Negative equity help!

bafi

Hi everyone,

long time reader but short timne poster. I currently own my residential property which has interest only mortgage of £183,000. Due to the property crash real value of property is £120,000 - £130,000. I would like to start paying off the capital / negative equity to give me more options for moving / selling in the future. I have possibility of the following 5 year plan options:

Option A
overpay mortgage by £400 per month & pay £400 per month into S&S ISA with medium risk - with a view to cashing this in and paying off lump sum!

Option B
overpay mortgage by £800 per month

Just wondered what peoples opinions were - or if there are other options out there?

Thanks,

B

HappyMJ

bafi wrote: »

Hi everyone,

long time reader but short timne poster. I currently own my residential property which has interest only mortgage of £183,000. Due to the property crash real value of property is £120,000 - £130,000. I would like to start paying off the capital / negative equity to give me more options for moving / selling in the future. I have possibility of the following 5 year plan options:

Option A
overpay mortgage by £400 per month & pay £400 per month into S&S ISA with medium risk - with a view to cashing this in and paying off lump sum!

Option B
overpay mortgage by £800 per month

Just wondered what peoples opinions were - or if there are other options out there?

Thanks,

B

Are you really £63,000 in negative equity. Bit of of a wild suggestion...but how about starting again at zero and saving in an ISA for the next 6 years then buying a house using that money as a deposit on a new house. You would have £48,000 saved by then.

BoGoF

What interest rate are you on ?

Conrad

Just overpay, do NOT invest. I was around in the last crash and lots of clients were in your position, I well recall them thinking they would never see prices rise again. Prices will rise I promise, much of the world is growing like billy-o, so don't get too hung up on Western Europes temporary issues. IMO we are entering a new growth phase (yes early days). 3 years from now the market will be in rude health - neg heads won't agree with this as they use the old fashioned method of making economic predictions using a linear trend from a CURRENT scene - they don't factor in the bends in the road that alter the current scene.

Thrugelmir

Overpay would be my suggestion. At £800 per month you will soon be making inroads into the debt.

ViolaLass

Conrad wrote: »

Just overpay, do NOT invest. I was around in the last crash and lots of clients were in your position, I well recall them thinking they would never see prices rise again. Prices will rise I promise, much of the world is growing like billy-o, so don't get too hung up on Western Europes temporary issues. IMO we are entering a new growth phase (yes early days). 3 years from now the market will be in rude health - neg heads won't agree with this as they use the old fashioned method of making economic predictions using a linear trend from a CURRENT scene - they don't factor in the bends in the road that alter the current scene.

If things are going to be much better in three years time, why not invest now? Not saying I think you're wrong or right but your reasoning suggests that either overpaying or investing would be fine.

bafi

Thanks for the replies guys:

Are you really £63,000 in negative equity - unfortunately yes!

Bit of of a wild suggestion...but how about starting again at zero and saving in an ISA for the next 6 years then buying a house using that money as a deposit on a new house. You would have £48,000 saved by then. - bit of a newbie myself but would it noe be really difficult to secure a mortgage on a new property?

mortgage interest rate is currently 2%

Conrad - love your positivity

Thrugelmir - i am planning to overpay with both options - not sure which is best?

Thrugelmir

bafi wrote: »

mortgage interest rate is currently 2%

Then fill a cash ISA first before overpaying the mortgage. As you'll earn a positive return on the ISA (currently).

pinkteapot

Don't put the money into an S&S ISA. You should only ever invest money you can afford to lose. If you're trying to reduce your debt, you can't afford to lose the money. Cash ISAs might not make as much as S&S ISAs. On the other hand, they could make much more.

Simplest rule of thumb is that you should save (rather than overpay) if the interest rate you receive on your savings is higher than the interest rate you pay on your mortgage.