Need advice re negative equity

Trapped_lass

We bought a house in northwest in June 2007 - we got 5 yr fixed rate (gutted we did that with glorious hindsight - not even in the buying just as we would have been at our low rate sooner and on a lower rate for those 2 yrs) at 6% on a 100% mortgage as we wanted to use cash for fees and furniture (bad I know). Anyway we finally got on to the tracker and have a 2.5% rate as our mortgage is with loudspeaker and taken out prior to 2010 (assume this is as docs said tracker will track at 1-2% above base rate. So good but as we are either now level with house price in terms of price (2 yrs ago was valued at £130k to expect £125k (we owed £130k so we may be now level or thereabouts - prices aren't doing here what they are in London)

So the problem is we can't move even though we desperately want to.
2 yrs ago we asked the bank about letting it out and we would rent elsewhere but they won't let us do that.

The only thing they could do is give us a buy to let mortgage on our house at 4.69%(ish) which came out at £638 per month ( rent would be £540 which is our current mortgage repayment but on the buy to let we would have top top up plus pay mortgage where we moved to) and then port our mortgage to a new property but it could only be 90% ltv (which I would expect - I understand we can't even remortgage without finding a deposit to bring it to 90% ltv ) so that is a no go and tbh I would rather sell and find a deposit.

So we are working on finances which has been hard with childcare.

We both work ft, earn £58k between us gross plus £80 pm cb, dfiance has company car and may get a bonus of £1-2k. We have £10k personal debt between us. We do have to get more organised.

But I want to know - if we can round up a deposit how does porting work - all the literature points to it being treated as a new app - can they take our rate away? At the moment we are covered by a court ruling I believe that means we track at 2% above base rate?

How would you sort this out?

tL x

Trapped_lass

Loudspeaker = lloyds bank

Trapped_lass

Pps it is a nightmare being in negative equity - feel so trapped,just bought a few years too late. I keep getting told just to part ex but I don't see how (unless I am missing a trick?)

Thrugelmir

If you are £10k in personal debt. Then you'll struggle to make inroads into the mortgage debt. Suggest you sit down , run through your budget and decide what your priorities are. Life is about choices. Debt being one of them.

Trapped_lass

I agree and that is what we are doing - we have childcare costs going down and a loan finished so we are making good inroads now.

But if we get there and have a deposit and port the mortgage can they take our rate off us?

Thrugelmir

Trapped_lass wrote: »

But if we get there and have a deposit and port the mortgage can they take our rate off us?

Porting is very much at the discretion of the lender. Does your existing product literature make reference to porting at all?

Spidernick

I bought a flat in June 1989 just before the really big crash in property prices. I didn't sell the property until 2007 (at the bottom I had over £30K negative equity), therefore just avoiding the next one! I actually did OK in the end and made a bit of money overall, but I would never want to go through that again and feel for you.

At first I had to let out the flat and rent where I needed to live (we moved around quite a bit in those days with work) until we were able to get a mortgage on a house in 1996, with the BTL on the flat still in place.

Negative equity is only really a problem if you need to move, which you do. I'd say find the best BTL mortgage you can (making up the difference as needed), rent somewhere where you want to live for a few years and try to sort yourselves out over time, paying down the loans and mortgage where you can. You do need to get a lot more organised.

I'm surprised you could get a 100% mortgage, as I didn't know those were still available. I had a 95% mortgage in 1989, which was fairly easy to get at the time, but would never do that again.

Hope this helps.

Waldorf_Statler

could do what most amateur BTLs do and just not tell your mortgage provider that you are renting it out? i'm not condoning it, just saying is all...

pinkteapot

Spidernick wrote: »

I'm surprised you could get a 100% mortgage, as I didn't know those were still available. I had a 95% mortgage in 1989, which was fairly easy to get at the time, but would never do that again.

I got a 100% mortgage in 2007 at 4.2 times my salary. Ah, those heady pre-crash days.

I sold in 2009 in negative equity - had to pay off about £8k. I feel your pain, OP.

First suggestion is to get over to the Debt-Free Wannabe board and post your monthly budget (see the stickies there for information about how to do this). You'll get loads of great feedback and suggestions for reducing your outgoings.

Second is to work out how much money it will cost you to sell up and move out into rented. This will be the total of all the fees associated with selling, and the amount of negative equity. That's the amount you need to save up. You could save this up and move before paying off your personal debt - you'll just have to put money into savings after making minimum repayments. You could then work on repaying the personal debt once in rented, if moving is more important to you than paying off the debt. This obviously isn't the best approach in money-saving terms, but it depends on why you want to move so badly.

You could try and keep the property as an investment but my view when I was in negative equity was that it would take so long to pay off that I didn't want the hassle of being a landlord. I just cut my losses and got out.

TBagpuss

I was just about to suggest that you go to the Debt-Free Wannabe board but see PinkTeapot beat me to it. Your mortgage isn't huge in comparison with your income, so although it will be hard work, it ought to be possible for you to start making some savings which you can use to reduce the negative equity. Presumably your monthly payments went down when you moved onto the tracker - what did you do with the difference? Could you start paying at the old rate again to make over payments and start to build up some equity (or to use that to reduce the debt you have, which is likely to be better from a money-saving point of view)

Good luck

amnblog

What do you mean by 'At the moment we are covered by a court ruling'?