Negative equity question

Generali

The_White_Horse wrote: »

you are offering the same security as you have already. they are 30k down. at the new property they are 30k down. But, the house value is more - therefore, as a percent, the deficit is smaller.

You can demonstrate that you can pay the monthly repayments, just not pay of the NE in one lump.

as I say, this makes no difference to the banks - they are just being awkward really.

Banks go out of their way to make a profit. They don't go out of their way to be awkward. It's a pretty peculiar argument TBH.

Why do you think they go out of their way to be awkward?

PS Did you once post here under the moniker Horse in Hat Man by any chance?

Really2

The_White_Horse wrote: »

you are offering the same security as you have already. they are 30k down. at the new property they are 30k down. But, the house value is more - therefore, as a percent, the deficit is smaller.

You can demonstrate that you can pay the monthly repayments, just not pay of the NE in one lump.

as I say, this makes no difference to the banks - they are just being awkward really.

No, your initial loan was 100%.

Your security is now -10% (110%)

I am not having a go at you I am a mortgage holder but it is not going to happen.

Say prices drop further you could than have a £330K mortgage on a £250K house

Can you not see that is a bigger risk.

WTF?_2

The_White_Horse wrote: »

Can someone answer this, as I don't understand it.

Lets say I have a house that was worth 250k and a mortgage worth 225k.

Lets then say that property crashes, and the house is now worth 195k.

I am now 30k in negative equity.

Lets say I have a good job and I am quite easily paying the mortgage - in fact I am overpaying.

If i think to myself, I would like to move to a bigger house because the price has reduced and my family is getting larger.

Why can't I be lent, by the same lender, 300k on a house worth 300K?

Therefore, I sell mine for 195k and pay off the mortgage. They are now owed 30k by me. They then lend me a further 300k and I buy the house worth 300k.

Before they were owed 225k on a house worth 195k (they are 30k down - 13.3% as a percent)

Now they are owed 330k on a house worth 300k (they are 30k down - 9% as a percent)


therefore, what difference to the mortgagee bank, provided you have a good credit history? why can you not, as a matter of course, take your NE with you?

The whole point of mortgages is that they are secured against an asset that should cover the cost of any outstanding debt should you be unable to repay.

If you are in negative equity from an existing mortgage then no-one is going to offer you a new deal in the current climate where prices are dropping and credit is scarce.

As another poster said, you wouldn't expect to be able to take out a >100% LTV mortgage in this climate so why do you think you can do the exact same thing by carrying negative equity to a new house?

If you think that it doesn't matter than you might currently be in NE because you are repaying the mortgage, take a look at what happens should you come off a fixed-time deal like a 2-year tracker or low fixed rate. You will have no flexibility to renegotiate your mortgage and will have to go onto SVR. If you were a business borrower you might well face a margin call according to the terms of the contract.......

Numenor

Really2 wrote: »

No, your initial loan was 100%.

Your security is now -10% (110%)

I am not having a go at you I am a mortgage holder but it is not going to happen.

Say prices drop further you could than have a £330K mortgage on a £250K house

Can you not see that is a bigger risk.

It's not necessarily a bigger risk, just a bigger potential loss. The 'risk' (i.e. the probability of default) is surely not affected greatly...? If you lose your job you lose your job, and the price of your house does not have an impact on that scenario.

Really2

Numenor wrote: »

It's not necessarily a bigger risk, just a bigger potential loss. The 'risk' (i.e. the probability of default) is surely not affected greatly...? If you lose your job you lose your job, and the price of your house does not have an impact on that scenario.

Ok two £300k houses

One £150k equity the other £-30K

Which one are you likely to get your money back on default.

Sorry there is more risk to the lender of not getting paid back the less equity the mortgage holder as.

SandC

I would have thought that portable mortgages have clauses about LTV.

Numenor

Really2, you and I are obviously just disagreeing on the meaning of the word 'risk' then. If the same person with the same job was paying both mortgages, you'd obviously be happier to lend them less. But without considering the income, the mindset, the reliability and the flexibility of the borrower, LTV alone is a flawed measure because it ignores the risk factor of how likely the person is to not be able to pay their mortgage.

You could give the £150K mortgage to someone who only just earns enough to qualify at 3.5x salary, and the £330K mortgage to someone whose salary is £175K. In that case, the lesser loan is the greater risk.

hoggums

So let me understand this -

You want a bigger house without paying anyone any money for it at the time?

The_White_Horse

Really2 wrote: »

Ok two £300k houses

One £150k equity the other £-30K

Which one are you likely to get your money back on default.

Sorry there is more risk to the lender of not getting paid back the less equity the mortgage holder as.

but that is the same in the first property. they would lose out on 30k if you default. the end.

Really2

Numenor wrote: »

Really2, you and I are obviously just disagreeing on the meaning of the word 'risk' then. If the same person with the same job was paying both mortgages, you'd obviously be happier to lend them less. But without considering the income, the mindset, the reliability and the flexibility of the borrower, LTV alone is a flawed measure because it ignores the risk factor of how likely the person is to not be able to pay their mortgage.

You could give the £150K mortgage to someone who only just earns enough to qualify at 3.5x salary, and the £330K mortgage to someone whose salary is £175K. In that case, the lesser loan is the greater risk.

Well given they have a mortgage they already have worked out the repayment risk. The point is why would a bank want to give you more money than somthing is worth?

The risk of a 110% mortgage is stupid to a Bank (espesialy in the current cliamte how do you think this all kicked off? look at what happened in America).
If you can't see that this is a pointless argument and perhaps I was wrong about some owners .