Newbie - Negative Equity Help

Penpot_2

Hi guys,

Apologises if I've posted in the wrong place but would love some advice/opinions as we're desperate to move.

My husband and I bought a house in 2006 for £184k with a 100% repayment mortgage and as it was a new build then spend an extra £10k on extras.

In 2009 we then moved to the other end of the country with husband's job. As we were unsuccessful in selling the house we managed to get consent to let from our lender & have been renting it out ever since through a letting agent whilst we rent where we are currently living. Our fixed term mortgage has now ended so are on a variable rate of 3.99% costing £1022pm (we only get £616 in rent after deductions which covers the rent on the place we are living - £600pm).

We are now desperate to move but the few recent sales prices on the same estate as our house have been in the region of £130-£150k. We have around £40k in savings and no other debts.

Our tenancy agreement ends next September so not sure whether we should:
a) Try to sell and take the hit, then start saving again for a deposit on a new place
b) Try to pay down the mortgage and convert it to a buy-to-let mortgage if possible
c) Ask the lender for permission to let again for another year and see if the market picks up

Sorry for the long post - can't believe what a mess we've got ourselves into! Any advice would be really welcome xx

DannyboyMidlands

Sell it. I know people who have been "waiting for the market to pick up" for 3 years now. Each year the place is worth less and each year they hand over several grand for the privilege of holding this depreciating asset. Madness.

I'm afraid that you are never gonna get anywhere near what you paid. It's a different world now. Sorry to sound harsh but the sooner you face up to it the better.

pinkteapot

If you can afford to pay off the negative equity, I agree with DannyboyMidlands.

I bought a flat in Jan 2006. A few years on, my other half (now husband) had moved in and we were keen to move. Sold the flat in negative equity in Feb 2009 and I don't regret it for a minute. It's still worth no more than when I sold and we moved into our wonderful new house last August.

originalmiscellany

We were similar to you - but have been able to ride the storm out so far, but house prices have consistently gone down; the only saving grace is low interest rates. I would suggest you sell it at the going rate and accept the hit - or think long term (10 years say) and put it on buy to let and really hammer the mortgage down on it whilst still renting. But I think it'll take several years for the current storm to be ridden out.

Penpot_2

Thanks for the replies. I think we will have to just bite the bullet and put it on the market next summer. I feel so sick when I think about how much money we'll have lost (probably over £80k compared to if we'd just rented from 2006).

Advice to self - ignore everyone (esp. parents) who tell you to buy as much as you can afford and a little bit more cause you never lose out on property!!!

poppy10_2

Penpot wrote: »

Advice to self - ignore everyone (esp. parents) who tell you to buy as much as you can afford and a little bit more cause you never lose out on property!!!

Good advice :cool:

pinkteapot

Yeah it hurts - I'd have been £22k better off if I'd carried on renting instead of owning my flat. What your parents always forget to say is that their logic only applies over the long term. Historically, even those who bought right at the peak before a crash have still made money, but it's taken a long time (15 years+). Any property ownership is risky if it's only for a few years. I learnt that too and now would only buy a house that (a) I could be happy in for at least ten years, if I *had* to stay in it, or (b) would easily rent out if the need arose.

For what it's worth, I read an article today saying that the British economy could shrink by 8% if the euro collapses. That would be huge. And house prices would fall further if it happened. I can't see any forthcoming news that will be good for house prices in the next couple of years. Offload it now or be prepared to hold onto it for a longggg time!

CPS

Me and my wife bought our flat for £141k at start of 2007. After trying to sell from 2008 - 2011 we eventually put it on at £79k and sold it for £77k in April this year. A massive hit and pretty soul destroying (thankfully the hit was laregley funded by my parents). We now live in a lovely rented detached house, saving a deposit and watching prices fall further (similar flats now on the market at £65k!!). We will be ready to buy again in 2013 but in no rush if prices still falling.

So, take the hit and sell. Will be a weight off your mind and you can get on with life.

Thrugelmir

pinkteapot wrote: »

Yeah it hurts - I'd have been £22k better off if I'd carried on renting instead of owning my flat.!

What matters is total cost. Its cheaper to borrow £150,000 at 4% over 25 years than £130,000 at 6%. Property is a long term committment. Not something to be churned over.