Please help re. Negative Equity!

Irishgal_2

Hi I am new to the forum and am having a few problems I was hoping someone could offer me helpful advice.

Me and my husband bought our first house in Northern Ireland at the very height of the property boom (literally just before it crashed!). We were able to get an interest only mortgage through the bank and did not have to pay a deposit (just a higher lending charge). When we purchased our house the interest rates were at their highest for some years (5.75%) and we felt that they wouldn't go much higher therefore getting an interest only mortage wuld be ok for the first few years then we culd switch to a better repayment mortgage.

Well, true to form the market crashed and interest rates dropped. We were paying lower payments during this time. We were due to renew our mortgage last July, however, our home is worth significantly less than what we paid for it so we thought we could just stay with the current bank on the mortgage we were in, as we are unable to move to another company.

We got a letter from the bank at renewal just saying that our mortgage rate was doubled. This instantly doubled our mortgage, so even though the interest rate was 0.5% our mortgage was nearly £700. This is just about manageable now, however as the interests rates go up we will be paying significantly more than we have ever paid in our mortgage, certainly more than we can afford!! We both earn less than £20k a year each so paying over a thousand pounds for a mortgage will just break us. We could barely afford the mortgage when we took it out - now it is doubled we definitely can't afford it.

I know the Interest Rate is still low but it will go up again and soon I'm sure. I just don't know where to turn. The house we are in as a small ex-council house. We paid £175k for it and it wouldn't even be worth £100k now (literally).

We just don't know what to do. Is it worth getting ourselves into extreme debt on this house? what would you do. Please offer some advice please!!!

GlynD

You need to go onto a fixed rate of interest or a tracker to get the payments low again. That's my view anyway. As you recognise yourself you're stuck where you are until property prices recover.

dojoman

Try posting in the DFW forum, you may get more help there


http://forums.moneysavingexpert.com/forumdisplay.php?f=76

kepar

GlynD wrote: »

You need to go onto a fixed rate of interest or a tracker to get the payments low again. That's my view anyway. As you recognise yourself you're stuck where you are until property prices recover.

Which company is going to give you a repayment mortgage when you have a possible shortfall of 75k.

Answer. I don't think you will find one.

GlynD

kepar wrote: »

Which company is going to give you a repayment mortgage when you have a possible shortfall of 75k.

Answer. I don't think you will find one.

Answer: their own lender.

Irishgal_2

GlynD wrote: »

Answer: their own lender.

Yes, agree. It will have to be with current lender. We will never be able to move.

Question is....will a repayment mortgage not be really expensive, given the expense of the Interest Only one?

GlynD

Irishgal wrote: »

Yes, agree. It will have to be with current lender. We will never be able to move.

Question is....will a repayment mortgage not be really expensive, given the expense of the Interest Only one?

If you're on an endowment then just ask for a fixed rate or tracker. You don't have to go onto a repayment mortgage.

silvercar

This is really a mortgage question and I would suggest you post on the mortgage board.

Except that I can't see a lender wanting to take you on with so much negative equity. So the answer is that you are stuck with your current lender. That may not be so terrible depending what mortgage deals they have available.

I wouldn't encourage switching to a repayment mortgage as that commits you to higher repayments, better to stick to interest only and make overpayments when you can afford to. Even overpaying each month gives you the freedom to pay the interest only if you hit hard times.

GlynD

People seem to be forgetting that this poster already has a lender. She just doesn't seem to know that her fixed rate has run out.

silvercar

GlynD wrote: »

People seem to be forgetting that this poster already has a lender. She just doesn't seem to know that her fixed rate has run out.

and with negative equity, she is stuck with her existing lender.

But the existing lender will have different deals available and it is a question of choosing the best one for her circumstances.

DON79

Unless of course they are like my current lender and they are no longer offering any fixed rates etc.

We are not interest only, we are repayment, but we are stuck on standard variable and cannot fix as my lender just is not offering any fixed/capped/tracker mortgages. So whilst it is very good for us that interest rates are low, we are not so keen if the rates shoot up again, which hopefully will be a couple of years given the way things are at the moment.