Negative Equity - Moving House

gifster83

Hi all.

I need a bit of advice.

My wife and I live in a small appt in Manchester city centre and have recently had a baby. There isn't that much room where we are and will need to move within the next 1-2 years. The same flats in the area are going for £92,000 to £100,000. My mortgage is about £91,500 and I have a second charge of about £14,000. So I am at least £5000 in negative equity.

We want to move out of the city centre into a house, we a can probably find a nice house further out for about £90,000 - £110,000. The mortgage is portable. Not sure about the second charge though.

The other option might be a new build on a 100% transfer, but I don't think that they help if I am negative equity.

Is there anything we can do or do we just need to ride it out and hope the value increases?

globalds

Could you start making overpayments on your mortgage ?

gifster83

globalds wrote: »

Could you start making overpayments on your mortgage ?

Going to try, but money is tight just now. My wife is on maternity pay just now. Probably when she goes back to work.

It seems daft if all house prices are down just now you think that you would be able to transfer negative equity to a new property as the negative equity will be made up eventually no matter what property it is on...

maninthestreet

gifster83 wrote: »

Going to try, but money is tight just now. My wife is on maternity pay just now. Probably when she goes back to work.

It seems daft if all house prices are down just now you think that you would be able to transfer negative equity to a new property as the negative equity will be made up eventually no matter what property it is on...

No lender in the current economic situation is going give you a mortgage for more than the value of a property - what happens if you lose your job and the house is repossessed? Selling it would not pay-off the mortgage debt.

gifster83

maninthestreet wrote: »

No lender in the current economic situation is going give you a mortgage for more than the value of a property - what happens if you lose your job and the house is repossessed? Selling it would not pay-off the mortgage debt.

I understand that, but I have a portable mortgage. So if I am in an appt that was worth £120,000 and is now worth £92,000 and want to move to a house that is worth ~£92,000 and in theory should regain its value in the same way as the current appt, then the risk is the same isn't it? I could still lose my job now, and the appt get repossessed...

What I was asking is not "Can I get a new > 100% mortgage?", but more "Is there anyway I can move house?"

sonastin

It does seem logical to think that owing £100k on a different £92k property would be OK as that is the risk that the bank is currently facing but banks don't always appear to act in logical ways when it comes to assessing risk - they don't have the time, resources or interest in doing so.

The assessed your flat and decided what was involved and tied themselves into that so they now accept the consequences of it being a bigger risk than they first thought. But to port your mortgage and negative equity would involve them doing all the work again to assess the suitability of the risk and that will be done in isolation - not by comparison to the property that the mortgage is already secured on - so it will look like a shocking risk to the underwriters and they will take about a nanosecond to turn it down. Even if you were to point out that the house had potential to increase in value to £150k when the flat would only be £120k that info wouldn't reach the ears of the people turning you down and the bank just wouldn't care.

I think waiting it out and paying down the negative equity is your best bet.

gifster83

I think my 1-2 year plan is out then.



To move within 2 years my overpayments would have to be in the region of £540 a month.

maninthestreet

gifster83 wrote: »

I understand that, but I have a portable mortgage. So if I am in an appt that was worth £120,000 and is now worth £92,000 and want to move to a house that is worth ~£92,000 and in theory should regain its value in the same way as the current appt, then the risk is the same isn't it? I could still lose my job now, and the appt get repossessed...

What I was asking is not "Can I get a new > 100% mortgage?", but more "Is there anyway I can move house?"

What about that other £14,000 secured on your property?
Are there really houses available in a location you would want to live in for the same price as your apartment's estimated current value??

gifster83

maninthestreet wrote: »

What about that other £14,000 secured on your property?
Are there really houses available in a location you would want to live in for the same price as your apartment's estimated current value??

I would have to look into the second charge, I don't know if that is portable.

I am looking at houses out of the city centre which are generally cheaper than in the city centre. So yes I would be looking at houses at a similar price to my appt.

gifster83

gifster83 wrote: »

I think my 1-2 year plan is out then.



To move within 2 years my overpayments would have to be in the region of £540 a month.

And that would only bring it down to 100% equity. To get a 25% deposit as well my overpayments would be £1500 plus my current payment of £480 on the mortgage and £200 on the second charge.

Definitely stuck for a while....

ameliaswank

hey guys.. thats the toughest part of one's life i hope you guys move soon. but surely you need to try minimize the issue of overpayment so you could better get an apartment of your choice...