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Negative equity when moving house
YoungAngus
Posts: 7 Forumite
Hi,
My wife and I bought our first (2 bed) house at the hight of the boom (2007). We took a mortgage worth 100% the value of the house + £14k unsecured. The value of our house (we estimate) will have dropped by about £20k!
We now have 1 child and expecting a second and are now desperate to sell. We have managed to repay £8k of the unsecured loan, and have £12k + plus in savings. I am a freelance IT consultant and have owned my own limited company for almost 3 years - we are able to save approx £2k per month.
In our minds we have 3 options:
(1) Save up for a deposit for a new house and apply for permission to let from NRAM (current mortgage providers), allowing us to keep our current house.
(2) Save up for a deposit and attempt to sell our current property for several thousands less that the purchase price.
(3) Try to part exchange our house for a new one, but again we would need to make up the huge loss on our house.
Option 1 has been our focus over the last few months - but are still unsure weather NRAM will allow us to let our property.
Question 1:
If we went for option 1 should we continue to repay our unsecured loan off, or use the money to save for a second deposit?
Question 2:
Can anyone think of anything else we haven't thought of which would allow us to move house within the next 12 months or so?!
Sorry for the length of the post, but we are really at a loose end at the moment and any comments will be greatly appreciated!
Thanks
My wife and I bought our first (2 bed) house at the hight of the boom (2007). We took a mortgage worth 100% the value of the house + £14k unsecured. The value of our house (we estimate) will have dropped by about £20k!
We now have 1 child and expecting a second and are now desperate to sell. We have managed to repay £8k of the unsecured loan, and have £12k + plus in savings. I am a freelance IT consultant and have owned my own limited company for almost 3 years - we are able to save approx £2k per month.
In our minds we have 3 options:
(1) Save up for a deposit for a new house and apply for permission to let from NRAM (current mortgage providers), allowing us to keep our current house.
(2) Save up for a deposit and attempt to sell our current property for several thousands less that the purchase price.
(3) Try to part exchange our house for a new one, but again we would need to make up the huge loss on our house.
Option 1 has been our focus over the last few months - but are still unsure weather NRAM will allow us to let our property.
Question 1:
If we went for option 1 should we continue to repay our unsecured loan off, or use the money to save for a second deposit?
Question 2:
Can anyone think of anything else we haven't thought of which would allow us to move house within the next 12 months or so?!
Sorry for the length of the post, but we are really at a loose end at the moment and any comments will be greatly appreciated!
Thanks
0
Comments
-
I suppose that the advantage of option 1 is that you do not need to pay off the negative equity on your present home?
As you know, you need at least a 10% deposit for the new property, but your lender will also perform an affordability test. They will take into account any unsecured loans you have outstanding. Also, they will take into account any shortfall on the existing mortgage, ie mortgage interest that is not covered by the rent after allowing for expenses.
If you go for option number 2, you have to pay off the negative equity on your present home as well as saving up a deposit, but it does make your life a heck of a lot easier. It is not easy being a landlord, and the house that you bought to live in 4 years ago might not be a good letting proposition. Do you really want to end up with 2 mortgages and 2 houses, with the possibility that house prices might go down rather than up?No reliance should be placed on the above! Absolutely none, do you hear?0
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