Negative equity mortgages? what happens to original house?

rover25

Hi, I have recently been reading about negative equity mortgages on offer from Lloyds, Nationwide and other lenders.
They gave the eg of someone whose property was currently worth £110,000 but whose mortgage was £130,000. With the new scheme they could trade up to a £120,000 home while keeping their mortgage as it is. They would use £10,000 they had managed to save as a deposit.
I have seen a number of these examples on difft websites but am still a bit confused as to what happens to the original house that is in neg equity. Do they assume it is sold to a buyer + if so getting a buyer for the house is obviously the 1st stage that has to be completed before this new type of mortgage could be started.
Does this sound right?

opinions4u

Correct.

Without a buyer for the property in negative equity these mortgages are a non-starter.

diable

Trade up £10k lol I think its a non starter especially with all the legal fee's etc etc......

Thrugelmir

rover25 wrote: »

They gave the eg of someone whose property was currently worth £110,000 but whose mortgage was £130,000. With the new scheme they could trade up to a £120,000 home while keeping their mortgage as it is.

The aim is to trade down rather than up. So that the debt becomes more manageable.

With the figures you've quoted there is £20k of negative equity. So trade down to £95k house and owe a £115k.

If you have savings then pay down the mortgage. As the interest you are paying on the mortgage is most likely significantly more than you are earning on your savings. In time a combination of rising house prices (may be a while) and debt repayment will eradicate the negative equity.