Negative Equity Question.....Our first house

PrincessJR

Hi,

Myself and my husband bought our home in Nov 2007 for its market value of £159,950.
We have since done a valuation online and it is coming up at a value of £135000!

We do live in a small rural village, very sought after with the best schools in the area within the catchment, and a railway station so transport links are really good!
We were told about 6 months ago, that our area was one of those that wouldn't suffer quite as much as the national average as it has always been very desirable. I know these online valuation things aren't THAT accurate but im still shocked.

Does this mean that as our mortgage balance is still £152000, that we are roughly £18000 in negative equity?? - Its our first home and so I dont really understand all of the terms etc...

If so, how difficult will it prove to get a better mortgage deal in Nov 2010 when our fixed rate ends?

We are so worried,,,,

System

Yes you are £18000 in NE.

As for the deal when the current one ends, you'll drop onto whatever the SvR is at the time, or if you're lucky your lender might be one of the ones allowing people to remortgage if they are in NE.

If you can afford to pay some of your mortgage off I'd recommend doing so.

You won't know what your options are until about 3 months before your deal ends, but overpaying now might open more options up when that time comes.

sdooley

What does a valuation online mean? Some sites such as zoopla that guess values are very unreliable. If you have a paid-for valuation from a surveyor then that is better but it is ultimately the mortgage company's valuation that matters.

That said you bought at the top of the market so paying down your mortgage if you can afford it is sensible to give you more flexibility if you ever need to move off your standard variable rate or even to move house.

PrincessJR

Unfortunatley at the moment we aren't in a position to overpay, at least not by an amount that would make a difference.
(we have a 0% Credit card, which ends in Jan and so we are furiously throwing every last penny at that to clear the £5000 balance before Jan)

Maybe after that we can overpay. Probably only by £100 per month though, would that be enough to make a real difference in your opinion? Given that we are £18000 in NE :-(

Incidently - is £18k a lot? Just wondering what the average NE is for those unfortunate enough to find themselves in it!

Really2

Go on the mortgage board
http://forums.moneysavingexpert.com/forumdisplay.html?f=15

Some of the people on here are quiet nasty on things like this.

The people on the mortgage board will give you the best advice to be honest.

the_ash_and_the_oak

If the online valuation is correct then that puts you at about in NE to tune of about 12%. Given you bought more or less at peak it could have been worse (it looks like there was a deposit of 5% or less in your case?)

tyllwyd

You are more than a year away from your mortgage ending, so if you are not planning to move, I'd say don't have sleepless nights over it now - house prices might have changed a lot by then, mortgage rates might have changed a lot by then, different mortgage deals will be on offer. Maybe you won't want to move to a new deal, and your lender's SVR will be fine. Obviously it makes sense to try to save or pay off credit in the meantime, but don't make yourself miserable about it.

PrincessJR

Thanks Guys,

the ash and the oak - yes we only had a 5% deposit (£8000)
tyllwyd - you're right, a lot could change by then, I'm just hoping to get a bit 'clued up' before then incase there are things i can be doing in the run up to next Nov which will help in the long run.
Thank you all.

nearlynew

PrincessJR wrote: »

Unfortunatley at the moment we aren't in a position to overpay, at least not by an amount that would make a difference.
(we have a 0% Credit card, which ends in Jan and so we are furiously throwing every last penny at that to clear the £5000 balance before Jan)

Maybe after that we can overpay. Probably only by £100 per month though, would that be enough to make a real difference in your opinion? Given that we are £18000 in NE :-(

!

As soon as you can start overpaying, do so. Even by £100 per month.

Obviously, I don't know the details of your mortgage, but generally over the term of the mortgage it will make a massive difference to when you pay it off and it will reduce the amount of interest you pay.

And once you get used to overpaying, not only will future rises be less of a shock, but it it instils good financial discipline as well.

Don't lose sleep over it, take control.

Best wishes to you.

System

nearlynew, what was the real reason you had to remove your signature? Brit's is far scarier.

Graham_Devon

PrincessJR wrote: »

Thanks Guys,

the ash and the oak - yes we only had a 5% deposit (£8000)
tyllwyd - you're right, a lot could change by then, I'm just hoping to get a bit 'clued up' before then incase there are things i can be doing in the run up to next Nov which will help in the long run.
Thank you all.

Hi Princess, if you want to be a bit more clue'd up, don't worry too much about what an online valuation says, though they can be used as some kind of guide, it's doubtful it will be accurate for your property.

What I will say, as someone also in Negative Equity myself, is that the valuation may be £135k by the estate agents (all figures used as an example). But times are also different now than they were when you bought in 2007 (I bought in 2006).

So if it went on the market for £135k, its doubtful you would get 135k. You might end up taking offers of 125-130k. My parents have just sold their house after a year, and the final offer which they had to accept was 20k below asking price which had already been reduced.

However, on the other side of the coin, they bought their new house with an offer 28k under the asking price.

So that's just something worth bearing in mind. Don't take the online valuation as godsend. An example would be in my area, my type of house is holding up well, but 3-4 bed detached are plummeting....so the valuation will bring mine down based on averages which are being pulled down by other houses, but when it comes to selling, mine should hold up better than the average.

The other thing is bear in mind the valuation is unlikely what you will now get for the next few years.

If you plan on just living there, just sit back and ride it out, as theres not much you can do! In reality, lenders are starting to look at NE mortgages, where you can take the NE with you to your new house. So this may be an option down the line which means you are more free to move.