Negative Equity

JPD86

My wife and I are currently in a situation where our flat is worth significantly less than what we owe. It was purchased new on a builders 25/75 shared equity deal. Looking at a realistic selling price I would be
around £10k down to clear both the mortgage and shared equity loan.

Due to an unexpected arrival late last year, we would like to move to a house sooner than we had planned. I would expect to be able to raise a deposit (and clear some existing credit card debt) by this time next year however another £10k to clear the existing mortgage would be difficult.

I am wondering if it would be possible to obtain a personal loan to clear the negative equity or even a larger loan to clear the shared equity loan.

Option 1 - Personal loan used to clear negative equity on flat either at completion of sale( or as an overpayment?) with deposit for new house purchase from savings.


Option 2 - Larger longer term Personal loan used to clear shared equity loan in full, this would lead to a larger deposit as I would have equity in the property plus funds from savings.

At a basic level the loans are affordable and would not impact on my obtaining a mortgage however I am concerned about the timing of it as I understand that loans cannot be used for a deposit although that is not what I am doing, more transferring a secured loan from the Builder of my flat to an unsecured loan from a bank.

Does any of the above make sense?