Would like to move house but in negative equity

slanket

Our Current Situation


Existing House 3 Bed Semi


Outstanding Mortgage = €135K approx (Tracker with Ulster Bank with 21 years remaining)

Market Value = €100k approx

So Negative Equity = €35K


For a number of reasons we would like to move to a bigger house in a different area and we are looking at a


4 Bed Detached House (New Build)

Cost = €275k

Cost to decorate, etc €25K


We are in a position due to a Redundancy and an Inheritance to have approx €300K in cash.

Employment History

Husband to be made redundant but hoping to get a new job soon.

Me - Permanent Position with salary of €38k


How best to go about purchasing new house and selling old one and dealing with the negative equity.

Please bear in mind we haven’t approached any banks yet.


Option 1.

Purchase & Decorate new house with the €300K.

Put old house up for sale while awaiting completion of new build

Approach bank to see if Negative Equity portion of mortgage can be moved to new house.

Option 2

Pay off outstanding mortgage on 3 Bed Semi with the €300k cash leaving €165K

Approach bank about mortgage of €135k for new house (added 25k for house decoration)

Buy and decorate new house with €165k cash and €135K mortgage

Sell 3 Bed Semi and make lump sum payment on the €135k mortgage leaving mortgage of approx €35K

Any other options or opinions we would be delighted to hear.

Henry Ford III

I'd approach your lender now. Tell them of your plans and see what they say.

Pac2015

Speak to your lender see what they say also speak to a broker or financial advisor so as to get their opinion from an independent point of view.
If you are only looking for a mortgage of 135K you should easily get that on a salary of 38K using the 3.5 rule.

Repayments would be very low with this option too, I know you said your husband will be made redundant if he could look for a job to go straight to before he leaves the job he is in that would look better for you both I think you are in a good position.

spaceHopper

What rate it the tracker? If you purchase the second house now and sold the first later you'd have a debit of 35K to clear, and the back will try to take the tracker.

Personally my company pension is in the toilet and I can't see it being much better in 20 odd years if I could I'd buy a place as an investment. If you don't mind doing the work of a LL I'd try to keep the fist house as an investment. All of that would assume the ECB stays low.

What could you rent it of, would it self fund and would the bank try to take the tracker later. At the prices you are talking about you can't be in Dublin.

slanket

Thanks for all the replies. Our tracker is ECB+ 1.5%. Our thinking at the moment is to buy the new house outright and sell our current house and bring the 35K negative equity with us, we are hoping that the bank (UB) will leave us carry it over and pay it off at the same rate as we are paying at the moment over 5 years. Only thing is back won't have any security, although our current a/c is with them also. We have a meeting with the mortgage adviser in the bank next week to see if this is an option (I have a feeling it won't be though).

Renting our current house out isn't an option either, as neither of us would have the time or effort to put into it, and we're just not interested in being landlords.

karenalot

I would be trying my best to get 35k knocked off the new build price. Even 10k off and selling your current house would leave you with zero debt. You would have no money left to decorate of course but that would be less important to me than being in debt.

spaceHopper

Good luck with it what ever you do. Between now and then buy a bucket load of prize bonds and see what happens

CiniO

slanket wrote: »

Option 1.

Purchase & Decorate new house with the €300K.

Put old house up for sale while awaiting completion of new build

Approach bank to see if Negative Equity portion of mortgage can be moved to new house.

Option 2

Pay off outstanding mortgage on 3 Bed Semi with the €300k cash leaving €165K

Approach bank about mortgage of €135k for new house (added 25k for house decoration)

Buy and decorate new house with €165k cash and €135K mortgage

Sell 3 Bed Semi and make lump sum payment on the €135k mortgage leaving mortgage of approx €35K

Any other options or opinions we would be delighted to hear.

Both options will leave you with 35k debt you'll need to repay on your own.
Would you not be better off, to buy and decorate a house you are thinking for €300k you have, and rent out old house. Use rent money to cover cost of mortgage repayment.
That will leave you with 135k debt, but assuming rent will be higher than mortgage repayments, it will cost you nothing.

April 73

I would do nothing until your other half secures a new job & sees out any probation period. You will have plenty of options then but for now hold tight.