Dealing with Negative Equity

Irvhud

Hello all

I'm hoping you can give me some advice, I can appreciate these type of queries must get posted all the time however if anyone has had any similar experiences or can offer some advice I would be very thankful.

Me and the girlfriend are seriously talking about moving in together and are starting to save for a 10% deposit on say a £120k property. (will probably take at least a year)

I have a flat which I bought for 72k in April 2006 with a 100% mortgate, I have not had the flat valued properly but online valuations indicate it to be worth about 65-66k today , my outstanding balance on the mortgage is 69k and I am on SVR. I understand that the value may go up or down in the time it takes to find the deposit depending on the economy.


My query is what can I do with the inevitable Negative equity when I am ready to move house, it seems sensible to be able to do one of the following but is it possible to...

1. Take out a loan to pay off the Negative equity? (I'm assuming this would affect the possible amount of borrowing of a new mortgage?)
2. Transfer it into a new mortgage?
3. Refinance it with existing lender?

I have also considered that it may be an idea to try and sell my current property now and deal with the negative equity now using what ever is possible from 1-3 and rent until in a position to buy again? The advantage I can see here would be that there would be no chain.

My sister has suggested rather than try and sell I could rent out my current place however I understand I would have to get approval to do so from the lender and feel it would be a risky move to do this (maintainance costs, dodgy tenants etc)

Any advice greatly appreciated.

Cheers

brit1234

Sell the property now before prices fall any lower which they will do. Pay off a ny remainder and then save a deposit.

The banks will want to know about any loans with future mortgage, which can be damaging to you. Don't get a loan.

andrewmp

Pay off as much capital as possible to reduce negative equity.

ALIBOBSY

Any loan will count against what you can borrow on a future mortgage, so probably better to clear the debt now if you can. Other option may be for her to move in with you so you can both save as much as possible towards your next home, you could even look at overpaying the mortgage to reduce the negative equity. But obviously this could depend on if you think HP in your area will rise/fall or be stable in the next couple of years. But remember if the HP fall as well as getting less for the flat the next property you buy will also cost less.

good luck

ali x