Upsizing possibilities if in Negative Equity

islander222

I posted this in another section which I think was the wrong place so reposting here...

Hi,

We bought our house back in 2006 before the property bubble burst and now find ourselves in negative equity. Its a 3 bed semi and I reckon its worth about 80k less than what we owe on the mortgage.

Our initial plans when we bought it (its in a town) was to stay there for 5 or 6 years and then sell up and buy a bigger house outside of town (a house on its own)... but that hasn't happened due to the property market changes in the last 6 years.

Up until recently I had felt we were trapped and had no choice but to stay putt because we would be losing money if we sold up, but lately I've been thinking that maybe we could still be in a position to do something so this is where I'm looking for advice :-)
I've been lucky in that my salary has increased by 15% in the last 6 months (My job is pretty secure) and I suppose it would have increased about 20% since I first took out the mortgage (The wife's would have remained unchanged)..

We are on a tracker mortgage (which was a 100% mortgage spread over 35 years).
1) Is it possible to get a new mortgage to upsize in homes?
2) We would need to save up a deposit over the next year or two but would it also make sense to also pay extra per month on our mortgage to decrease its term?
3) Or would selling up and renting be a better option?

Many Thanks!

whippet

You have a couple of options:

- Sell current house and pay of NE out of savings
- Sell current house and come to arrangement with Bank to carry NE portion to new mortgage
- Rent out current house and rent bigger house (could cost you your tracker rate)
- Rent out current house and buy new house


Unless you have decent savings neither option 1 or 4 would be an option, option 2 would probably be unlikely.

ted1

whippet wrote: »

You have a couple of options:

- Sell current house and pay of NE out of savings
- Sell current house and come to arrangement with Bank to carry NE portion to new mortgage
- Rent out current house and rent bigger house (could cost you your tracker rate)
- Rent out current house and buy new house


Unless you have decent savings neither option 1 or 4 would be an option, option 2 would probably be unlikely.

or extend your present house, what type mortgage do you have? if its a tracker you could well lose it and end up paying much higher interest rates, so the extension may be the more practical option. extend out back, convert attic etc.

Skybox

I would think if you went to the bank, they would allow you to sell the current house and provide you a mortgage on the new house. They would only be delighted to get rid of your tracker mortgage. No doubt the new mortgage would be a variable rate.

My sister and brother in law were with KBC. My brother in law will inherit a house in a few years so they have sold their old house and moved in with his parents. The bank agreed the sale of the old house with the balance of the mortgage repayable over the term of the mortgage.

The_Conductor

whippet wrote: »

You have a couple of options:

- Sell current house and pay of NE out of savings
- Sell current house and come to arrangement with Bank to carry NE portion to new mortgage
- Rent out current house and rent bigger house (could cost you your tracker rate)
- Rent out current house and buy new house


Unless you have decent savings neither option 1 or 4 would be an option, option 2 would probably be unlikely.

Option 3 probably isn't a runner either- as you can't offset rental income against renting another property (which you can do in a lot of other countries, and something that I think is inherently unfair).

Trish56

OP...Lenders are now offering Negative Equity Mortgages.. the amount you can borrow depends on the lender you are with. PM me if you want more details or else advise who your lender is.

islander222 wrote: »

I posted this in another section which I think was the wrong place so reposting here...

Hi,

We bought our house back in 2006 before the property bubble burst and now find ourselves in negative equity. Its a 3 bed semi and I reckon its worth about 80k less than what we owe on the mortgage.

Our initial plans when we bought it (its in a town) was to stay there for 5 or 6 years and then sell up and buy a bigger house outside of town (a house on its own)... but that hasn't happened due to the property market changes in the last 6 years.

Up until recently I had felt we were trapped and had no choice but to stay putt because we would be losing money if we sold up, but lately I've been thinking that maybe we could still be in a position to do something so this is where I'm looking for advice :-)
I've been lucky in that my salary has increased by 15% in the last 6 months (My job is pretty secure) and I suppose it would have increased about 20% since I first took out the mortgage (The wife's would have remained unchanged)..

We are on a tracker mortgage (which was a 100% mortgage spread over 35 years).
1) Is it possible to get a new mortgage to upsize in homes?
2) We would need to save up a deposit over the next year or two but would it also make sense to also pay extra per month on our mortgage to decrease its term?
3) Or would selling up and renting be a better option?

Many Thanks!

The_Conductor

Trish56 wrote: »

OP...Lenders are now offering Negative Equity Mortgages.. the amount you can borrow depends on the lender you are with. PM me if you want more details or else advise who your lender is.

They're called 'Movers Mortgages'.
Essentially- you're allowed carry the NE portion of the mortgage on a property to a new property, enabling you to sell the first property.

In general you will be closing off the first mortgage- so any terms or conditions associated with it (such as it being a tracker mortgage for example) will not carry to the new mortgage.

You still have to comply with prevailing 'ability to pay' criterion for the new mortgage (aka whatever terms and conditions the mortgage company are currently applying- which means income multiples etc would be assessed).

It does enable some people who imagined they were locked into a property to move- but the fact that you still have to comply with income multiples etc- will rule it out for a lot of people.

This type mortgage was started by ILP but most companies have their own variants now (you can even apply online on some of the websites).

Its not a get-out-of-jail-free card, but if you have reasonable income levels, a good credit record and the ability to service a higher mortgage from your existing income- and comply with lending rules and criteria- it could be a flier. If you've strategically defaulted on your mortgage- have a lower income, or fail the stress tests etc- then unfortunately not.

A good independent financial broker can give you the run down.

islander222

Thanks for the responses - Losing the tracker mortgage rates will be painful but its great to hear there are options. Next step I suppose it to pay a visit PTSB and see what they think :-)

Melloh

I'm currently in the process of beginning the same process as yourself. Ive been advised that I can take my negative equity with me. It will get added to my new mortgage. Have to abide by new mortgage rules and I will lose the tracker I'm on, but they have an offer of giving me a new tracker rate for 5 years (my current one plus 1%). This would be on the total of my existing mortgage - so Id end up paying a variable rate on anything i borrow in excess of what i currently owe.
Definately worth thinking about - no point in being on a tracker for the next 30 years in a house thats not suitable for you. Best of luck.