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options for moving with negative equity??

We owe just under 64k on a property worth less than 60k based on recent sales in the street (stupidly took NR together mortgage in 2007). We just moved to SVR of 4.79%. Don't know whether to keep overpaying by £160 a month, increase our overpayments, or pay no overpayments and put more savings in the bank. We earn £46k between us and have no other debt except a student loan, and no kids. We have 2 months salary in an isa and some shares which are down at the moment. We basically want to move to a bigger property asap as are too cramped. What's our best strategy?

Comments

  • Overpay as you are, but also save, save, save on top.

    Its not just the negative equity; there are EA fees, HIP costs, Solicitors fees, moving costs, and potentially stamp duty tax, BT phone line charges, broadband exit fees, etc etc.

    Then, bigger council charge bills, larger heating costs for a larger property...

    Not to mention the bigger mortgage you would need to get a bigger place.


    If, out of £46k pa, you can only save £5k over 3 years then you are probably best sitting tight for a while and putting a solid effort into increasing your savings. Standard MSE advice is to have 3-6 months savings in an emergency fund - good idea as the recession is still unfolding.

    The NE may disappear if the market goes upwards in the meantime, saving you thousands.

    If you set a target of 6 months worth of savings, within say a year, then half of that could be directed at the fees/mortgage etc when you make the move.
    Act in haste, repent at leisure.

    dunstonh wrote:
    Its a serious financial transaction and one of the biggest things you will ever buy. So, stop treating it like buying an ipod.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    YRGM wrote: »
    We owe just under 64k on a property worth less than 60k based on recent sales in the street (stupidly took NR together mortgage in 2007). We just moved to SVR of 4.79%. Don't know whether to keep overpaying by £160 a month, increase our overpayments, or pay no overpayments and put more savings in the bank. We earn £46k between us and have no other debt except a student loan, and no kids. We have 2 months salary in an isa and some shares which are down at the moment. We basically want to move to a bigger property asap as are too cramped. What's our best strategy?

    The stratagy is to spend less save/overpay more

    Overpayments reduce costs but what you need to calculate is the amount needed to move to your target place and do this by saving/overpaying


    £64k @ 4.79% say 20y term £415pm.

    £46k income £2780-£2900pm

    With the mortgage and overpayment you have £2.2k-£2.4k pm to live off.

    You don't say what you could be saving(might be a lot allready) but a review where your money goes would do no harm.

    Do a SOA to find out where you are spending and reprioritise with your goal to move house as a higher priority than it is now.

    http://www.makesenseofcards.co.uk/soacalc.html

    If you think like you are in debt that can help.

    Think of your debt as the savings required to move.

    eg If your bigger place will cost £100k you need £4k+ to clear the exisitng mortgage and £20k deposit for a decent rate and fees so say £30k in debt.

    If you need help with the reprioriitise then debtfreewanabee is a good places to get ideas of where any cutbacks can come from.
  • YRGM
    YRGM Posts: 4 Newbie
    So.. based on the comments we're better to use a combination of overpayments and savings rather than one or the other? It's just frustrating being stuck in a tiny flat but you have convinced me we don't have any choice for the foreseeable future. Thanks - I think! Much more focused on the goal now at least...
  • YRGM
    YRGM Posts: 4 Newbie
    I forgot to add - the NR together mortgage comprises a £10k unsecured loan and £54k secured loan - should we make overpayments to the secured loan first or to the unsecured one or both in equal amounts? NR won't give me advice on what is best. Any thoughts??
  • Pay off the highest interest rate, if they are different.

    If not, I'd clear the mortgage first.
    Act in haste, repent at leisure.

    dunstonh wrote:
    Its a serious financial transaction and one of the biggest things you will ever buy. So, stop treating it like buying an ipod.
  • YRGM
    YRGM Posts: 4 Newbie
    they are both the same interest rate - is it better to clear the mortgage first so we can remortgage?
  • Partly that, as it reduces your negative equity and hopefully in time builds up some positive equity that will improve the mortgage deals available, but also the unsecured element cannot jeopardise your house in the event of falling into arrears (except in very rare circumstances that we don't need to complicate the thread with)
    Act in haste, repent at leisure.

    dunstonh wrote:
    Its a serious financial transaction and one of the biggest things you will ever buy. So, stop treating it like buying an ipod.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    YRGM wrote: »
    they are both the same interest rate - is it better to clear the mortgage first so we can remortgage?

    Untill you remortage then theh the unsecured normaly goes up.

    You need a plan that takes all factors into account.
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