Stuck with Negative Equity

R_P_W

So you are going from buying one property at 100% mortgage, bit unlucky with timing maybe and now you are in negative equity.

So your next move is looking into buying a house on a shared equity scheme with 5% deposit? And at the same time you will either have a rental property or a unsecured loan!

Regardless of what the mortgage advisor says you can have or afford (I'm sure he doesn't have any incentive!) - do you really want to put yourself in that situation?!

Can you really not stay at your flat for another year and concentrate greeting the mortgage overpaid?

zzzLazyDaisy

The simple fact is that you are not yet in a position to move.

Saving for a deposit while paying a mortgage on a property that is in negative equity is putting the cart before the horse. The only sensible way to deal with this is to use the deposit to pay down the mortgage*, which will reduce the amount you owe and the amount of interest you are paying. By keeping the repayments the same, you will continue to pay down the mortgage and increase your equity in the property.

*assuming that you are not on a deal which prevents or limits you from doing this.

Look at it this way - you will still be saving for your new home, but the money will be held in the equity of the property, and not in a savings account.

Unfortunately, the reality is that you are in negative equity. You cannot ignore it, and there is no magical solution, you have to deal with it.

Thrugelmir

ChampagneFever wrote: »

Therefore id be worse off because my life would be on hold for the next few years as we cant move and this flat is too small for us to live in now.

Then you should have been overpaying the mortgage from a few years back if your goal was to buy a house. Start now. If you review your expenditure you may be surprised by the amount of money that you waste.

Also review your mortgage. See if your existing lender can offer a better rate.

ChampagneFever

Me and my girlfriend are at the stage when we want to be looking at starting a family (we are 32yr old), so if we are to stay in the flat then that is put on hold and apparently her biological clock is ticking. Thats why we are willing to buy the house on the shared equity as this would be the family home and we could live there rest of our lives. So we feel we need to move and then either rent or sell the flat.

ChampagneFever

Mortgage lendor say they are trying to pull out of the english property market so their products have ridiculously high interest rates to encourage people to go elsewhere. But since im not in a position to take out a new mortgage product, im stuck on their standard variable rate. Which is another fear, what happens if their interest rate goes up? Id have to cope with the new payments.

richardw

How are your careers going?
Are you expecting your earnings to significantly rise above inflation over the next few years?

ChampagneFever

My career is a bit stale, not had a pay rise for a few years (not even an inflation one) and way business is, its not likely. So i am looking for a new job but thats not been very fruitful either. My girlfriends work is more reliable and gets pay rises, and they are initiating trying to get her a pay rise.

Thrugelmir

ChampagneFever wrote: »

Mortgage lendor say they are trying to pull out of the english property market so their products have ridiculously high interest rates to encourage people to go elsewhere.

Interest rates are low not high. In the future more than likely will be 2% to 3% higher.

The credit boom is over. A fact of life.

zzzLazyDaisy

ChampagneFever wrote: »

Me and my girlfriend are at the stage when we want to be looking at starting a family (we are 32yr old), so if we are to stay in the flat then that is put on hold and apparently her biological clock is ticking. Thats why we are willing to buy the house on the shared equity as this would be the family home and we could live there rest of our lives. So we feel we need to move and then either rent or sell the flat.

Sorry to be harsh, but you need to wise up.

Normally one of the conditions of shared equity is that you must not own another property, and if you do, it must be sold before you can purchase under the scheme. Have you checked this out with the organisation selling the property on the shared equity basis?

Even if you are allowed to do this, you will have to be able to show that you can support both mortgages before a lender will give you a mortgage on the second property. Do you and your gf earn enough between you to meet the affordability criteria for both mortgages?

And what about when you gf stops work to have a baby - would you be able to pay both mortgages on your own single wage?

You might not like the situation you are in, but that's life. You need to deal with the problem, you can't simply walk away from it, or hope it will disappear. It won't.

If you are really determined to have a child now, then the baby will just have to share a room with you. Lots of families do this. No it isn't ideal, but sometimes you just have to make the best of the situation.

ChampagneFever

Under the shared equity scheme we dont need to sell the flat, we have checked that. With our current salaries we could afford to cope with 2 mortgages as long as we didnt go out as much etc. Obviously on maternity it would be different. However if we were to rent it out, then we should be able to manage. Its that fear of having no rent income when baby is here.