Negative Equity...Whats the story ?

andym1

Before I start I used to own a house but now I rent a flat, Not delighted, but content .
Whats the big issue with what your house is worth ? I am only directing this question to those who bought a house...And...
Can afford the mortgage ?
Like where you live/area/neighbours etc ?
Did plan to stay put where you are for the forseeable future/ or for the length of your mortgage ?
What do you care if you are in negative equity ? It's only a number ! I know one person in good paying job who finally after a long time got a house in the area he grew up in and was delighted, but now he moans about it being worth 200k less than he paid for it but he always planned on staying put anyway so why should he worry about the worth when he never intends to sell ?
Does anyone see my point ?
And dont get me started on the ''wont pay'' brigade,Who can afford the repayments and have stopped paying it, hoping eventually to get their house for free.... End of Rant !

Chucken

The way I see it is, people bought 'property', not homes.

andym1

Chucken wrote: »

The way I see it is, people bought 'property', not homes.

Eloborate please !

awec

andym1 wrote: »

Eloborate please !

People who bought houses that they didn't intend to make their long term home?

E.g. couples forking out massive money for 2 bedroom apartments in Dublin.

Or landlords buying to rent.

FixdePitchmark

awec wrote: »

People who bought houses that they didn't intend to make their long term home?

E.g. couples forking out massive money for 2 bedroom apartments in Dublin.

Or landlords buying to rent.

But things were so over priced - couples had very limited choice.

They bought a house too small in the wrong place. They have kids now and need to move - Neg Equity is a real problem for more than you think.

Chucken

awec wrote: »

People who bought houses that they didn't intend to make their long term home?

E.g. couples forking out massive money for 2 bedroom apartments in Dublin.

Or landlords buying to rent.

Exactly. I've seen it here where people bought off plan in order to sell it on after living in the house for a year, with the stupid outlook of "the value" going up by stupid amounts of money. Then they could buy the apartment in Bulgaria or Cape feckin Verde that would rent out and make trillions of wonga. Couldnt go wrong really :rolleyes:

andym1

awec wrote: »

People who bought houses that they didn't intend to make their long term home?

E.g. couples forking out massive money for 2 bedroom apartments in Dublin.

Or landlords buying to rent.

Read the Op again, I am talking about people who INTENDED their purchase as their long term home, And not couples 2 bed apt in Dublin etc. I really made that clear.

Chucken

FixdePitchmark wrote: »

But things were so over priced - couples had very limited choice.

They bought a house too small in the wrong place. They have kids now and need to move - Neg Equity is a real problem for more than you think.

andym1 wrote: »

Read the Op again, I am talking about people who INTENDED their purchase as their long term home, And not couples 2 bed apt in Dublin etc. I really made that clear.

Ok, I guess 100% mortgages werent much help. People didnt know how to save for things.?

People paid too much for too little without thinking, what will happen if 1 of us is out of work or we have a baby?

FixdePitchmark

Chucken wrote: »

Ok, I guess 100% mortgages werent much help. People didnt know how to save for things.?

Pepole paid too much for too little without thinking, what will happen if 1 of us is out of work or we have a baby?

I was thinking all that - but the choice was a small house in the right place for 300,000 euro or a big house in the wrong area for 300,000.

I need a bigger house now , but in negative equity.

I could have got that bigger house at the time for 600,000 in the right area.

What would you have done ?

andym1

Chucken wrote: »

Ok, I guess 100% mortgages werent much help. People didnt know how to save for things.?

Pepole paid too much for too little without thinking, what will happen if 1 of us is out of work or we have a baby?

And ? Who will pay your mortgage ? **** happens, Thats why I am in a dingy flat but thats not your fault but I'm talking about the ''can pay but wont pay brigade who are holding out for a write off/down of their debt. Not people in genuine hard times

Chucken

FixdePitchmark wrote: »

I was thinking all that - but the choice was a small house in the right place for 300,000 euro or a big house in the wrong area for 300,000.

I need a bigger house now , but in negative equity.

I could have got that bigger house at the time for 600,000 in the right area.

What would you have done ?

I know it cant be easy, honestly

I was an 80s home owner, I'm not too educated but I saw the bubble back then too and I waited a few years and bought my house when it was a realistic price. I knew I had to look at the worst that could happen so I bought a home that Id never lose no matter what happened.

When I saw the 1st estate going up here where the houses were up to 450,000, I said here we go again, give it 5-10 years and lo and behold those houses were sold on for 100,000 or lower.

Edit: It was a 2 up 2 down house. We went on to have 2 children and built an extension.

andym1

FixdePitchmark wrote: »

But things were so over priced - couples had very limited choice.

They bought a house too small in the wrong place. They have kids now and need to move - Neg Equity is a real problem for more than you think.

Read OP please

andym1

FixdePitchmark wrote: »

I was thinking all that - but the choice was a small house in the right place for 300,000 euro or a big house in the wrong area for 300,000.

I need a bigger house now , but in negative equity.

I could have got that bigger house at the time for 600,000 in the right area.

What would you have done ?

I feel your pain bud x

Cookie_Monster

Part of the problem is the phrase itself. Lets just call it what it is: "excessive debt", "negative equity" in my mind softens the impact of the actual reality and gives people the impression it's not really their debt.

You cannot have negative equity. You have a house worth X and a mortgage worth Y and if Y>X then Debt > Equity

BillyMitchel

Anyone else start singing Oasis?

What's the story, morning glory.

Shenshen

We bought our house some 3 years ago now.

Yes, we can afford the mortgage. We bought the house at a price that we knew would allow us to afford paying the mortgage easily for interest up to 6/7%, if it does go over that we will have to make changes to our lifestyle.

No, I honestly don't care if the value of our house went up or down. We bought a house, you know, a place to live, a home, not an investment.
We plan on staying here pretty much for the rest of our lives.
It was really funny in a way how many estate agents we talked to at the time didn't seem able to grasp the concept...

Shenshen

FixdePitchmark wrote: »

I was thinking all that - but the choice was a small house in the right place for 300,000 euro or a big house in the wrong area for 300,000.

I need a bigger house now , but in negative equity.

I could have got that bigger house at the time for 600,000 in the right area.

What would you have done ?

Rented and saved up the money to buy the place you knew you'd need?

fyfe79

andym1 wrote: »

I know one person in good paying job who finally after a long time got a house in the area he grew up in and was delighted, but now he moans about it being worth 200k less than he paid for it but he always planned on staying put anyway so why should he worry about the worth when he never intends to sell ?

Well, it's not just about the "selling" price, it's the "buying" price as well - anyone would be p1ssed when they realise they paid 200k too much for their property! Over his lifetime it's probably close to a quarter of a million euro that he will need to pay back to the bank or has spunked from his savings (if he hasn't a mortgage). People can be upset about paying far too much for a house even if they never intend to sell. At the end of the day, they're out of pocket.

I bought my home over the odds, although not too much, in 2005. I've no plans to move either. Luckily I'm on a tracker mortgage which allows me to overpay my monthly repayments. My house has lost value (nothing like 200k - probably about 50k) so nothing to get too excited over but still, it would've been nicer to pay 50k less for it! Nobody likes to pay over the odds for anything.

Shenshen

fyfe79 wrote: »

Well, it's not just about the "selling" price, it's the "buying" price as well - anyone would be p1ssed when they realise they paid 200k too much for their property! Over his lifetime it's probably close to a quarter of a million euro that he will need to pay back to the bank or has spunked from his savings (if he hasn't a mortgage). People can be upset about paying far too much for a house even if they never intend to sell. At the end of the day, they're out of pocket.

I bought my home over the odds, although not too much, in 2005. I've no plans to move either. Luckily I'm on a tracker mortgage which allows me to overpay my monthly repayments. My house has lost value (nothing like 200k - probably about 50k) so nothing to get too excited over but still, it would've been nicer to pay 50k less for it! Nobody likes to pay over the odds for anything.

The way I see it, you bought something you wanted at a price you were willing or even happy to pay, right?

So why be upset about it now, just because now you maybe, possibly could get it cheaper?

I tend to shop around whenever I make any large purchases, but I don't shop around for years hoping for a better deal, once I find something I like at a price I regard fair at the time I buy. Yes, if I waited another half a year, I might get it cheaper.
Or I might not.
Why worry over it if you are happy with what you have and can afford it?

Sky King

Shenshen wrote: »

Why worry over it if you are happy with what you have and can afford it?

It only affects people who were buying as property an investment or buying as a stop gap before they traded up. Otherwise, it doesnt matter.

For example there was a guy on Pat Kenny yesterday who paid 560k for a 2 bedroom apartment in 2006. Now he has kids and needs a house. His apartment is worth 150k if he sells it, yet he still has the 560k mortgage.

He is there for life, basically. His head must be wrecked.

Death and Taxes

andym1 wrote: »

Before I start I used to own a house but now I rent a flat, Not delighted, but content .
Whats the big issue with what your house is worth ? I am only directing this question to those who bought a house...And...
Can afford the mortgage ?
Like where you live/area/neighbours etc ?
Did plan to stay put where you are for the forseeable future/ or for the length of your mortgage ?
What do you care if you are in negative equity ? It's only a number ! I know one person in good paying job who finally after a long time got a house in the area he grew up in and was delighted, but now he moans about it being worth 200k less than he paid for it but he always planned on staying put anyway so why should he worry about the worth when he never intends to sell ?
Does anyone see my point ?
And dont get me started on the ''wont pay'' brigade,Who can afford the repayments and have stopped paying it, hoping eventually to get their house for free.... End of Rant !

The big deal is he is paying a huge amount more every month than he needs to, negative equity means that you are paying a €400,000 mortgage on an asset worth €200,000.

Shenshen

Sky King wrote: »

It only affects people who were buying as property an investment or buying as a stop gap before they traded up. Otherwise, it doesnt matter.

For example there was a guy on Pat Kenny yesterday who paid 560k for a 2 bedroom apartment in 2006. Now he has kids and needs a house. His apartment is worth 150k if he sells it, yet he still has the 560k mortgage.

He is there for life, basically. His head must be wrecked.

I do feel sorry for people in situations like his, I really do.
But at the same time the whole "investment property" and "property ladder" thinking wrecks my head, always has and always will.

It must be because I'm from a country where owning a property isn't really that high on most people's lists, it's something you only look at once you're starting a family. And once you do buy or - in most cases - actually build your house, that's where you plan on staying for the rest of your life.

Buying property as investment is something people would only look at once they own a place and have paid it off in full.

I know the mind set here is different, but I still sometimes have to wonder.

clairefontaine

Shenshen wrote: »

I do feel sorry for people in situations like his, I really do.
But at the same time the whole "investment property" and "property ladder" thinking wrecks my head, always has and always will.

It must be because I'm from a country where owning a property isn't really that high on most people's lists, it's something you only look at once you're starting a family. And once you do buy or - in most cases - actually build your house, that's where you plan on staying for the rest of your life.

Buying property as investment is something people would only look at once they own a place and have paid it off in full.

I know the mind set here is different, but I still sometimes have to wonder.

I come from a rental culture where buying isnt the be all, end all, but I know it can be hard in places like Dublin to get a rental off landlords if you have kids.

Also what happened in the US, was after 911 when stocks and retirement funds crashed people started investing in property because they trusted property more.... low and behold that came out from under their feet too. So a perspective shifted from seeing property as a home to seeing it as a retirement investment.

fyfe79

Shenshen wrote: »

The way I see it, you bought something you wanted at a price you were willing or even happy to pay, right?

So why be upset about it now, just because now you maybe, possibly could get it cheaper?

I tend to shop around whenever I make any large purchases, but I don't shop around for years hoping for a better deal, once I find something I like at a price I regard fair at the time I buy. Yes, if I waited another half a year, I might get it cheaper.
Or I might not.
Why worry over it if you are happy with what you have and can afford it?

It's just human nature to be miffed about it. If you bought a pair of shoes for 100 euro and then a week later it's on sale for half price, would you be happy? Just because you can afford it at 100 euro and were happy to buy at that price, doesn't mean you'd be happy a week later to see them at half the value. You'd feel conned.

Personally, I'm not upset about losing some value on my home (hasn't everyone?), but people who are struggling with the mortgage on a home (note I said 'home' not investment property) worth a fraction of what they paid for it, I understand why they'd be upset.

gramar

WileyCoyote wrote: »

The big deal is he is paying a huge amount more every month than he needs to, negative equity means that you are paying a €400,000 mortgage on an asset worth €200,000.

But if you don't intend to sell as this is your long-term home and you were happy with the value of the house when you bought it then what's the point in pulling your hair out over negative equity.

I built a house 3 years ago and I was happy with what it cost and intend to live there all my life. It's value now is essentially 0 because I honestly don't think anyone would buy it based on the current market. That doesn't bother me in the least as I don't want to sell and I paid a fair price.

Shenshen

fyfe79 wrote: »

It's just human nature to be miffed about it. If you bought a pair of shoes for 100 euro and then a week later it's on sale for half price, would you be happy? Just because you can afford it at 100 euro and were happy to buy at that price, doesn't mean you'd be happy a week later to see them at half the value. You'd feel conned.

Personally, I'm not upset about losing some value on my home (hasn't everyone?), but people who are struggling with the mortgage on a home (note I said 'home' not investment property) worth a fraction of what they paid for it, I understand why they'd be upset.

Conned? No, not really.
I am aware that something like this is bound to happen. I can get the shoes now, and pay a price that might change in a week. Or I can chance it knowing that a sale is just around the corner, but that gamble will involve the risk of them not having my size any more.

Which is rather similar to the situation we were in when we bought our house. We knew prices were going to fall, but we couldn't gamble on waiting and hoping the banks would still be willing to give us a mortgage.

I suspect the value dropped by something like 50 - 100k (as I said, I don't really check it much), but we like it and we bought it at what we considered a fair enough price.

gramar

fyfe79 wrote: »

It's just human nature to be miffed about it. If you bought a pair of shoes for 100 euro and then a week later it's on sale for half price, would you be happy? Just because you can afford it at 100 euro and were happy to buy at that price, doesn't mean you'd be happy a week later to see them at half the value. You'd feel conned.

Personally, I'm not upset about losing some value on my home (hasn't everyone?), but people who are struggling with the mortgage on a home (note I said 'home' not investment property) worth a fraction of what they paid for it, I understand why they'd be upset.

Absolutely agree, no-one likes to pay a price only to find out they could have paid less. We get annoyed after paying for petrol if we see it a few cents cheaper a few miles down the road so paying thousands more for a home that you might have paid less for a few months later is particularly galling. More than a con it's just an unfortunate circumstance as a result of demand, speculaliton and general impatience to get on the propery latter.

For people who don't want to sell it pisses you off but you'll get over it.
For people who need to move because of a change in circumstance but who'll only raise a fraction of the mortgage if they sell, then it's a real problem.

knucklehead6

You can't feel conned when you made a decision to purchase at what you considered to be a fair market price.

Feel unlucky, yes, conned no.

I bought my house 3 years ago after enduring years of good and bad natured ribbing from friends, colleagues and family about not having my own place, paying dead rent etc.

I paid a fair price for the house. Yes it has decreased in value but i don't feel conned about that fact. I knew when i bought that the market was still coming down, so it was something that i factored into my thinking when i signed the documents.

No one forced you to sign, so to say you were conned is a little disingenuous.

Sand Wedge

fyfe79 wrote: »

Well, it's not just about the "selling" price, it's the "buying" price as well - anyone would be p1ssed when they realise they paid 200k too much for their property! Over his lifetime it's probably close to a quarter of a million euro that he will need to pay back to the bank or has spunked from his savings (if he hasn't a mortgage). People can be upset about paying far too much for a house even if they never intend to sell. At the end of the day, they're out of pocket.

I bought my home over the odds, although not too much, in 2005. I've no plans to move either. Luckily I'm on a tracker mortgage which allows me to overpay my monthly repayments. My house has lost value (nothing like 200k - probably about 50k) so nothing to get too excited over but still, it would've been nicer to pay 50k less for it! Nobody likes to pay over the odds for anything.

What you are forgetting here is that most people who bought in the boom and are in negative equity also got tracker mortgages. Yes the house could be bought cheaper now but the mortgage repayment would actually still be the same.

For instance a mortgage of €450,000 with a tracker rate of 1.75% (as this is the rate many on trackers are paying) would cost €1,607.60 before any Tax Relief.

Today the same repayment on a rate of 4.24% (cheapest rate you can get as a first time buyer with a deposit of less than 20%) would be a mortgage of €327,000, this is again before Tax Relief.

So in effect someone buying today paying €123,000 less for the house would have the same monthly repayment as someone who bought the same house for €450,000 in the boom on a tracker mortgage.


P.S. I took the effect of the Tax Relief out of calculation for simplification even though people who bought in boom actually are getting a significant Tax Relief and anyone who buys now does not get any.

Balmed Out

read the thread and was going to make the same point sand wedge. Interest rates are only going one way for the foreseeable future so you might be understating the affect.

fyfe79

Sand Wedge wrote: »

What you are forgetting here is that most people who bought in the boom and are in negative equity also got tracker mortgages. Yes the house could be bought cheaper now but the mortgage repayment would actually still be the same.

True that - the only advantage of buying in the boom was the offer of a tracker mortgage. Offset that against buying at a much lower sale price but at a higher mortgage rate. Swings and roundabouts, I guess!

Ando's Saggy Bottom

andym1 wrote: »

And ? Who will pay your mortgage ? **** happens, Thats why I am in a dingy flat but thats not your fault but I'm talking about the ''can pay but wont pay brigade who are holding out for a write off/down of their debt. Not people in genuine hard times

Sounds to me like you're less content than you claim to be in your OP.

COYVB

andym1 wrote: »

Before I start I used to own a house but now I rent a flat, Not delighted, but content .
Whats the big issue with what your house is worth ? I am only directing this question to those who bought a house...And...
Can afford the mortgage ?
Like where you live/area/neighbours etc ?
Did plan to stay put where you are for the forseeable future/ or for the length of your mortgage ?
What do you care if you are in negative equity ? It's only a number ! I know one person in good paying job who finally after a long time got a house in the area he grew up in and was delighted, but now he moans about it being worth 200k less than he paid for it but he always planned on staying put anyway so why should he worry about the worth when he never intends to sell ?
Does anyone see my point ?
And dont get me started on the ''wont pay'' brigade,Who can afford the repayments and have stopped paying it, hoping eventually to get their house for free.... End of Rant !

how would you feel if you bought a new car and then soon afterwards they slashed the cost of said car? same with pretty much anything else, pretend you bought something and then the cost to everyone else went through the floor. that's why people are concerned with it

fyfe79

knucklehead6 wrote: »

You can't feel conned when you made a decision to purchase at what you considered to be a fair market price.

Feel unlucky, yes, conned no.

I bought my house 3 years ago after enduring years of good and bad natured ribbing from friends, colleagues and family about not having my own place, paying dead rent etc.

I paid a fair price for the house. Yes it has decreased in value but i don't feel conned about that fact. I knew when i bought that the market was still coming down, so it was something that i factored into my thinking when i signed the documents.

No one forced you to sign, so to say you were conned is a little disingenuous.

My 'conned' comment was more in relation to the shoes analogy, but I take your point that buying a home in the boom was a gamble more than anything.

I've no sympathy for the investment buyers who were buying 2nd houses - when I was searching for a house to buy I was continually (on about 6 or 7 different houses) outbid by these people only to notice these same houses for sale a year later, obviously trying to sell on again for quick profit.

But I do feel some sympathy for the well-meaning people who only wanted to get on the ladder (eg. small apartment) before they felt it became too expensive to buy at all, and planned to upgrade to a bigger home later whenever they were married with kids etc, only to find that they're now stuck in the apartment forever, unless they wish to rent it out.

A gamble on their behalf that backfired, sure, but the government certainly didn't help matters in allowing banks and builders to do whatever they wanted which ultimately created hysteria and inflated the market which eventually crumbled around everyone, in particular joe-soap who thought he was doing the right thing in 'getting on the ladder'.
It's tough to take your medicine when others don't takes theirs but walk free with golden handshakes instead.

LoonyLovegood

Negative Equity only exists if you're intending to sell. If you're content living where you are, it doesn't exist because you're not selling.

Sand Wedge

COYVB wrote: »

how would you feel if you bought a new car and then soon afterwards they slashed the cost of said car? same with pretty much anything else, pretend you bought something and then the cost to everyone else went through the floor. that's why people are concerned with it

But what has happened is that bought a car on finance in boom at 0% interest over 5 years. Price now slashed but finance is now 10% over 5 years. Monthly repayment over 5 years is the same.

andym1

WileyCoyote wrote: »

The big deal is he is paying a huge amount more every month than he needs to, negative equity means that you are paying a €400,000 mortgage on an asset worth €200,000.

But he happily paid the asking price in the first place, He bought and item was happy and hopefully is still happy so why whirr figures around your head and wreck it ? Close the door behind you every evening and smile...You are home..Bliss

donegal_road

andym1 wrote: »

Read the Op again, I am talking about people who INTENDED their purchase as their long term home, And not couples 2 bed apt in Dublin etc. I really made that clear.

Right, sorry if someone else has already made this point... people who bought with the intention of the house being their long term home probably did so intending it to be their long term investment. When the original value of the house drops by 50-60%, the purchaser is caught in a position of having throw hard earned wages into what has now become a virtual money pit.

For example... a couple buy a house for the advertised price of €300,000.

Lets say the interest rate is 4.7% and the term of the loan is 30 years.
The total repayments on the mortgage will be €530,000.

Now, the house was originally valued at €300,000, lets say it has dropped in value to €150,000, and is likely to remain so for the foreseeable.

Maybe it might gain a bit of value in 10 years, but for the time being, it is looking unlikely, and let us say for the sake of argument, that the value might go back up to €250,000 by the end of the term of the loan.

The buyer will have lost €280,000 on the purchase. This will mean €280,000 less savings for their retirement.

andym1

COYVB wrote: »

how would you feel if you bought a new car and then soon afterwards they slashed the cost of said car? same with pretty much anything else, pretend you bought something and then the cost to everyone else went through the floor. that's why people are concerned with it

But You are happy with your purchase, Well you were when you bought it. Peeping through your window at the bastard next door who got his Ford Focus, same year as yours for 2k less... Just let it go...let it go. Resentment and stressing over numbers will probably kill you quicker than smoking, cancer etc.
Just kick back and enjoy what you have.. A Home ! (Hopefully a happy one )

Ando's Saggy Bottom

donegal_road wrote: »

Right, sorry if someone else has already made this point... people who bought with the intention of the house being their long term home probably did so intending it to be their long term investment. When the original value of the house drops by 50-60%, the purchaser is caught in a position of having throw hard earned wages into what has now become a virtual money pit.

For example... a couple buy a house for the advertised price of €300,000.

Lets say the interest rate is 4.7% and the term of the loan is 30 years.
The total repayments on the mortgage will be €530,000.

Now, the house was originally valued at €300,000, lets say it has dropped in value to €150,000, and is likely to remain so for the foreseeable.

Maybe it might gain a bit of value in 10 years, but for the time being, it is looking unlikely, and let us say for the sake of argument, that the value might go back up to €250,000 by the end of the term of the loan.

The buyer will have lost €280,000 on the purchase. This will mean €280,000 less savings for their retirement.

You'd have to subtract rent from that figure too. You have to stay somewhere for those 30 years if you don't buy.

Even a modest rent of 600 a month for 30 years is 600 x 12 x 30 = 216k. And at the end of that time you still have to keep paying rent for the rest of your life whereas a mortgage is paid and free forever after apart from maintenance.

If you're talking about poor investments forking out a quarter of million over a lifetime with nothing to show at the end seems a poor investment to me.

gramar

donegal_road wrote: »

Right, sorry if someone else has already made this point... people who bought with the intention of the house being their long term home probably did so intending it to be their long term investment. When the original value of the house drops by 50-60%, the purchaser is caught in a position of having throw hard earned wages into what has now become a virtual money pit.

For example... a couple buy a house for the advertised price of €300,000.

Lets say the interest rate is 4.7% and the term of the loan is 30 years.
The total repayments on the mortgage will be €530,000.

Now, the house was originally valued at €300,000, lets say it has dropped in value to €150,000, and is likely to remain so for the foreseeable.

Maybe it might gain a bit of value in 10 years, but for the time being, it is looking unlikely, and let us say for the sake of argument, that the value might go back up to €250,000 by the end of the term of the loan.

The buyer will have lost €280,000 on the purchase. This will mean €280,000 less savings for their retirement.

As the OP has said - if you were happy at the time of purchase with the price and conditions you haven't really lost anything. To take it to the extreme you could have stayed living with your parents and saved 530k.

If you found out later that you could have paid less for something you have to ask yourself 2 things:

1) Was I happy with the price and the conditions?
2) Am I happy with what I got in return for what I paid / am paying?

If the answer is yes to both then don't beat yourself up over ifs and buts.

andym1

Pete Campbell wrote: »

Sounds to me like you're less content than you claim to be in your OP.

Not really happy, marraige breakdown etc so I am as content as anyone would be considering the situation. Kids are in a better sphere so I am happy about that.

Balmed Out

donegal_road wrote: »

Right, sorry if someone else has already made this point... people who bought with the intention of the house being their long term home probably did so intending it to be their long term investment. When the original value of the house drops by 50-60%, the purchaser is caught in a position of having throw hard earned wages into what has now become a virtual money pit.

For example... a couple buy a house for the advertised price of €300,000.

Lets say the interest rate is 4.7% and the term of the loan is 30 years.
The total repayments on the mortgage will be €530,000.

Now, the house was originally valued at €300,000, lets say it has dropped in value to €150,000, and is likely to remain so for the foreseeable.

Maybe it might gain a bit of value in 10 years, but for the time being, it is looking unlikely, and let us say for the sake of argument, that the value might go back up to €250,000 by the end of the term of the loan.

The buyer will have lost €280,000 on the purchase. This will mean €280,000 less savings for their retirement.

or
couple A purchase a house in 2006 with a mortgage of 450000.
They have a tracker mortgage and lets say over the lifetime the average rate is 2%.

Couple B buy an identical house in 2013 for 300,000. They rented for 7 years longer then couple A.
They have a variable rate mortgage but the average rate over the 30 years is
5.5%.

Couple A spend a total of 598783
Couple b spend a total of 613,212 plus 6 years of renting at a cost of say 60,000!

Couple A whinge about negative equity and losing a fortune couple B pay massive interest rates so the bank can sustain tracker mortgages.

andym1

donegal_road wrote: »

Right, sorry if someone else has already made this point... people who bought with the intention of the house being their long term home probably did so intending it to be their long term investment. When the original value of the house drops by 50-60%, the purchaser is caught in a position of having throw hard earned wages into what has now become a virtual money pit.

For example... a couple buy a house for the advertised price of €300,000.

Lets say the interest rate is 4.7% and the term of the loan is 30 years.
The total repayments on the mortgage will be €530,000.

Now, the house was originally valued at €300,000, lets say it has dropped in value to €150,000, and is likely to remain so for the foreseeable.

Maybe it might gain a bit of value in 10 years, but for the time being, it is looking unlikely, and let us say for the sake of argument, that the value might go back up to €250,000 by the end of the term of the loan.

The buyer will have lost €280,000 on the purchase. This will mean €280,000 less savings for their retirement.

And....What can they do about it...Nothing ! Like I said, roll the figures around your head, Go to bed...Think about it and bad nights sleep, Be snappy towards your partner/family etc ? Nothing solved... Just let it go and enjoy your home, Its yours !

Mikros

You may well have bought a house several years ago with no intention of selling, trading up or getting on the property market. Unfortunately life rarely stays the same
- you might have lost your job or taken a pay cut
- you might have got offered a better job in another location
- you might have had kids (or more kids)
- you might have separated from your partner
- your might need an extra room for an elderly parent to move in

In any of these cases the problem with negative equity is that you cannot sell your house. It starts to feel more like a very large weight attached to you while you are trying to swim. Because the crash was so severe it could be 10-15 years before you are in a position to clear the mortgage by selling. When you are in a difficult situation negative equity can add hugely to the stress.

andym1

Mikros wrote: »

You may well have bought a house several years ago with no intention of selling, trading up or getting on the property market. Unfortunately life rarely stays the same
- you might have lost your job or taken a pay cut
- you might have got offered a better job in another location
- you might have had kids (or more kids)
- you might have separated from your partner
- your might need an extra room for an elderly parent to move in

In any of these cases the problem with negative equity is that you cannot sell your house. It starts to feel more like a very large weight attached to you while you are trying to swim. Because the crash was so severe it could be 10-15 years before you are in a position to clear the mortgage by selling. When you are in a difficult situation negative equity can add hugely to the stress.

Please read OP, I thought I covered everything, Someone buying a house, Planning to stay there, Secure job etc. Not Parents moving in, Cat having kittens, losing a leg, I could go on

donegal_road

andym1 wrote: »

And....What can they do about it...Nothing ! Like I said, roll the figures around your head, Go to bed...Think about it and bad nights sleep, Be snappy towards your partner/family etc ? Nothing solved... Just let it go and enjoy your home, Its yours !

walk away

*awaiting the usual bombardment of 'you have to take responsibility for you actions' and 'Bertie didn't put a gun to your head to buy a house'... yawn

fyfe79

Balmed Out wrote: »

or
couple A purchase a house in 2006 with a mortgage of 450000.
They have a tracker mortgage and lets say over the lifetime the average rate is 2%.

Couple B buy an identical house in 2013 for 300,000. They rented for 7 years longer then couple A.
They have a variable rate mortgage but the average rate over the 30 years is
5.5%.

Couple A spend a total of 598783
Couple b spend a total of 613,212 plus 6 years of renting at a cost of say 60,000!

Couple A whinge about negative equity and losing a fortune couple B pay massive interest rates so the bank can sustain tracker mortgages.

Good post, thanks! I sure am glad to be on a tracker!

COYVB

andym1 wrote: »

But You are happy with your purchase, Well you were when you bought it. Peeping through your window at the bastard next door who got his Ford Focus, same year as yours for 2k less... Just let it go...let it go. Resentment and stressing over numbers will probably kill you quicker than smoking, cancer etc.
Just kick back and enjoy what you have.. A Home ! (Hopefully a happy one )

I think it's more to do with kicking yourself for stupidity of spending such ridiculous sums on a house. The Germans have the right idea. I certainly have no intention of buying personally anyway

AgileMyth

Sky King wrote: »

It only affects people who were buying as property an investment or buying as a stop gap before they traded up. Otherwise, it doesnt matter.

For example there was a guy on Pat Kenny yesterday who paid 560k for a 2 bedroom apartment in 2006. Now he has kids and needs a house. His apartment is worth 150k if he sells it, yet he still has the 560k mortgage.

He is there for life, basically. His head must be wrecked.

Hard to feel sorry for someone who spent 560 grand on a 2 bed apartment..

gurramok

In Balmed Out's example, the only way really for couple B to not pay more is to have saved a hefty deposit in the years they were waiting and also to get a shorter term mortgage.