What are your experiences with Negative Equity...

wymondham

Troughout the boards I often see replies to people stating that negative equity won't be a problem to them as they will be staying where they are for X years and will ride out the storm.

whilst it's a good plan and indeed hopefully true, personal circumstances have a habit of changing unexpectantly to the point where affording to pay the mortgage is not an option, and protection policies may not be adequate, or not even exist.

People don't seem to realise the severe problems of being in negative equity and not being able to sell when you absolutely have to, and this point is being overlooked, especially with the FTB's at present who seem blind to this real issue - especially as it will hit them hardest should the worst happen. There is a real feeling of 'it won't happen to me' going on.

To this point I thought it would be an idea to get real life stories from people who have been through this previously so people can read what could be potentially in store and take note, and more importantly understand what it is!

Your stories please ....!

wymondham

Ill be number 1

During the last downturn in the late 80's/90's we had a one bedroom house which we had real problems selling. My wife was pregnant and we needed some more space so felt the pressure!

Fortunately we are a boring couple and had been saving, so we were eventually able to move, but we had to pay out £8,000 to cover the difference between what we paid for the place and what we sold it for .. ouch!

This is quite a while ago with a very small negative equity, and we did benefit in the long term as with it being a downturn we got a bigger place for the same size mortgage so in the end it was not all bad, but being in a similar situation now I suspect this £8,000 would be chicken feed!

IveSeenTheLight

wymondham wrote: »

Fortunately we are a boring couple and had been saving, so we were eventually able to move, but we had to pay out £8,000 to cover the difference between what we paid for the place and what we sold it for .. ouch!

It is good that you saved and could see yourself out of the situation.
Presumably you saved more than that 8,000 on the larger property you bought with it's de-valued price.

Problems with negative equity really is only seen when people choose / have to sell.

Good advice for MSE'ers out there is to overpay on the mortgage where you can.
If your mortgage interest is greater than your saving interest, then the money works better puting it into a mortgage

If you are simply struggling to make the monthly mortgage payment, then speak to the lender. There are a number of options to help (changing the amortization period, payment holidays etc) rather than defaulting on the mortgage.

maninthestreet

Back in the summer of 1989, I bought a new 2 bed terrace in Milton Keynes for £54,000 - at the time I was working in Aylesbury. At the end 1989, I was made redundant. I quickly found a new job in Uxbridge, but couldn't afford to move - I spent all my savings buying and furnishing my house. At the end of 1991 my employer in Uxbridge was taken over, and although I was kept on, I didn't feel comfortable working under a new management regime, and found a new job in Bracknell in summer 1992. I was driving 100 miles each day commuting to and from work - my house was now less signficiantly less than i paid for it, and was on an interest only mortgage so I was not reducing the oustanding mortgage (interest rates were close to 15% back then). My salary would have allowed me to afford a property in a decent area closer to work, but I couldn't sell my house due to negative equirty. Eventually, after 5+ years of saving and the help of a negative equity mortgage from my mortgage lender, I sold my house in MK for £37,500 and bought my new house in the Reading area for £98,500, losing £16,500. The guy who bought my house in MK got a real bargain.
I wouldn't want to go through anything like that again.

moneysavinmonkey

It is frequently stated by people on these boards that negative equity is only a problem if you have to sell but this is patently not true.

There must be at least a dozen threads on this board of people who have run into problems when their fixed rate mortgage came to an end, and they were unable to re-mortgage due to negative equity and so were stuck on the lenders SVR and were now struggling to meet repayments.

I'm thinking in particular of people on northern rock together mortgages, but i wouldn't be surprised if they were just the tip of the iceberg.

Strapped

My hubby bought a house with his first wife in 1990. She left (for the final time) in 1993. She took a removal van to the place while he was at work. He was left paying the mortgage alone on a(n empty) house in negative equity. He was made redundant and had to get another job fast. He ended up working long hours 6 or 7 days per week to cover the (interest only) mortgage payments while the house slowly disintegrated around him as he didn't have the money or time to maintain, or even to furnish, it. Fortunately I had my own property when we met. He finally sold his place at the end of 1998 after spending some money on it and cleared the mortgage plus a couple of grand - but it had still been a disastrous "investment". Needless to say, we now happily live with our family in a relatively modest house which we did not over-stretch ourselves to buy. I don't think hubby would ever want to go through that kind of financial stress again.

Premier_2

The value of your investment can go down as well as up and you may get back less than you invested. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured on it. If you require advice on the suitability of any product, you should consult an independent financial adviser. You may be charged for this.

Having said that, there ain't many people who have lost money on property they have held for the long term.

pinkshoes

wymondham wrote: »

Troughout the boards I often see replies to people stating that negative equity won't be a problem to them as they will be staying where they are for X years and will ride out the storm.

whilst it's a good plan and indeed hopefully true, personal circumstances have a habit of changing unexpectantly to the point where affording to pay the mortgage is not an option, and protection policies may not be adequate, or not even exist.

People don't seem to realise the severe problems of being in negative equity and not being able to sell when you absolutely have to, and this point is being overlooked, especially with the FTB's at present who seem blind to this real issue - especially as it will hit them hardest should the worst happen. There is a real feeling of 'it won't happen to me' going on.

To this point I thought it would be an idea to get real life stories from people who have been through this previously so people can read what could be potentially in store and take note, and more importantly understand what it is!

Your stories please ....!

Or maybe people just don't want to spend their entire life worrying about every little "what if" scenario!?

So long as you live within your means, and have a sensible life plan, then who cares??

I'm not gonna give up my home, or pull out from when I bought, just because I MIGHT end up in negative equity. If it happens, it happens, and I'll stay put. If worse happens, then I'll cross that bridge when I come to it.

Should I start driving with an oxygen mask just in case all the fumes from other cars give me cancer?

Should I stop driving my car just incase someone crashes into it? (Doh - that already happened - too late!)

Should I wear a crash helmet when I go out drinking just in case I fall over and hit my head on the pavement?

Owning your own home is marvelous! Have you also not read all the threads about those having to move every 6 or 12 months as landlords issue S21s? If negative equity is the worst that can happen, then so be it! It's just money! I put sanity and happiness first I'm afraid!

neverdespairgirl

IveSeenTheLight wrote: »

Problems with negative equity really is only seen when people choose / have to sell.

Or if they want a new mortgage deal, rather than being on the Standard Variable Rate?

neverdespairgirl

maninthestreet wrote: »

I didn't feel comfortable working under a new management regime, and found a new job in Bracknell in summer 1992. I was driving 100 miles each day commuting to and from work - my house was now less signficiantly less than i paid for it, and was on an interest only mortgage so I was not reducing the oustanding mortgage (interest rates were close to 15% back then).

Sounds tough - a really stressful commute (and you had to end it in Bracknell! Yuck!)

Interest rates weren't 15%, though, for most of 1992, they were 8 - 10 %

Premier_2

neverdespairgirl wrote: »

Sounds tough - a really stressful commute (and you had to end it in Bracknell! Yuck!)

Interest rates weren't 15%, though, for most of 1992, they were 8 - 10 %

I believe BoE rates hit 15% in 1989 but I remember I was still paying 17% mortgage rate in 1991 - which is why I sold and bought a more expensive property using a different lender for a lower monthly amount (rather than paying for the remortgage on the original property). In my case the BoE was reducing rates but the lender was not. That lender is no longer in business.