Negative Equity Property & Struggling to Manage

space_rider

I bought a house in dec. The person I bought it from bought it new from a large housebuilder. They bought it for 185,00. I bought it for 144,00. They bought Oct 2005, I bought Dec 2006. An estate agent who wanted me to buy one of their properties warned me that buying this house on a large new development will mean that when I come to sell there will be alot of houses for people to choose from. They are correct, there are lots on the market and I think it will be because of the interest rate rises and the fact that they were bought at an over inflated price. There are also lots of reposession notices on front doors. One just across the road was up for 149950 and kept going down. It went down to £115,000 and was due to be auctioned 22 feb if it didnt sell. This was bought at a similar price to the one I bought. I did look at that house, but comparing it with this one I bought this. They were up at the same price. I have a family so I won`t be selling it for years and I also had nearly 50% deposit.

Personally, the way prices are dropping on new developments and with the amount of rental properties available on new developments you won`t be able to guarantee renting it.

irnbru_2

space_rider wrote:

They bought it for 185,00. I bought it for 144,00. They bought Oct 2005, I bought Dec 2006.

Which town?

space_rider wrote:

Personally, the way prices are dropping on new developments

Shhhhhh, we're supposed to be in a boom :rolleyes:

MJMum

Which town?

Curious also!

We sold in Nov 2006 in Crawley, but had originally agreed a sale a year earlier, which fell through. We took the property off the market for 6 months, and made some improvements. Apart from the extra value of the improvements, there was no real difference in sale price; the market's definitely been a bit flat there.

imoneyop

I would be surprised if you are actually able to get a B2L mortgage on the property as (based on the info you've given) I doubt you would be able to meet the rental requirements of most lenders.

You bought it for 215k, so assuming a 5% deposit have a mort of 204k.
It is now worth 195k so the max B2L (85%) would be 166k

You haven't given any interest rates, but in the best case scenario your B2L mort would have the same interest rate as your current residentual so I've assumed a simple 5% rate.

Your interest payments alone for the current mortgage are 851.04 and you said you are recouping 70% of that in rent (abt £600pm).

A new B2L for 165750 (85%) would have interest of 690 and most lenders require rent of at least 115% of the monthly payment so about 800.

Based on the above you are about 200pm shorts.

So, I'd agree with the other posts - cut your losses and get rid of it. It looks like a repo just waiting to happen it you try and hold onto it so you might end up losing a lot more in the long run.

silvercar

if the fall in price is just because it is a new build and you now expect the price to stabalise AND you have equity that you could transfer from the house you live in to the BTL (in order to re-mortgage), then I would consider sticking it out.

If either of those conditions fail, then sell up and stomache the loss.

nmiah786

I'm sure everyone would be very interested in knowing where this house is that the OP is referring too.

Just being curious!!

bristol_pilot

I was in a similar situation in the previous housing boom (and bust). I chose to stick it out and did get back what I paid. It took 12 years. Good luck.

lynzpower

A few thoughts from me

Have you actually had it valued? Nethouseprices isnt 100% reliable, given properties can and do differ.

Have you considered selling it to your tenant? they might be interested?

Doozergirl

lynzpower wrote:

Have you considered selling it to your tenant? they might be interested?

Pretty good idea. The OP needs to make up their mind that they're definately going to sell though because if the tenant doesn't want to buy it, they may just take the hint and hand in their notice!

Awkward!

TBeckett100

Krish wrote:

Bought for 215K, now worth 195(based on going prices for similar property within that development.

builders premium - always check comparables within the area to avoid this pitful.