negative equity, bought a lemon, now working over seas

neverdespairgirl

HammersFan wrote: »

Would you really do that? Take a hit of many thousands when there was a prospect that you wouldn't take a hit at all? It is one thing to think it, quite another to actually do it.

You would most certainly take a hit in the short and medium term - subsidising the place by, say, £200 a month, and fall in equity as well.

Ignoring the falls in equity, even, that £200 a month wouldn't half mount up. You'd need to see very large capital growth in order to beat the £200 plus compound interest if you stuck it in a savings account.

So yes, I would.

keeprenting

neverdespairgirl wrote: »

You would most certainly take a hit in the short and medium term - subsidising the place by, say, £200 a month, and fall in equity as well.

Ignoring the falls in equity, even, that £200 a month wouldn't half mount up. You'd need to see very large capital growth in order to beat the £200 plus compound interest if you stuck it in a savings account.

So yes, I would.

I think HammersFan's argument is based on the view that the housing market might suddenly turn round and rocket upwards again, so why deny yourself the chance of big capital gains? IMHO there is no realistic prospect of this happening. None whatsoever.

brit1234

Its a balancing act between subsiding rent for say about 100 months vs discounting the sale price below the others.

However if you do sell and put the money in a high interest account for say 5 years you could buy a far bigger property or multiple properties.

Then there is also the danger of falling rents at the moment. Rents typically fall going into recessions and are now falling fast as people who can't sell are renting there properties creating a oversupply of rental properties.

BiggaThanBen

brit1234 wrote: »

However if you do sell and put the money in a high interest account

What money ? If he sells there is no money but likely debt ...

keeprenting

BiggaThanBen wrote: »

What money ? If he sells there is no money but likely debt ...

True but if he sells he will be left with a smaller debt, so he will be able to start paying his money into a savings account sooner. If he doesn't sell, he will be left with a millstone round his neck for years to come.

One thing I'm not sure about is the tax consequences. Suppose even after selling the house he is left with a debt of £10k to the bank. Would he be able to get tax relief for the interest on that debt? Personally I suspect that he wouldn't.

I think the OP needs to post some of the numbers on his flat e.g. what is the interest cost per month, how much rent is it bringing in, what could he realistically get for it if he sold now, what is his monthly income? He then needs to do the maths to work out what the least bad option is.

HammersFan

keeprenting wrote: »

I think HammersFan's argument is based on the view that the housing market might suddenly turn round and rocket upwards again, so why deny yourself the chance of big capital gains? IMHO there is no realistic prospect of this happening. None whatsoever.

I dont think house prices will rocket up. By rents look likely to increase (and already are in many areas). I look at it a little differently to you - at worst its a £2400 per year 'loss' (and there's way of using that to offset future earnings I think). Over 10 years, 24,000. I would certainly expect the house to be worth a helluva lot more than 160,000 in 10 years' time. Although I agree there are no certainties here.

However, what if, for example, prices fall no more after the OP sells. The buying and selling costs are lost and the OP has a debt that will linger. Holding debt and trying to get a mortgage is getting tougher.

Just trying to put some alternative scenarios across.

HammersFan

keeprenting wrote: »

True but if he sells he will be left with a smaller debt, so he will be able to start paying his money into a savings account sooner. If he doesn't sell, he will be left with a millstone round his neck for years to come.

One thing I'm not sure about is the tax consequences. Suppose even after selling the house he is left with a debt of £10k to the bank. Would he be able to get tax relief for the interest on that debt? Personally I suspect that he wouldn't.

I think the OP needs to post some of the numbers on his flat e.g. what is the interest cost per month, how much rent is it bringing in, what could he realistically get for it if he sold now, what is his monthly income? He then needs to do the maths to work out what the least bad option is.

And paying down debt on something you no longer own is going to be motivationall very very tough. Having the place tenanted with the prospect of the rent eating up a good portion of the interests costs seems reasonable. Also, by the OP reducing their own living costs that also helps offset the £200 per month 'loss'.

geoffky

Ah my old sparring partner hammers fan...hows it going ..remember the days when you said that the market will not crash....oh those where the days...only 8 months ago...

neverdespairgirl

BiggaThanBen wrote: »

What money ? If he sells there is no money but likely debt ...

The £200 a month he isn't paying to subsidise the mortgage, for a start?

neverdespairgirl

HammersFan wrote: »

Just trying to put some alternative scenarios across.

It's very hard to tell. I was explaining my personal position, because I'd hate to worry about it.