Negative Equity Query

PickleTricks

Hi All,

My last post may have had a case of information overload! So I've narrowed it down to a simple question.

We're currently in negative equity on our flat. Given that we can cover the 8-9K we're likely to be down with savings - will the negative equity cause any problems selling the flat?

We're thinking of cutting our losses and moving in with a parent for 6 months to save up a deposit.

Many thanks in advance.

kingstreet

No. Your solicitor will ask you to make up the negative equity just before you're due to complete so he has enough to cover his fees and redeem the mortgage.

Thrugelmir

What rate of interest are you paying on your mortgage?

Is the mortgage repayment or interest only?

PickleTricks

It's a repayment mortgage. Fixed rate ended 12 months ago and we now pay just 2.5% - nationwide's bmr. We figure the flats going to be difficult to sell, so trying to avoid a chain... Looking for the quickest way to move into a house.

Thrugelmir

Then continue to build up savings \ overpay the mortgage while interest rates are low.

In time you'll be able to take a step up the ladder.

PickleTricks

Thank you! Sometimes it's a little too easy to get caught up and common sense goes out the window. We did look at overpaying... Is there any advantage over saving?

JQ.

Thrugelmir wrote: »

Then continue to build up savings \ overpay the mortgage while interest rates are low.

In time you'll be able to take a step up the ladder.

and if property values drop?

pleasedelete

Can you convert it to buy to let and then use the 8-9k as a deposit for a new house (possibly with more you have saved).

This isn't as easy as it was but you might find it's an option if the rent will cover the mortgage.

MissMoneypenny

JQ. wrote: »

and if property values drop?

That's was my thought too.

Both of my children are ready to buy their first property and I have advised both of them to wait. Interest rate rises, job loses and welfare cuts across the board, just seem to add up to house prices continuing to drop IMHO.

If they can get consent from their mortgage lender to rent out the flat, then they should also be aware that they are entering into the world of investment; and property has stopped being a good investment to get into. It was only the massive price rises that really made it a good investment. When prices fall, you can't get out of property investment as easily as selling shares.

Then there is all the pitfalls that being a landlord can bring, i.e voids, major repairs, tenant not paying the rent, rising interest rates. All these things will need to be considered too.

It's a gamble and the OP has to decide what she thinks will happen and what will be best for them.

PickleTricks

We did look at renting. At the moment the rent would cover the mortgage, but that situation would reverse if the interest rates rise by 2% or we decided to use a letting agency. As MissMoneyPenny says it looks a little risky right now! That and the risk of house prices going down, and the fact that the flat will probably be very difficult to sell - for some time to come - make me think my best move is to cut our losses asap, before we end up another 10k down. --I'm afraid we are the fools who bought a new build 1BF in 2008!

Financially we're not too bad, we bring in around 62K pa, it's just a question of how to escape the dreaded flat!

Thank you all for your suggestions, greatly appreciated!

InMyDreams

JQ. wrote: »

and if property values drop?

Then your step up will be less expensive. This would be to your advantage.

The 'cheapest' option is still not to be paying anything though and live with your parents if this is an option.