Moving house with -ve equity

bingobangobongo

We have been interest only for 3 and a half years. I dont know whether to go in and speak to a Nationwide mortgage advisor - would they have any clout and be able to make decisions? How about an independent mortgage advisor - could they help?

Thrugelmir

bingobangobongo wrote: »

We have been interest only for 3 and a half years.

Why haven't you been paying down the capital balance?

The negative equity problem needs to be resolved and your current property disposed of. As having 2 mortgages will leave you highly leveraged. Redundancy. sickness, loss of the tenant. Any combination of events could create enormous financial difficulties.

Assunimg that interest rates will remain low is a dangerous strategy. Rather than take yet another gamble. Use the good fortune of an inheritance to sort your financial affairs out.

The downside of lying to an organisation such as the Nationwide. Is that you could find yourself blacklisted by all the members of the CML. Who represent around 94% of the mortgage lending market.

bingobangobongo

We haven't been paying the capital as we were saving heavily for our wedding, and because the interest rate dropped so low it seemed better to stick the money in a saving account/ISAs. Now we are left with this decision - to buy the house of our dreams or not. And gamble that the house prices improve over the next few years so we could sell the other house.

Thrugelmir

bingobangobongo wrote: »

We haven't been paying the capital as we were saving heavily for our wedding, and because the interest rate dropped so low it seemed better to stick the money in a saving account/ISAs. Now we are left with this decision - to buy the house of our dreams or not. And gamble that the house prices improve over the next few years so we could sell the other house.

Only you can decide the priorities in your life. Get it wrong however and all that you'll have left is memories , and deep regrets.

inmypocketnottheirs

bingobangobongo wrote: »

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?

Use your inheritance to pay it down? Pay a smaller deposit on the new mortage?

RenovationMan

I've just been arguing on the 'invisible board' against the government bringing in tighter restrictions on mortgage lending and allowing people to act like adults and sort out the own finances. After reading your thread, I feel that my argument on the other board has been blown out of the water. Some people should be regulated.

You have been in a dreadful situation with negative equity, through no fault of your own. Luckily, you now have a chance to get out of that situation and use your inheritance as a real spring board for getting your finances completely back on track. I cant believe that your considering throwing that good fortune away and travelling down a path that could lead to the complete destruction of your finances.

I'm sorry about the 'tough love' in my post, but I was just completely gobsmacked that anyone would consider doing what your considering doing. It's absolutely crazy.

EDIT:: Sorry, I've recovered from the shock and will make a more helpful post>>>

I think what your doing is an extremely reckless gamble. With most pundits accepting that we will see further falls in house prices, if you buy a second home you'll go further into negative equity with your first property and possibly go into negative equity with your second property. If you cant get a tenant you'll end up paying two mortgages. If your letting income doesnt cover the mortgage (remember when letting you also need to get landlord's insurance, periodic gas and electricity checks, letting agency fees and cover repairs & void periods) then youll be paying your mortgage and something towards the other mortgage. If you lose your job and/or interest rates increase then the worst case scenario is that you lose both homes.

My advice would be to follow what most people have already said and pay off your negative equity and sell your house.

bingobangobongo

I hear what your saying RenovationMan - loud and clear. It is a risk and I fear we would be making the same mistake as we did nearly 4 years ago. But balancing the risk against the possible benefits is difficult.
Buying somewhere ideal to live, where you could raise a family, closer to work (less travel, less petrol), closer to parents, more schools, friends etc Closer to restaurants / nightlife (quality of living). It's tempting especially when you have 25% deposit and are getting a good purchase price on the house (comparative to prices of similar houses in the area). I have done the sums and we can afford both mortgages as it stands - if the interest rates shoot up then of course the situation would change.

Not rushing into anything - I keep see-sawing between to the two options..

RenovationMan

bingobangobongo wrote: »

I hear what your saying RenovationMan - loud and clear. It is a risk and I fear we would be making the same mistake as we did nearly 4 years ago. But balancing the risk against the possible benefits is difficult.
Buying somewhere ideal to live, where you could raise a family, closer to work (less travel, less petrol), closer to parents, more schools, friends etc Closer to restaurants / nightlife (quality of living). It's tempting especially when you have 25% deposit and are getting a good purchase price on the house (comparative to prices of similar houses in the area). I have done the sums and we can afford both mortgages as it stands - if the interest rates shoot up then of course the situation would change.

Not rushing into anything - I keep see-sawing between to the two options..

You dont have 25% deposit, your effectively borrowing that deposit from the negative equity of your other house. Lets do the sums. If you had £75k inheritance and £20k of negative equity, your net worth is £55k. Which ever way you try and work it, that figure will never change.

I dont understand what the benefits are of this gamble. You can have a larger home and much less debt by doing what everybody else does, sell their current house and buy a new one. If you think that this new build is the one and only, never to be repeated bargain in your life, then your wrong.

Im confused why you bought a house that was not right for you and one where you only intended to stay in for such a short time. It costs a lot of money to buy a house, you dont want to be doing it too often. It seems you may have rushed into that purchase and your doing the same again.

bingobangobongo

RenovationMan wrote: »

Im confused why you bought a house that was not right for you and one where you only intended to stay in for such a short time. It costs a lot of money to buy a house, you dont want to be doing it too often. It seems you may have rushed into that purchase and your doing the same again.

Basically after renting for several years I felt I was at a time in my life hwere I would like to buy. The prices were going up mad crazy and I felt I would be soon priced out of the market completely. Hence I bought somewhere more 'affordable' with the intention of moving on in a couple of years. But we all know what happened.

getmore4less

bingobangobongo wrote: »

Basically after renting for several years I felt I was at a time in my life hwere I would like to buy. The prices were going up mad crazy and I felt I would be soon priced out of the market completely. Hence I bought somewhere more 'affordable' with the intention of moving on in a couple of years. But we all know what happened.

But that was interest only so you were not creating equity,
Moving on would have cost money . moving up the ladder and costs where was that to come from?

Rising prices don't help you move, earning more or saving(paying down debt) is what does it.

sell and buy the new place, the builder will still include the extras and might do a part ex deal.

What would the gross yield be if you did rent your current place(based on the debt).