negative equity mortgage

kdowling

I am looking to get a negative equity mortgage but need some help with the loan to value ratio.

This is from the AIB website:

"The new loan to property value ratio (LTV) of your total mortgage must not be over 175%.
That means your new loan can’t be more than 175% of the value of the new property.
For example if your property is valued at €275,000 and you are borrowing €303,000
(including residual debt of €50,000) your LTV is 110%."

My negative equity is €175,000, how much does that mean I can borrow?

My understanding is that it is calculated as follows

(Cost of new house + negative equity)/ (cost of new house) x 100 = LVR

So if I want to but a house for 200,000 my LVR would be
(200,000+175,000)/200,000 = 187.5% which is over 175% so I would be denied.

I assume I am calculating this wrong because if I apply that ratio to a €175,000 house it is increasing my LVR to 200% rather than decreasing it!

Can somebody put me straight?

wexie

kdowling wrote: »

I am looking to get a negative equity mortgage but need some help with the loan to value ratio.

This is from the AIB website:

"The new loan to property value ratio (LTV) of your total mortgage must not be over 175%.
That means your new loan can’t be more than 175% of the value of the new property.
For example if your property is valued at €275,000 and you are borrowing €303,000
(including residual debt of €50,000) your LTV is 110%."

My negative equity is €175,000, how much does that mean I can borrow?

My understanding is that it is calculated as follows

(Cost of new house + negative equity)/ (cost of new house) x 100 = LVR

So if I want to but a house for 200,000 my LVR would be
(200,000+175,000)/200,000 = 187.5% which is over 175% so I would be denied.

I assume I am calculating this wrong because if I apply that ratio to a €175,000 house it is increasing my LVR to 200% rather than decreasing it!

Can somebody put me straight?

I think that's actually correct, it's the ratio of the loan to the value of the house. So by going for a cheaper house the ratio would go up rather than down (as in there is less value compared to the outstanding loan).

If you calculate it with a 300000 house then the LTV goes down

seamus

wexie wrote: »

I think that's actually correct, it's the ratio of the loan to the value of the house. So by going for a cheaper house the ratio would go up rather than down (as in there is less value compared to the outstanding loan).

If you calculate it with a 300000 house then the LTV goes down

They're marketing it as a "trade up" mortgage, so the intention here is for people to increase their total debt rather than reduce it. From AIB's point of view a larger property (i.e. a house rather than an apartment) is a surer bet in the event that the mortgage goes tits up.

The two big things to note are that:

- Approval and your ability to repay will obviously be assessed on the total loan. So if you're struggling with your existing mortgage, you haven't a hope of being - approved for a trade-up
- The entire amount of the loan will be at standard variable rates. So if you're sitting on a tracker at present, a negative equity mortgage may be the simplest option, but not the cheapest. It may work out more cost-effective to rent out your existing property and get a second mortgage on the new one.

kdowling

seamus wrote: »

They're marketing it as a "trade up" mortgage, so the intention here is for people to increase their total debt rather than reduce it. From AIB's point of view a larger property (i.e. a house rather than an apartment) is a surer bet in the event that the mortgage goes tits up.

The two big things to note are that:

- Approval and your ability to repay will obviously be assessed on the total loan. So if you're struggling with your existing mortgage, you haven't a hope of being - approved for a trade-up
- The entire amount of the loan will be at standard variable rates. So if you're sitting on a tracker at present, a negative equity mortgage may be the simplest option, but not the cheapest. It may work out more cost-effective to rent out your existing property and get a second mortgage on the new one.

Thats crazy that the banks solutions to people in arrears is to offer them a NE mortgage and encourage them to borrow over a minimium amount!

In my own situation does that mean I have to borrow up to a minimium of €230,000 + €175,000 = €405,000 up to a maximium of whatever they feel we can pay back?

johnnyskeleton

Has anyone actually obtained a negative equity mortgage?

The conditions to get one are, presumably, you have purchased a property that is no longer suitable for your needs, it is in negative equity and you have no savings to pay it off.

That would certainly explain to me why many dual income professional couples with significant savings that I know find it very hard to find a good property at a price they can afford - stupid loans are still being given to the favoured minority who then outbid everyone else.