciated...

Unless you can raise the 50k yourself and pay the mortgage down so that the outstanding loan amount is less than the house valuation, I would say you are unfortunately stuck where you are. That going to be pretty difficult tbh because most property price are sliding downwards all the tim, so you would be trying to chase a moving target.

The loan is secured on the property, and the bank is very very unlikely to allow you move away from that because then they would have an unsecured loan on their hands.

ferga_com

There are two transactions involved, not one.

1. Sell your existing house. You can't do this until you pay the bank back what you owe them.
2. Buy a new house. Maximum mortgage you'll get to buy a new house is 92% of the value, so you'd also need to come up with 8% deposit plus legal fees, valuation fees etc.

madmik

if you both pool your resources and pay off her mortgage early while interest rates are low this will enable you both to be in the green

then you can apply for a monster mortgage together and buy the dream house

seanybalywaly

Thanks for the input guy's ya it seems as if im pretty stuck, done a bit of readind and it seems as if there are 340000 houses in the same situation. I wonder if i raised part of the 50k and got a loan of the outsanding from the credit union. would I realistically be able to move?

Toots

Well you'd have to declare the credit union loan on your mortgage app, which will affect the amount you'll be approved for. Also, you'll need your deposit in addition to that, and the stamp duty, and the legal fees.

stepbar

seanybalywaly wrote: »

Thanks for the input guy's ya it seems as if im pretty stuck, done a bit of readind and it seems as if there are 340000 houses in the same situation. I wonder if i raised part of the 50k and got a loan of the outsanding from the credit union. would I realistically be able to move?

And then you would have to raise another amount equal to 8% of the purchase price of the new property plus meet solr fees and a deposit to the solr to buy the house. I mean seriously you should know this having a house already.

EDIT: And the stamp duty. Seriously forget about it because it's not going to happen.

seamus

If your intention is to get into a position of having no debt and no negative equity as quick as you can, then a personal loan to cover the shortfall is the best plan.

Let's say you're paying €1200/month into your mortgage and you're in negative equity to the tune of €30k. In order to reduce the non-equity part of your mortgage, you need to up your repayments by €600 for 50 months (just over 4 years) leaving you further in trouble fiscally.

However, if you can sell the property, get a personal loan to cover the €30k shortfall and pay your €1200/month into that loan, you'll have it paid off in just over 2.5 years. You may have paid a little more interest, but if your priority is getting out of debt in the shortest time possible, this is the way to go.

ferga_com

Where would they live?

stepbar

It's unrealistic to think one could walk into a bank and get a personal loan (unsecured may I add) of 50k for the purpose of paying down debt on a mortgage. For god sake the repayments would be akin to a second mortgage. There's not many folk who could do this. Lets be realistic.