Coming soon: negative equity mortgages

Permabear

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ei.sdraob

donegalfella wrote: »

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Yes this is a good idea

since it demolishes the main argument the Matt Cooper's "NAMA for Reckless & Gullible Fools" brigade has

that people in negative equity cant move home if they need to get job etc ....



aside: funny how negative equity is not a problem for people who get a car loan for a new car and are straight away in "negative equity" by few grand the moment they put a number plate on and their "negative equity" grows over time ... oh i forgot "house prices can only ever go up"

thebman

Its going to be a necessity. I think it will be good as it will keep house prices somewhat stable in areas people want to live while making the ghost estates truly empty if implemented properly.

I think it will probably turn out bad as banks will limit it very strictly and try not to let the above occur as they won't house prices in crap areas go down too much as it isn't in their interest.

Scarab80

thebman wrote: »

Its going to be a necessity. I think it will be good as it will keep house prices somewhat stable in areas people want to live while making the ghost estates truly empty if implemented properly.

I think it will probably turn out bad as banks will limit it very strictly and try not to let the above occur as they won't house prices in crap areas go down too much as it isn't in their interest.

I think the opposite would be the case. This is based on the assumption that a negative equity mortgage will not advance any additional credit to the borrower which i think is going to be a pretty obvious condition.

If implemented the borrower will be incentivised to sell their house in a decent location and move to cheaper accomodation, e.g. partially sold developments, to try to reduce or eliminate their negative equity and hopefully reduce their mortgage to reflect their newly lowered earning power. Obviously some of these developments are so far from civilisation that they will never be filled (unless they are taken over during the upcoming Chinese invasion ), but i reckon there will be upward pressure on cheaper homes and downward pressure on more expensive homes.

thebman

Scarab80 wrote: »

I think the opposite would be the case. This is based on the assumption that a negative equity mortgage will not advance any additional credit to the borrower which i think is going to be a pretty obvious condition.

If implemented the borrower will be incentivised to sell their house in a decent location and move to cheaper accomodation, e.g. partially sold developments, to try to reduce or eliminate their negative equity and hopefully reduce their mortgage to reflect their newly lowered earning power. Obviously some of these developments are so far from civilisation that they will never be filled (unless they are taken over during the upcoming Chinese invasion ), but i reckon there will be upward pressure on cheaper homes and downward pressure on more expensive homes.

Maybe but many people won't go to live in those estates unless they have no choice and can't make repayments on existing mortgage I imagine.

Most people able to afford their mortgage will want to move into the more expensive areas.

lubo_moravcik

I'm in negative equity, and although i can afford to pay my mortgage i would love to be able to sell up under this proposal and move closer to the city. i do'nt mind moving into a smaller place, apartment would even do just to get out of the country and back to normal living.

danbohan

donegalfella wrote: »

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i think we may have a lot 90 year olds still paying mortgages in the future at this rate.

Scarab80

danbohan wrote: »

i think we may have a lot 90 year olds still paying mortgages in the future at this rate.

I assume that they wouldn't change the term of a mortgage or increase the total amount owed, it just let's you transfer your negative equity to another property of a similar or lesser value.

danbohan

Scarab80 wrote: »

I assume that they wouldn't change the term of a mortgage or increase the total amount owed, it just let's you transfer your negative equity to another property of a similar or lesser value.

yes probably , but what if house you move too continues to fall in value your negative equity will continue to increase ?. but overall it probably is one way to bring some freedom of movement to people who could remain trapped in negative equity for many years , and its a bit realistic unlike the nama type2 put forward by matt cooper n friends

Scarab80

danbohan wrote: »

yes probably , but what if house you move too continues to fall in value your negative equity will continue to increase ?. but overall it probably is one way to bring some freedom of movement to people who could remain trapped in negative equity for many years , and its a bit realistic unlike the nama type2 put forward by matt cooper n friends

If your house continues to fall in value you would most likely be in the same situation as if you hadn't moved assuming a general decrease in the property market as opposed to an area specific decrease.

I think it's the best (only?) solution out there to the problem, allows people to move if they want and to downgrade if they find that they can no longer afford their mortgage. Can't see any rational argument against it other than "where's my free money?" and "we need to borrow to stimulate the economy".

danbohan

Scarab80 wrote: »

If your house continues to fall in value you would most likely be in the same situation as if you hadn't moved assuming a general decrease in the property market as opposed to an area specific decrease.

I think it's the best (only?) solution out there to the problem, allows people to move if they want and to downgrade if they find that they can no longer afford their mortgage. Can't see any rational argument against it other than "where's my free money?" and "we need to borrow to stimulate the economy".

dont worry the ''wheres my free money brigade '' will be along shortly!

nesf

danbohan wrote: »

yes probably , but what if house you move too continues to fall in value your negative equity will continue to increase ?. but overall it probably is one way to bring some freedom of movement to people who could remain trapped in negative equity for many years , and its a bit realistic unlike the nama type2 put forward by matt cooper n friends

Negative equity is only a problem if you want to move really. If someone avails of such a mortgage and moves to a home they can realistically live in for the long term then a short term increase in negative equity isn't a big problem so long as they can continue to repay the loan.

P. Breathnach

danbohan wrote: »

i think we may have a lot 90 year olds still paying mortgages in the future at this rate.

That's not necessarily a bad thing. The alternative is having their 65 year old children getting impatient about their inheritance.

Dob74

donegalfella wrote: »

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This is another terrible idea. It will just force prices higher and will lead the banks into more finanical trouble.
But when you have the taxpayer to bail you out, sure any ole scam is worth a try.

Jaysoose

ei.sdraob wrote: »

Yes this is a good idea

since it demolishes the main argument the Matt Cooper's "NAMA for Reckless & Gullible Fools" brigade has

that people in negative equity cant move home if they need to get job etc ....



aside: funny how negative equity is not a problem for people who get a car loan for a new car and are straight away in "negative equity" by few grand the moment they put a number plate on and their "negative equity" grows over time ... oh i forgot "house prices can only ever go up"

Sigh...really expected better from you but then repeating the same smug comments over and over will get your post count up i suppose. Well done.

ei.sdraob

Jaysoose wrote: »

Sigh...really expected better from you but then repeating the same smug comments over and over will get your post count up i suppose. Well done.

Nothing intelligent to post on the subject itself no?

This allows people to move homes and take their debt with them so can continue to repay it (and hell maybe in 10-20 years time they be back in positive equity, well so goes the NAMA plan), how is that a bad thing?? as an added bonus it puts a stake trough the nonsense arguments of the likes of Matt Cooper

Jaysoose

ei.sdraob wrote: »

Nothing intelligent to post on the subject itself no?

This allows people to move homes and take their debt with them so can continue to repay it (and hell maybe in 10-20 years time they be back in positive equity, well so goes the NAMA plan), how is that a bad thing?? as an added bonus it puts a stake trough the nonsense arguments of the likes of Matt Cooper

Now thats better, no need for sarcastic comments and attempts at humour comparing car loans to mortgages...snort snort..guffaw.

What does smug taste like by the way?

kmick

Example
Current Mortagage 250k
House Value 150k
Negative Equity Carried Forward 40%

New House Price 250k (Assuming buyers can afford roughly the same thing but in fact it will be bigger/better location than current property)
Loan (say 85%) 212,500
Plus Negative Equity 100,000
Total Loan 312,500
Negative Equity Carried Forward 32%

Makes sense to me if you need a bigger place for a growing family or want to escape the daily commute from Cavan.

seamus

Jaysoose wrote: »

Now thats better, no need for sarcastic comments and attempts at humour comparing car loans to mortgages...snort snort..guffaw.

What does smug taste like by the way?

Any chance you could add some content to the discussion at some point?

danbohan wrote: »

yes probably , but what if house you move too continues to fall in value your negative equity will continue to increase ?

But if they pay off the loan, there's no problem. I imagine most people in negative equity who have no intention of moving, actually couldn't care less. So likewise, someone who can move into a more appropriate long-term accomodation with their negative equity won't really care quite so much if it continues to drop in price.

The car loan comparison is in fact apt. Negative equity or no, it's still a debt which is being repaid and will eventually be repaid. Negative equity isn't an eternal noose around someone's neck which only dissipates when property prices start to increase.

Loan (say 85%) 212,500
Plus Negative Equity 100,000
Total Loan 312,500
Negative Equity Carried Forward 32%

This is actually something which will need to be clarified when these loans are made available. Most people won't have a deposit saved up to move into a new home. So the mortgage will need to be the purchase price + the negative equity. There won't be any equity put into the sale by the homebuyer. That is, if the purchase price is €250k and you mention a loan for €212.5k, where is the other €37.5k coming from? Nobody will have that saved up, because traditionally you used the proceeds from your current home sale to fund the deposit on your new home.

ei.sdraob

Jaysoose wrote: »

Now thats better, no need for sarcastic comments and attempts at humour comparing car loans to mortgages...snort snort..guffaw.

What does smug taste like by the way?

I forgot houses are "special", yes its that sort of thinking that got us into this mess, ever heard of renting btw? :rolleyes:

And yes comparing the 1st and 2nd most important purchases in a persons life (when borrowing is involved) is quite apt

both are a product made out of materials and labour with various selling points/variables, both depreciate over time, both are used to make your life better and more productive

oh i forgot houseprices can only ever go up :rolleyes:

Jaysoose

ei.sdraob wrote: »

I forgot houses are "special", yes its that sort of thinking that got us into this mess, ever heard of renting btw? :rolleyes:

And yes comparing the 1st and 2nd most important purchases in a persons life (when borrowing is involved) is quite apt

both are a product made out of materials and labour with various selling points/variables, both depreciate over time, both are used to make your life better and more productive

oh i forgot houseprices can only ever go up :rolleyes:

Were did i say houses are special? i have heard of renting and have rented so im not sure what your getting at but knock yourself out.

Comparing buying cars and houses is like comparing apples and oranges and are COMPLETELY different no matter how many times you say it and using one to make a point about the other is distorting reality in the extreme but then whatever keeps you happy.



If people in negative equity have the opportunity to better their situation thriough a scheme like this then im all for it, they must face the reality of their situation and accept responsibility for the mortgages they have taken though as i feel people need to pay their own bills but then thats just me.

Scarab80

kmick wrote: »

Example
Current Mortagage 250k
House Value 150k
Negative Equity Carried Forward 40%

New House Price 250k (Assuming buyers can afford roughly the same thing but in fact it will be bigger/better location than current property)
Loan (say 85%) 212,500
Plus Negative Equity 100,000
Total Loan 312,500
Negative Equity Carried Forward 32%

Makes sense to me if you need a bigger place for a growing family or want to escape the daily commute from Cavan.

I would doubt very much if banks are going to extend additional credit to borrowers in negative equity. I would expect that the total amount that could be spent on a new property would max at the sales price of the current home.

seamus

Scarab80 wrote: »

I would doubt very much if banks are going to extend additional credit to borrowers in negative equity. I would expect that the total amount that could be spent on a new property would max at the sales price of the current home.

I'm not so sure. What you're doing in that case is forcing the borrower to move to an entirely different area - likely one which is less desirable or outside of the major urban areas and where house prices are less likely to be stable. If I have an apartment in Dublin 14 which I can sell for €250k, there's no way I can buy a 3-bed house in the same area for that money. So I need to move to Tallaght or Clondalkin or even out to a commuter town in Navan, where house prices will take longer to stabilise.

On the other hand, if you allow the borrower to stay within a more desirable area, but change to a more desirable home type, then long-term you're looking at a more stable asset, even if the size of the mortgage is larger.

I imagine they're not introducing these loans willy-nilly. The banks have spotted that in the short to medium term, family homes will bounce and apartments will continue to flounder because we have far too many of them and far too many which are inadequate for anything but rental accomodation. So convincing people to move from apartments will stabilise their loan book, even if it does inflate it.

Scarab80

Scarab80 wrote: »

I would doubt very much if banks are going to extend additional credit to borrowers in negative equity. I would expect that the total amount that could be spent on a new property would max at the sales price of the current home.

I guess that is the only way to make this work without increasing the amount lent. If people have managed to save some cash from redundancies or whatever I guess they could trade up.

Scarab80

seamus wrote: »

I'm not so sure. What you're doing in that case is forcing the borrower to move to an entirely different area - likely one which is less desirable or outside of the major urban areas and where house prices are less likely to be stable. If I have an apartment in Dublin 14 which I can sell for €250k, there's no way I can buy a 3-bed house in the same area for that money. So I need to move to Tallaght or Clondalkin or even out to a commuter town in Navan, where house prices will take longer to stabilise.

On the other hand, if you allow the borrower to stay within a more desirable area, but change to a more desirable home type, then long-term you're looking at a more stable asset, even if the size of the mortgage is larger.

I imagine they're not introducing these loans willy-nilly. The banks have spotted that in the short to medium term, family homes will bounce and apartments will continue to flounder because we have far too many of them and far too many which are inadequate for anything but rental accomodation. So convincing people to move from apartments will stabilise their loan book, even if it does inflate it.

Whatever judgements banks make about the security or otherwise of certain asset classes will be made largely irrelevant by new regulation. See yesterdays report from the financial regulator. They don't go into detail at the moment but it is clear that there is going to be greater restricition on lending limits and stress tests.

We anticipate that, as part of a series of legislative amendments following the restructuring of the Central Bank, we will be given broader regulatory powers which would include the ability to prescribe lending limits.

Therefore if someone qualified for a certain loan under the old unregulated system, under the new system they will qualify for a lot less, especially if they have suffered pay cuts since they took out their mortgage. Remember that the fall in property values will only benefit first time buyers, people already in the market will have to finance their negative equity in new loans.

I would imagine that it would be possible to get increased credit on a ne loan if someone's personal circumstances have improved dramatically but these will probably be in the minority.

Also remember that banks have a vested interest in moving people out to the country into unsold housing estates as this money will be offsetting losses on their development book.

danbohan

Scarab80 wrote: »

If your house continues to fall in value you would most likely be in the same situation as if you hadn't moved assuming a general decrease in the property market as opposed to an area specific decrease.

I think it's the best (only?) solution out there to the problem, allows people to move if they want and to downgrade if they find that they can no longer afford their mortgage. Can't see any rational argument against it other than "where's my free money?" and "we need to borrow to stimulate the economy".

interesting article here http://trueeconomics.blogspot.com/, , he does not seem very impressed

OMD

ei.sdraob wrote: »

aside: funny how negative equity is not a problem for people who get a car loan for a new car and are straight away in "negative equity" by few grand the moment they put a number plate on and their "negative equity" grows over time ... oh i forgot "house prices can only ever go up"

Of course negative equity is a problem for people buying a car and especially for the bank lending the money. That is why the rate of interest is so much higher on car loans than on house loans.

OMD

danbohan wrote: »

interesting article here http://trueeconomics.blogspot.com/, , he does not seem very impressed

This guy doesn't have much of a clue about much. Look at some of his other blogs. He cannot even understand basic maths. I really wouldn't listen to much of what he says

danbohan

OMD wrote: »

This guy doesn't have much of a clue about much. Look at some of his other blogs. He cannot even understand basic maths. I really wouldn't listen to much of what he says

funny enough i would put a lot more weight in what he says than our politicians , bankers or tethered economists !

OMD

danbohan wrote: »

funny enough i would put a lot more weight in what he says than our politicians , bankers or tethered economists !

Try reading what he says. You will soon change your mind. That doesn't mean I trust everyone else, just I don't trust him.

Even the example he gives here, he chooses a person who bought a property above average price, at the peak of the market, that has fallen more than the average and after only 4 years in this above average property they need to move to a bigger place. Yes it happens but hardly the people this measure is aimed at (if it ever goes ahead).

dean21

This is a scam by the banks to fool people in to giving up there trackers.
If you move house you will have to take out a new mortgage and hence the banks will be making a profit on you.
Hold on to you trackers and say where u are living and enjoy everday that you have the banks by the balls

Diarmuid

OMD wrote: »

This guy doesn't have much of a clue about much. Look at some of his other blogs. He cannot even understand basic maths. I really wouldn't listen to much of what he says

Yes, the guy doesn't have a clue.

Current

* Chairman at IRBA
* Chief Economist at Irish Exporters Association
* Head of Macroeconomics at Institute for Business Value, IBM
* Blogger at www.trueeconomic.blogspot.com
* Adjunct Lecturer in Finance at Trinity College, Dublin


Past

* Head of Strategy & Research, Global Markets at Heinz Associates
* Non Executive Director at Business & Finance Magazine
* Director of Research at NCB Stockbrokers
* Editor at Business & Finance Magazine
* Lecturer in Economics at Trinity College Dublin


Education

* Trinity College, Dublin
* The Johns Hopkins University
* University of Chicago

It is better to keep one's mouth shut and be thought a fool than to open it and resolve all doubt

OMD

Diarmuid wrote: »

Yes, the guy doesn't have a clue.


It is better to keep one's mouth shut and be thought a fool than to open it and resolve all doubt

As I said read his blogs and you will see the kind of rubbish he spouts. Anywhere he uses figures he is usually wrong.

Take the example we are talking about here.
http://trueeconomics.blogspot.com/2010/06/economics-21062010-innovation-economy.html

According to his figures this person will have a loan to value of 162%. Now the negative equity mortgage will only be open to people up to a max of 140% (and probably 125%). So what he is basically saying is that someone who would not get a negative equity mortgage shouldn't get a negative equity mortgage. Well that is just total nonsense. What is the point of even writting a blog telling someone not to get something that they cannot actually get anyway.



However as I said that is according to his figures and in almost every blog I have seen of his where he uses figures he is wrong.
Using his figures he starts with a person buying 4 years ago for 500,000
Initial mortgage 400,000
Current value 275,500
Now he mentions that the person will have made repayments but seems to ignore the fact that these repayments will actually reduce the mortgage so they are currently about €110,000 in negative equity not the €124,500 he says. Their current LTV is 140%

They then want to buy a house for €316,800.
So costs will be:
Selling old house Fees € 10,000 (3.5% fees + extra €400)
Buying new house fees € 5,000 (1.5% fees + extra €250)
Stamp Duty €13,500

Total Costs €27,500 (not the €38,000 he says)

So overall costs
Cost of new house €316,800
Fees € 27,500
Balance to pay old mortgage €110,000

Total New Mortgage €454,300
Lets round that up to €460,000 to allow for extra €6,000 unforseen costs I have not included. So he needs a €460,000 mortgage on a house worth €316,800 or a LTV of 145%. So the person has gone from a LTV of 140% to 145% which is hardly a massive difference and remember we are using his figures here where the initial house price fell 45%. Also I don't really think this product would really suit someone only 4 years into a mortgage. Also you could quite easily negotiate lower solicitor and EA fees with a little shopping around. Indeed it would be very easy to use examples where the person moved from a high LTV to a lower LTV.


Now if you feel I am wrong and he is right then simply back it up otherwise keep the smart comments to yourself.

Scarab80

More crazy figures from Mr. Gurdgiev, the guy is clearly not dumb so one must assume that he is producing these figures to tap into the general irish zietgeist of whinging and pessimism in order to increase circulation for his magazine.

Clearly if you move your negative equity onto a loan with a higher value, your LTV ratio is going to fall not rise as the negative equity (constant) will be a smaller portion of the larger loan.

There are clearly costs involved in moving, stamp duty and legal and professional fees, but these are not financed (not through mortgages anyway) so do not come into LTV calculations. Not everybody will be able to afford these fees and will not be able to avail of these loans however for the people who can afford them the loans represent a method for them to move to a new property which is more in line with their family/work situation.

More detailed workings below, I have assumed that if you stay in the property you will refinance your loan at the lower 5 year fixed rate.

OMD

Scarab80 wrote: »

More crazy figures from Mr. Gurdgiev, the guy is clearly not dumb so one must assume that he is producing these figures to tap into the general irish zietgeist of whinging and pessimism in order to increase circulation for his magazine.

Clearly if you move your negative equity onto a loan with a higher value, your LTV ratio is going to fall not rise as the negative equity (constant) will be a smaller portion of the larger loan.

There are clearly costs involved in moving, stamp duty and legal and professional fees, but these are not financed (not through mortgages anyway) so do not come into LTV calculations. Not everybody will be able to afford these fees and will not be able to avail of these loans however for the people who can afford them the loans represent a method for them to move to a new property which is more in line with their family/work situation.

More detailed workings below, I have assumed that if you stay in the property you will refinance your loan at the lower 5 year fixed rate.

Thank you, very clearly explained. What he did in his figures I think (because it is difficult to work out) is add the interest payments already made to the price of the new home and also the lost interest on the initial 100,000 deposit. . I may be wrong but it looks like that is what he did. He probably added extra to allow for stamp duty claw back and possibly breaking a 5 year fixed rate but as I said it is difficult to see exactly where he gets his figures from.

Scarab80

OMD wrote: »

Thank you, very clearly explained. What he did in his figures I think (because it is difficult to work out) is add the interest payments already made to the price of the new home and also the lost interest on the initial 100,000 deposit. . I may be wrong but it looks like that is what he did. He probably added extra to allow for stamp duty claw back and possibly breaking a 5 year fixed rate but as I said it is difficult to see exactly where he gets his figures from.

I was going to try to reconcile his figures but it hurt my head

Finnbar01

Ok, let me give an example how this could work in my favour.

Original mortgage: €400,000
House worth: €300,000 and I sell it for that.
NE: €100,000

I buy a much smaller house for €175,000, so now my total mortage is including NE is €275,000.

So I clear off my mortgage altogether and have €25,000 to spare. I'm sure i would have to pay stamp duties and other fees as well.

Am I missing something?

Scarab80

Finnbar01 wrote: »

Ok, let me give an example how this could work in my favour.

Original mortgage: €400,000
House worth: €300,000 and I sell it for that.
NE: €100,000

I buy a much smaller house for €175,000, so now my total mortage is including NE is €275,000.

So I clear off my mortgage altogether and have €25,000 to spare. I'm sure i would have to pay stamp duties and other fees as well.

Am I missing something?

Nope, spot on. Like i said earlier in this thread i think these mortgages will make cheaper houses more attractive.

seamus

Finnbar01 wrote: »

Am I missing something?

Yes. That €300k from the sale of your house isn't yours, it's the bank's.

Look at this way, your original mortgage is €400k and the new house is €175k.

Therefore the total money required to complete the transaction is €575k.

If you sell the house for €300k, you need a mortgage of €275k to balance the transaction.

ei.sdraob

Finnbar01 wrote: »

Am I missing something?

i dont see interest being mentioned anywhere

a 400K mortgage over 30 years @ ~5 percent average would run up 370K in interest alone

i presume moving mortgage this way could result in loosing trackers (etc) and ending up on a higher rate which will only add to the interest pile (a move to 6% average above would add another 80k over the time)

Finnbar01

seamus wrote: »

Yes. That €300k from the sale of your house isn't yours, it's the bank's.

Look at this way, your original mortgage is €400k and the new house is €175k.

Therefore the total money required to complete the transaction is €575k.

If you sell the house for €300k, you need a mortgage of €275k to balance the transaction.

I would also have to pay stamp duties and maybe other fees. It's highly likely I'll be forced to take out a fixed rate as OP suggested.

Jaysoose

I think the only thing we can be certain of with this scheme is that the banks must be set to make a shedload of extra profit out of it. At the end of the day i would be very wary of any initiatives our 'financial experts' put forward.

OMD

ei.sdraob wrote: »

i dont see interest being mentioned anywhere

a 400K mortgage over 30 years @ ~5 percent average would run up 370K in interest alone

But the interest over 30 years is irrelevant if he pays off the mortgage this year. What is relevant is the money already paid off the mortgage as this reduces the NE.

As Seamus said, in this case a €€400,000 mortgage is swapped for a €275,000 mortgage but on a smaller property. Could make it a whole lot easier to pay but as has been mentioned earlier he should be very careful if loosing tracker.

ei.sdraob

OMD wrote: »

But the interest over 30 years is irrelevant if he pays off the mortgage this year. What is relevant is the money already paid off the mortgage as this reduces the NE.

As Seamus said, in this case a €€400,000 mortgage is swapped for a €275,000 mortgage but on a smaller property. Could make it a whole lot easier to pay but as has been mentioned earlier he should be very careful if loosing tracker.

I didnt explain myself too well, the difference between the rates of the old and the new mortgage (more than likely higher hence more money spend over the long run) might be quite relevant

Scarab80

ei.sdraob wrote: »

i dont see interest being mentioned anywhere

a 400K mortgage over 30 years @ ~5 percent average would run up 370K in interest alone

i presume moving mortgage this way could result in loosing trackers (etc) and ending up on a higher rate which will only add to the interest pile (a move to 6% average above would add another 80k over the time)

If you want to mention interest you have to mention repayments, repayments on a 400k mortgage over 30 years @ ~5 percent average would run up 770K in repayments

I doubt anyone with a tracker will be availing of these mortgages. If you are on variable rate then there won't be a difference. If you are on fixed then it will depend when you fixed, last year you will lose, 5 years ago you will gain (all depending on penalties for early exit).

OMD

ei.sdraob wrote: »

I didnt explain myself too well, the difference between the rates of the old and the new mortgage (more than likely higher hence more money spend over the long run) might be quite relevant

Well the new rate may be higher(or it may be lower) but then as the new mortgage is a lot less than the old one it could be paid off over a significantly shorter time. Hard to say how interest rates will effect someone unless we know more about their situation.

ei.sdraob

OMD wrote: »

Well the new rate may be higher(or it may be lower) but then as the new mortgage is a lot less than the old one it could be paid off over a significantly shorter time. Hard to say how interest rates will effect someone unless we know more about their situation.

yes without details its hard to know, and there could be major case by case variations

taking figures from this post

* 400K over 30 years at 3% flat, about 207K interest (607K total over 30 years)
* 275K over 30 years at 5% flat, about 256K interest (531K total over 30 years)
* 275K over 30 years at 6% flat, about 318K interest (593K total over 30 years)

i am using flat rates since its easier to get the picture/point this way

it all depends on what new rate the bank offers (im thinking easily 2-3% higher)

pros:
* mobility

cons:
* downsizing and debt might not be substantially smaller in reality

as i said earlier in the thread, i am all for this since it allows people to move if needed and banks not face bankruptcy

but there is no free lunch and there's no way in hell banks are doing this out of goodness of their hearts

anyone availing of this should really sit down and crunch the figures

OMD

ei.sdraob wrote: »

yes without details its hard to know, and there could be major case by case variations

taking figures from this post

* 400K over 30 years at 3% flat, about 207K interest (607K total over 30 years)
* 275K over 30 years at 5% flat, about 256K interest (531K total over 30 years)
* 275K over 30 years at 6% flat, about 318K interest (593K total over 30 years)

i am using flat rates since its easier to get the picture/point this way

it all depends on what new rate the bank offers (im thinking easily 2-3% higher)

In UK Nationwide offer a negative equity mortgage up to 125% LTV and offer the same 5 year fixed rate to someone in negative equity as someone with a 90% mortgage. (other mortgage lengths are the same also before you ask)

thebman

Isn't there usually a penalty if you pay off most of your mortgage in one go. So if you do that with the old do they waive that penalty in this case since your moving to a new mortgage or not?

OMD

thebman wrote: »

Isn't there usually a penalty if you pay off most of your mortgage in one go.

No

Sand

If youre on a tracker dont move off it, negative equity or no. You'll still owe the same but on a higher, variable rate that the bank controls and can jack up at will.

And they will.

I think the regulator should ban it. The banks have proven themselves incapable of properly judging risk or controlling their loan books so cant be trusted to understand whose hopelessly in negative equity and who isnt. Not with my money anway and its clear I and other taxpayers will have to underwrite their adventures into the big adult world of banking. Irish bankers need big old fashioned stabilisers on their bikes before theyre allowed out by themselves.