How to get our House the smart way.

Zachjohnson

We currently have a mortgage on our home. (Negative Equity of 40K ), 190K left to pay.
We need to upsize. Looking at new house @ 250/300K currently.
We have a Short Term Loan circa 25K.
From next month we will have 1.5K extra to use.

What should we do with extra cash to get the house we want the smart way?

Should we clear our loan (Saving almost 4K on interest over term) - (Buy House in 2018)
Should we save money - (Buy House in 2016) with debt still on loan.
Split payments between Savings and Loan - (Buy House in 2017)

Do something else clever? IF so ...what ?

Trish56

Have you considered applying for a negative equity Mortgage?

Zachjohnson

Hi Trish,

Looking into with our bank, but also looking into with other lenders to get best rate. I'm investigating but i wonder how much more debt am i getting myself into considering if i wait a year i may have less negative equity if prices pick up slightly. If i want the house now then its something i would have to consider alright.

Paul.

evolving_doors

Ive proposed this a few times so apologies to anyone who thinks Im shilling for the Council!

A neighbour down the road was in a similar situation wanting to upsize. She leased her house to the council for ten years. Dont propose it to a bank without your sums laid out in front of them though. People often mistake it for the RAS but its not.

Pluses:
No management fees,
Guaranteed income every month,
Only way her bank would entertain her second mortgage.
She was also able to push her old mortgage out by 5 years to bring monthly repayments down.
Council has to give you back the house in the same condition.
Review of rent after year 5
You can claim the usual tax relief on mortgage interest, depreciation of stuff in house, accountancy fees etc.

Minuses:
80% the daft rental value (but no vacancies or management fees).
You have to get electrics up to spec (wire smoke alarms to mains).
Need to pay for ber cert.
Depends on social mix of the area (they prefer not having other social welfare renters next door... but if they need housing they might overlook it).
You have to get solicitor to handle the contract (but again, counted as a cost incurred).
You have to get a tax clarence cert for previous year.
Think you have to change your house insurance but not sure about that.

Trish56

Zachjohnson wrote: »

Hi Trish,

Looking into with our bank, but also looking into with other lenders to get best rate. I'm investigating but i wonder how much more debt am i getting myself into considering if i wait a year i may have less negative equity if prices pick up slightly. If i want the house now then its something i would have to consider alright.

Paul.

That's true however if prices pick up the value of your new house will also increase thereby decreasing or wiping out the negative equity.