Moving home - negative equity

titusbungle

Hoping for any advice / help?

We bought a one bed apartment in 2006 for £85,000 as a FTB. We took this on a 100% mortgage (yes I know - big mistake - we used the deposit towards our wedding) and currently owe £75,000 as we have been making overpayments for 3 years.

We want to move house but the apartment is now valued at £65,000 - £10,000 negative equity. Our mortgage provider (Co-Op) will not allow us to rent the property out :mad:

We have saved a deposit for a house but are now stuck, I saw an article in the Telegraph (can't post link - google telegraph fsa mortgage relaxation - top link) that says that the FSA were introducing guidelines for banks to allow the negative equity to be ported to the new property - Co-Op say no :mad:
In theory the LTV is reduced as it is currently 115% and in moving home to say a £100k home plus £10k negative equity with a 15% deposit, the LTV on £110k would be 93.5% as the outstanding would be £93,500

Does anybody know if we are able to move to another lender and port it? Please only comment if you have advice.....

We are one of thousands who were the last FTB's and are now the 'trapped generation'. I say only comment if you have advice, if I knew now what i knew then, then things would have been so different but we were young and naive and excited for our own home.

_Andy_

Just to clarify, how much do you have saved up?

poppy10_2

titusbungle wrote: »

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In theory the LTV is reduced as it is currently 115% and in moving home to say a £100k home plus £10k negative equity with a 15% deposit, the LTV on £110k would be 93.5% as the outstanding would be £93,500

Your maths seems a bit wonky to me.

If you have a 15% deposit saved up for a £100k house, you need a mortgage of £85k to pay for the balance.
Add in the £10,000 you would need to add to the mortgage if you are porting over your negative equity, and your mortgage is £95,000 on a £100,000 house - i.e. LTV ratio of 95%

True, this is lower than your current LTV, but then the absolute risk to the lender is greater. At the moment the most they can possibly lose is the £75k you owe them. If you port up to a larger house, you will owe them £95k, so they are at risk of losing more money if you can't make the payments. Plus a drop in house prices of just 5% will put you back in negative equity again.

You'd be much better advised to use your "15% deposit" to pay off the negative equity in your current home and sell it on the open market. Then rent while you save up a new deposit.House prices are falling again, there's no harm in sitting out on the sidelines for a bit.