Negative Equity Question - Our First House

PrincessJR

Hi,

I have been advised to re-post this here instead of where it was originally......

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.

I now understand that we are roughly £18000 in negative equity which is thoroughly depressing considering we have only had our home just over 18 months (just realised we have potentially lost £1k per month in value!)

I have been reassured that sites like Zoopla do tend to underestimate but they cant be that wrong can they?

How difficult will it be to get a better mortgage deal in Nov 2010 when our fixed rate ends?

We are so worried,,,,

beecher

Hi again!

Did you get a 100% mortgage? And who do you bank with? Have you phoned them up to see if they can tell you what they estimate the present value to be?

Also have a look at

http://www.nationwide.co.uk/hpi/

and see what it says

Phirefly

Worrying about it now won't help, its over a year away and a lot can happen in that time. All you can do is save hard and try and reduce your Loan-to-value ratio. The worst that will happen is if in November 2010 your LTV is still not good enough to qualify you for another fixed-rate, you'll just revert to your lenders SVR. Your current lender might even offer you another fixed rate, its impossible to predict that now.

SVRs are likely to rise in the mid-term but if you fixed with a poor LTV in the first place when you bought (which is likely if you only had a 0-10% deposit), chances are your current fixed apr isn't that great anyway and the svr you revert to won't be too painful (it could even mean cheaper monthly payments).

Just do your best to ensure that when that SVR does start to soar (if it does), you've done everything you can to give yourself a more favourable LTV. More products are gradually trickling in and theres a chance there could be more remortgage options when it becomes an issue for you.

Also, Zoopla is by-in-large inaccurate

PrincessJR

Hi Again!

We got a 95% mortgage through Future mortgages (CITI Financial). I think we would have struggled at the time as my credit rating wasn't great so we went through a broker who got us 6.6%.

Apparently Future Mortgages are no longer offering new mortgages so Im not sure what their SVR is likely to be.....

beecher

I would try not to worry about it at the moment - just try to overpay as much as you can over the next year. Any pay increases etc should maybe just go straight to the mortgage, or you could post a Statement of Affairs on the Debt Free Wannabee forums for help in shaving money off other bills.

Phirefly

Long post alert, but I promise its all relevant, Princess.

You're wise to get clued-up about it now so you can take damage limitation steps in advance.

A colleage was going on about how she doesn't care that she's almost 30k in NE because she's not planning to move anyway. She was pretty shocked when I told her that her NE will matter when it comes to re-mortgaging next year. I still think she doesn't believe me though.

I'm in a similar position, we're in about 10k NE according to the Nationwide hpi calculator (interestingly that figure has gone down since the last time I checked). Our fixed-rate ends in March. I've found out that my lenders SVR is surrently 3.49 which is quite a drop from our 5.99 fix. It may well increase by the time we revert to it, but I'm just going to keep my eye on things and stay savvy and keep saving and not worry too much

One thing I will say though, think carefully about your long-term plans and your mortgage conditions before you start blindly throwing money at overpaying. On the whole its a very wise approach, but your lender, like mine, may calculate your interest yearly, in which case you may as well put overpayments in a savings account (as I am doing) and pay a chunk just before your yearly interest is calculated.

Also, I'm not going to make any overpayments until I'm fully clued up about all my options come remortgage time as theres a chance we could get another fix without having to overpay anything, in which case I'm going to hang onto the money I've saved as our long term goal is to keep this house and use those savings to buy another.

All the best whatever happens.

RufusA

Phirefly wrote: »

The worst that will happen is if in November 2010 your LTV is still not good enough to qualify you for another fixed-rate, you'll just revert to your lenders SVR. Your current lender might even offer you another fixed rate, its impossible to predict that now.

AFAIK Future Mortgages don't have an SVR. Instead they revert to an average Libor rate + a hefty percentage that is reviewed every three months.

Probably not too bad at the moment - I suspect 1.5% Libor + 2.5% above = 4% but could ramp up quite quickly if there are money supply issues, or inflation starts to look like it's creeping up!

OP - it would be worth checking your KFI documents carefully to see what you'll revert to, and asking Future Finance what their current average Libor rate is.

Rufus.

Johnny_Chaos

PrincessJR wrote: »

I have been reassured that sites like Zoopla do tend to underestimate but they cant be that wrong can they?

Don't worry about Zoopla. It's largely inaccurate - woefully underestimating the value of a property.

Phirefly

RufusA wrote: »

AFAIK Future Mortgages don't have an SVR.

I wasn't aware of that - thanks for pointing it out.

getmore4less

Check your follow on rate, not the estimate that was provided(that will have likely changed) but the actual way the rate is calculated so you know what the costs will be when the fix end.

Nobody has to remortgage when there "special" rates ends.

For many they are best just carrying on on the low rate and overpaying rather than switching and incuring charges.