Moving house with -ve equity

bingobangobongo

It is with some trepidation that I write this but I would appreciate all thoughts.

We bought a house back in Q4 2006 in order to get on the market
and (before the crash) this was going to be short-term as we planned to move in 2 or 3 years. We are now currently about £30k in negative equity and have wanted to move for some time. I have inherited some money which will enable us to buy a second home in an area we would like to live long term and have kids there. Deposit will be 25% on the new house.

Since selling is not an option we would have to consider renting out our current home. I understand that we would have to inform
Nationwide and they will add 1.5% on to our IO mortgage (which is out of a deal and on the base rate). This would make renting much less of a viable option for us. At the minute, if we bought a second home we could afford both mortgages if need be since our current
mortgage is low (of course the interest rates could rise which would be a problem). If rented, we wont be making much money on rent but this is not meant to be a business venture.

Would Nationwide waive this 1.5% increase in any situation?
I hear about people all the time who don't inform their mortgage company but I dont want to go down this route.
I have read of mortgage companies porting mortgages over to a new house and wiping off some debt on the old mortgage - any more info on this? Is this something I could take to Nationwide?

I am aware of all the pitfalls of being a landlord but at the same time we have an opprtunity to buy a house at a good price in an area we would be happy to live for 10+ years and raise kids there. My judgement may be clouded so I am hoping for some helpful comments.

TrickyDicky101

bingobangobongo wrote: »

I have read of mortgage companies porting mortgages over to a new house and wiping off some debt on the old mortgage - any more info on this? Is this something I could take to Nationwide?

I can't see this being a possibility as you have the money to pay off your negative equity by the sounds of it so why would Nationwide gift you any money?

If you are currently on the BMR of Nationwide then even with the 1.5% top up charge you will currently be on a pretty low rate (4%). But you are right to be wary about interest rates going up.

luckyfool

The extra 1.5% would be getting charged to reflect the higher risk of it no longer being an owner occupied mortgage as it was when you applied for it. From everything you have said above it does seem like it would be massively more risky for Nationwide. Going by my knowledge of them as a lender, and from common sense, I would say you have very little chance of them giving consent to let without charging the rate premium. Even with the rate premium it would still be cheaper than a BTL mortgage. Your choices are either to pay the premium (and if necessary supplement the rent with your own income to pay the mortgage) or sell the property take the hit and pay the £30k shortfall. What percentage deposit could you make on the new property if you sold up and repaid nationwide?

bingobangobongo

Assuming we were able to sell our house and pay off the 30k negative equity I would be left with 10% deposit for the new house.

Problem is - the new house being a new build they are keen on us since we are not in a chain as such - giving me some extra buying power to get a better deal. The builders had someone signed to buy this house but it fell through as the couple were not able to sell their house.

You think Nationwide would waive the 1.5% if we took out the new mortgage with them?

Other option is to keep schtum but I dont want to do that. What would Nationwide do if they found out?

luckyfool

bingobangobongo wrote: »

Assuming we were able to sell our house and pay off the 30k negative equity I would be left with 10% deposit for the new house.

Problem is - the new house being a new build they are keen on us since we are not in a chain as such - giving me some extra buying power to get a better deal. The builders had someone signed to buy this house but it fell through as the couple were not able to sell their house.

You think Nationwide would waive the 1.5% if we took out the new mortgage with them?

Other option is to keep schtum but I dont want to do that. What would Nationwide do if they found out?

Put the interest rate up by 3% instead of 1.5% is typical (i.e. double the premium for an authorised consent to let). They could also choose to call in the mortgage (i.e. require that you repay it within a certain timescale). If you could not do that they might seek possession of the property (i.e. repossess) through the courts and sell it themselves. If they do sell it as a repossession then its likely to sell for 10-20% or more less than what you could sell it for.

inmypocketnottheirs

If you are buying new, is there any chance of a PX?

bingobangobongo

I'm not sure - how would a PX work? I take it they will give you a low price for your house? Say my mortgage is 150k and they gave me 120k for my house - how could I buy the new house?

luckyfool

You get a 90% mortgage on the new house.

bingobangobongo

So could I port over my mortgage woth a px?

Say for example I get £130k for my house - mortgage is 150k. Would Nationwide lend you the extra or would you be better getting a new deal.

Anyway this is all speculation as I doubt they would go for PX. The reason I say this is because a couple were trying to buy this new house but the people buying their house pulled out - so the builder obv never offered to PX for them to keep the sale..

Caz3121

Nationwide will either need to give you consent to let or you move to a BTL mortgage....they may well say no to both due to the lack of equity the norm is 75%LTV and rental income of 125%(?) of the mortgage payment...only if you got this would your income be ignored for the new mortgage.

Will your income support both mortgages? £150k + new mortgage = how many times salary?

The lenders that are offering big discounts to move the morgage elsewhere tend to be sub-prime lenders that are getting out of the mortgage game - doubt Nationwide fall into this

How long have you been interest only? are you in a position that you can overpay to reduce the negative equity?

InMyDreams

bingobangobongo wrote: »

Anyway this is all speculation as I doubt they would go for PX. The reason I say this is because a couple were trying to buy this new house but the people buying their house pulled out - so the builder obv never offered to PX for them to keep the sale..

Maybe they did, but they wouldn't have offered as much as the original couple were expecting to get from the sale that fell through, so maybe they just couldn't afford to do it with only a PX price for their old house.