Negative Equity

millie1

Can you give us some advice. We are just on the brink, I think, of negative equity. Do you all think it's a good idea to sell now, go into a rented house, and then buy later when, perhaps, house prices will drop further? We're a family of 4 in a very small house and I'm worried we'll be stuck here for years if we don't sell now, or even indefinitely if house prices don't recover to cover our mortgage.

Also, if we don't make enough money on the sale and there's a small difference of say, £10k between what we sell it for and the amount we owe on our mortgage, does anyone know a way around this?

I hope someone can help as the pros and cons keep going round and round, and I can't seem to make a decision. Thanks.

maninthestreet

millie1 wrote: »

Can you give us some advice. We are just on the brink, I think, of negative equity. Do you all think it's a good idea to sell now, go into a rented house, and then buy later when, perhaps, house prices will drop further? We're a family of 4 in a very small house and I'm worried we'll be stuck here for years if we don't sell now, or even indefinitely if house prices don't recover to cover our mortgage.

Also, if we don't make enough money on the sale and there's a small difference of say, £10k between what we sell it for and the amount we owe on our mortgage, does anyone know a way around this?

I hope someone can help as the pros and cons keep going round and round, and I can't seem to make a decision. Thanks.

If you sell, the lender will want all the money back they lent you - if there is a shortfall, you will have to raise that money somehow, e.g unsecured loan.

pingu2209

You are about a year too late to sell and then rent thinking that you will be better off. I doubt you will even break even. The costs of selling (estate agents fees, solicitors fees) and then the costs of buying again (stamp duty, solicitors fees, fees for a mortgage etc) will outweigh the amount houses will come down.

Another really important thing to consider is that the cost of renting is far greater than the cost of a mortgage. A family of 4 can't downsize much so any rental property would need to be big enough for you. Most people who sell to rent (STR) have a lot of equity in their property and the interest they get from this lump sum in a bank cancels out any additional costs in rent over their mortgage.

If you are in negative equity you still have to pay the whole loan back - even if you sell for less.

Sorry. I know this doesn't help your situation.

Credit_Check_Services

I agree with the other posts, selling now is most likely going to make the situation worse. I doubt you will even find a buyer who will pay the "valuation price", so if you did sell you would have even more negative equity to deal with.

penguine

millie1 wrote: »

We're a family of 4 in a very small house and I'm worried we'll be stuck here for years if we don't sell now, or even indefinitely if house prices don't recover to cover our mortgage.

As house prices fall, the difference between your current property and your next one is also getting smaller (because the percentage drop translates into a larger amount off a more expensive house). So staying put doesn't necessarily mean you'll never be able to trade up to a larger house.

The best thing you can do now is to overpay your mortgage as much as you can. If you're on an SVR then it's a good idea to try to pay as much as you were paying before interest rates dropped.

millie1

Thank you all so much. You're all really helpful. I kind of thought that would be the consensus of opinion. There's just one thing I still don't get: if we go into negative equity which is looking very likely, how can we sell, even if other house prices drop too? I thought your mortgage lender wouldn't let you sell if you're in negative equity (NE)? Is that why you say to overpay your mortgage, to try to get out of NE? We are so close to the wire money-wise, there's no chance of us overpaying, at least in the foreseeable.