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ColinS

Some Advice Please, Negative Equity looms

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Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

I bought at the end of 2006 (not through greed etc. as most people on here think but through wanting to own a house and not foreseeing a burst of the bubble).

Anyway, bought for £141k (mortgage £134k, Interest Only). Putting the apartment up for Sale next week and its going on at £139k. I appreciate that if I am lucky enough to get a bid or a buyer (let alone a viewing) I will be selling for much less than that, say £120k at best (using that as an example £14k Neg Eq). So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

If I sold and bought another house would I add this £14k onto the new mortgage?

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

I assume I wont get a buyer and it will be many years until the apartment is worth what I paid for it, hence I am trying to get out now (Im aware Im a bit late tring to get out).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

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Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

I bought at the end of 2006 (not through greed etc. as most people on here think but through wanting to own a house and not foreseeing a burst of the bubble).

Anyway, bought for £141k (mortgage £134k, Interest Only). Putting the apartment up for Sale next week and its going on at £139k. I appreciate that if I am lucky enough to get a bid or a buyer (let alone a viewing) I will be selling for much less than that, say £120k at best (using that as an example £14k Neg Eq). So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

If I sold and bought another house would I add this £14k onto the new mortgage?

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

I assume I wont get a buyer and it will be many years until the apartment is worth what I paid for it, hence I am trying to get out now (Im aware Im a bit late tring to get out).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

The bank will want their £14K back. It's unlikely that you will be able to add the £14K to a new mortgage and it sounds like you wouldn't have a deposit for a new purchase. I think 100% (and certainly 100%+) mortgages are a thing of the past.

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I'd advise posting on MSE or getting professional advice. Are you on a fixed rate at the moment with an ERC as this would add to your debts. Are you sure you'd be able to get a mortgage for an even bigger place, and is it affordable if you haven't been able to afford a repayment mortgage on the 'hutch'. If you are in negative equity you'll owe the bank money and will have no deposit for a new place so I can't see how you could possibly set up a new mortgage. I think you have to sit it out, set up a repayment vehicle for your mortgage, and overpay as much as is possible - you may be stuck there for years but the possiblility of getting an even bigger mortgage right now seems low.

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I'd advise posting on MSE or getting professional advice. Are you on a fixed rate at the moment with an ERC as this would add to your debts. Are you sure you'd be able to get a mortgage for an even bigger place, and is it affordable if you haven't been able to afford a repayment mortgage on the 'hutch'. If you are in negative equity you'll owe the bank money and will have no deposit for a new place so I can't see how you could possibly set up a new mortgage. I think you have to sit it out, set up a repayment vehicle for your mortgage, and overpay as much as is possible - you may be stuck there for years but the possiblility of getting an even bigger mortgage right now seems low.

I think the plan is to rent and pay off the 14K debt.May end up better off in the long run by cutting his losses and paying less in rent than mortgage interest.Probably be sitting pretty around 2014 when we hit the bottom and he will be able to buy that house.

Edited by crashmonitor

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Best thing is to contact the mortgage company and ask for a redemption figure. This should include any early redemption penalties if there are any.

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Ask your bank, they may be flexible. They may appreciate getting a good portion of the debt back and for you to be off the mortgage books.

You may however be required to set up a loan through them to cover the difference at a considerably higher rate of interest.

It`s all if`s but`s and maybe`s though. Getting a buyer makes this a probable non starter unless you reduce to figure that upsets you and that will leave you with a debt greater than your eg. of 14k IMO of course

Last year you would have been able to carry over a 14k loan and bolt onto a mortgage, it will be impossible now for you to purchase anything as you do not have the required deposit.

Options are, chat to the bank and see where you stand with selling and creating a loan for the deficit or sit tight, buckle up and see where this takes you.

Good luck

Bosh

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If you are putting it on at £140k I think you are being very optimistic hoping to get £120k. I think you will have to be prepared for a much larger loss.

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I think the plan is to rent and pay off the 14K debt.May end up better off in the long run by cutting his losses and paying less in rent than mortgage interest.Probably be sitting pretty around 2014 when we hit the bottom and he will be able to buy that house.

My estimated buy date is 2016 when I hope to buy my first property - a 4-bed detached with a 50% deposit.

So £14k might sound like a lot now but this guy talks a lot of sense when he suggests taking this hit now for the chance of buying a better home later on. To hang on longer could result in such a large amount of NE that there is no option but to stay in the property until it's value recovered.

But in answer to the OPs original question - the bank will want the difference between the property sale price and your mortgage. There will be no other options. If you are blacklisted because you don't pay it back that will severely hamper your chances of getting the mortgage that you want in the future.

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It all seems pretty grim. In response to some queries and assumptions (in case it makes any difference),

Myself and my partner have had good payrises since we first bought and easily afford repayment on this place now, just using this time to do some saving and when the Fixed Rate runs out next year then go repayment.

Iv also been lucky enough to come into about £20k from a deceased granny.

With this to pay off the bank and increased pay I do think if I can get a buyer then the option of the next house or renting is a reality.

Getting a buyer probably is not though.

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Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

I bought at the end of 2006 (not through greed etc. as most people on here think but through wanting to own a house and not foreseeing a burst of the bubble).

Anyway, bought for £141k (mortgage £134k, Interest Only). Putting the apartment up for Sale next week and its going on at £139k. I appreciate that if I am lucky enough to get a bid or a buyer (let alone a viewing) I will be selling for much less than that, say £120k at best (using that as an example £14k Neg Eq). So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

If I sold and bought another house would I add this £14k onto the new mortgage?

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

I assume I wont get a buyer and it will be many years until the apartment is worth what I paid for it, hence I am trying to get out now (Im aware Im a bit late tring to get out).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

I think you will find it extremely difficult to get a buyer without taking a massive hit - maybe as much as 50% of purchase price.

It could be that renting out your apartment to cover mortgage repayments is a good idea (although it is also likely that the rent you can get will not be sufficient for the purpose.) That would leave you free to rent a place of your own more suited to your needs.

I think you are probably one of thousands who find thmselves up the creek without a paddle.

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Iv also been lucky enough to come into about £20k from a deceased granny.

With this to pay off the bank and increased pay I do think if I can get a buyer then the option of the next house or renting is a reality.

If you're thinking of buying again you also have to have a 10% deposit but I assume the fact you've been saving means you have that covered. Since your fixed rate doesn't end til next year you're likely to have an Early Repayment Charge so definitely check up on that in your original mortgage offer/annual statements.

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It all seems pretty grim. In response to some queries and assumptions (in case it makes any difference),

Myself and my partner have had good payrises since we first bought and easily afford repayment on this place now, just using this time to do some saving and when the Fixed Rate runs out next year then go repayment.

Iv also been lucky enough to come into about £20k from a deceased granny.

With this to pay off the bank and increased pay I do think if I can get a buyer then the option of the next house or renting is a reality.

Getting a buyer probably is not though.

As you say getting a buyer will be difficult. So I'd hang fire on any conclusions until you actually have one. Then you at least have some concrete figures to play with.

Seems you're not likely to default on the mortgage so living in the rabbit hutch may well be forced on you anyway. Planning any kids in the next 5 years or so?

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You will have to check with your lender first.

They may not allow you to sell (i.e. release their charge over your flat) unless they have evidence you can repay the shortfall. You are going to get hit for fees on moving anyway which may negate what you are hoping to achieve.

Depending on your location and the flat you are in, you may find that your flat has fallen more already relative to other properties, so your best option may be to tough it out and save up the shortfall to hopefully pay down your mortgage as fast as possible. I agree with other posters who think you may be over-optimistic on what price your flat may sell for.

You say you have an interest only mortgage - Is that because you are on the limit of affordability and could not afford a repayment or repayment vehicle or for some other reason?

By the way, I don't think you have been greedy, I think you acted out of "fear" of property only going up pumped out by the dishonest vested interests of the developers, banks and govt.

Good luck.

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Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

Any comments would be much appreciated.

why are you selling - thats my first question ?

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I am selling as this was only mean tot be a temporary thing until we could afford somewhere better, which wages wise we can now afford. Current place has 2 bedrooms, is small and a shared driveway and shared garden with downstairs apartment

We started out as Interest Only as this was all we could afford at the end of 2006. We have now got better combined income but going to let the Fixed Rate keep going while I have a decent rate and save each month

Yes unfortunately re kids. Just got married so I reckon I have 12-18 months until kids. Another reason looking out.

Redemption charge if I got out with a year or less of my rate to go is £1500 or something. No big deal when Im talking of a loss of £14k minimum anyway (I know it could be more than that).

I am putting the house on to "see what happens"

Thanks for the comments so far.

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I am selling as this was only mean tot be a temporary thing until we could afford somewhere better, which wages wise we can now afford. Current place has 2 bedrooms, is small and a shared driveway and shared garden with downstairs apartment

We started out as Interest Only as this was all we could afford at the end of 2006. We have now got better combined income but going to let the Fixed Rate keep going while I have a decent rate and save each month

Yes unfortunately re kids. Just got married so I reckon I have 12-18 months until kids. Another reason looking out.

Redemption charge if I got out with a year or less of my rate to go is £1500 or something. No big deal when Im talking of a loss of £14k minimum anyway (I know it could be more than that).

I am putting the house on to "see what happens"

Thanks for the comments so far.

i dont believe you.

a genuine poster would have been too insulted by my comments me to reply.

your trying to bait me i think.

this is all too 'perfectly ignorant'

i think your a landlord in DEEP TROUBLE looking for advice, without admitting your stupidity.

all paranoia and awooga finder general aside.....

why not just take the negative equity out of the next move up ?

see my sig

possibly a former bull poster with a new fresh gor blimey guv ID..

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Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

I bought at the end of 2006 (not through greed etc. as most people on here think but through wanting to own a house and not foreseeing a burst of the bubble).

Anyway, bought for £141k (mortgage £134k, Interest Only). Putting the apartment up for Sale next week and its going on at £139k. I appreciate that if I am lucky enough to get a bid or a buyer (let alone a viewing) I will be selling for much less than that, say £120k at best (using that as an example £14k Neg Eq). So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

If I sold and bought another house would I add this £14k onto the new mortgage?

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

I assume I wont get a buyer and it will be many years until the apartment is worth what I paid for it, hence I am trying to get out now (Im aware Im a bit late tring to get out).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

Lenders have higher lending charges that they charge to the borrower which reduces the loss incurred to lender in the event of a negative equity, or repossession situation, - the company that they take out the higher lending charge with can persue the borrower for their loss to the lender under what they call subrogation, so there will be a debt owing to the lender and possibly to the higher lending charge company that the bank has used. You have not said what your reason for selling is? It may well be that you can rent the property and offset the mortgage payment or depending on the property size rent a room out. If you are going to try and hang on to the property you will need to look long term as property prices are not coming back anytime soon. I would be tempted to try and hang on to the property as a 14k plus debt on your credit rating which is effectively a mortgage default will not sit comfortably on your future credit scores which will make it very difficult obtaining a mortgage going forward.

best regards

Carrington

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I am selling as this was only mean tot be a temporary thing until we could afford somewhere better, which wages wise we can now afford. Current place has 2 bedrooms, is small and a shared driveway and shared garden with downstairs apartment

We started out as Interest Only as this was all we could afford at the end of 2006. We have now got better combined income but going to let the Fixed Rate keep going while I have a decent rate and save each month

Yes unfortunately re kids. Just got married so I reckon I have 12-18 months until kids. Another reason looking out.

Redemption charge if I got out with a year or less of my rate to go is £1500 or something. No big deal when Im talking of a loss of £14k minimum anyway (I know it could be more than that).

I am putting the house on to "see what happens"

Thanks for the comments so far.

As some posters are saying don't be too surprised by how much property prices are now falling.

My sister and her boyfriend bought in Bristol in 2006 and paid about £190k

A property that is in fact bigger in similar condition just failed to sell at auction with guide of £180-£200k and is now on Rightmove with 'post-auction price £150k' attached.

That puts them in NE of £40k+ as this new price sets the current prices for their area.

Luckily I advised them that under no circumstances should they buy a flat and they did buy a run down 3-bed terraced so at least they can grow into it and in march they did have their first child so whilst they might be in NE they can sit it out although they probably wouldn't chose to for as long as they will have to as it's a shit area and I wouldn't see my children going to school in that area. So NE could still come back to haunt them down the line.

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I am selling as this was only mean tot be a temporary thing until we could afford somewhere better, which wages wise we can now afford. Current place has 2 bedrooms, is small and a shared driveway and shared garden with downstairs apartment

We started out as Interest Only as this was all we could afford at the end of 2006. We have now got better combined income but going to let the Fixed Rate keep going while I have a decent rate and save each month

Yes unfortunately re kids. Just got married so I reckon I have 12-18 months until kids. Another reason looking out.

Redemption charge if I got out with a year or less of my rate to go is £1500 or something. No big deal when Im talking of a loss of £14k minimum anyway (I know it could be more than that).

I am putting the house on to "see what happens"

Thanks for the comments so far.

anyhow

i dont believe you.

a genuine poster would have been too insulted by my comments to reply so wholeheartedly.

your trying to bait me i think.

this is all too 'perfectly ignorant'

i think your a landlord in DEEP TROUBLE looking for advice, without admitting your stupidity.

possibly a former bull poster with a new fresh gor blimey guv ID..

all paranoia and awooga finder general aside.....

why not just take the negative equity out of the next move up ?

see my sig

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using that as an example £14k Neg Eq. So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

Probably, as previous poster commented, ask your mortgage company about paying off in full including any penalties. This will give you the total you will need to settle up.

If I sold and bought another house would I add this £14k onto the new mortgage?

No, but if as you already said you have a windfall from your gran of £20k this is not an eventuality.

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

Yes, the house you will purchase will also be reduced from previous highs (provided you can get a mortage to fund it).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

Comments: It doesn't really matter if you move or stay, the flat has lost value. If you NEED a bigger house you will have to accept that and soak up the cost - which could end up being a lot. If you don't I would consider staying put until you are in a position to cover any losses from the first property and still have enough for a decent deposit on the next.

Good luck

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Guest mSparks
Hi there,

Have only lurked for a few weeks but seems a lot of good advice on here, so would appreciate any thoughts on the following (excuse my ignorance, not much idea about how Neg Eq works)

I bought at the end of 2006 (not through greed etc. as most people on here think but through wanting to own a house and not foreseeing a burst of the bubble).

Anyway, bought for £141k (mortgage £134k, Interest Only). Putting the apartment up for Sale next week and its going on at £139k. I appreciate that if I am lucky enough to get a bid or a buyer (let alone a viewing) I will be selling for much less than that, say £120k at best (using that as an example £14k Neg Eq). So,

If I sold and wanted to rent would I have to hand over £14k to the bank to break free?

If I sold and bought another house would I add this £14k onto the new mortgage?

Are there any positives (for someone in my position) from this? i.e. I hope my apartment isnt coming down in price as much as the sort of house I want

I assume I wont get a buyer and it will be many years until the apartment is worth what I paid for it, hence I am trying to get out now (Im aware Im a bit late tring to get out).

PS - I dont have to move, just want a bigger and better place, as currently is a bit of a rabbit hutch as you lot put it.

Any comments would be much appreciated.

Do you have a partner you can rely on?

If so, I would walk away, give the keys back to the bank, leave them no forwarding address, take the hit on my credit rating, give all my assets to my partner and use her credit rating to buy another house in two or three years.

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Nope Fred, unfortunately just a new poster, wishing he had not bought when he did.

I dont think I understood your insult.

Current house is liveable in, though not ideal. As I say, I have stuck it on the market an dhoep to get lucky. If I get an offer, no matter how low, I will certianly consider it, use my £20k and savings to pay off the bank and start again in a few years.

Mentally it is difficult to get over the waste of money (£20k + savings + org £7k deposit + doing the place up) but have to accept it, put it down as a learning experience.

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  • 395 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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