Any News on Negative Equity?

bigfoot1983

Several years ago I got some good advice from others on here about not surrendering my property to my mortgage lender as a result of being in 30K of negative equity.

4 years on, I still have a 1 Bed flat, still 30K negative equity and still on an interest only mortgage as seemingly my lender (birmingham midshires) do not have provisioning to move or do anything to my mortgage until I have equity or deposits.

I have rented the property out for now but the rental income is resulting in £400 loss per year when accounting for management fees and freeholder fees and besides anything else is a huge stress with a useless management company.

We are renting ourselves at the moment and we are going to attempt saving hard for the next 5-10 years to get a deposit\lump payment but as the flat is on an interest only mortgage I'll be totally knackered once the interest rate picks up to a reasonable level reducing our savings capability to almost nothing.

Has anyone any advice on any new schemes or systems which can be of any help?

mrginge

Well clearly instead of saving hard you should be paying off the capital on the mortgage

cns06

Is there anything you can do to get a better return on the rental? A loss is never good, even more so on interest only. I would not even entertain a loss on renting. Sure, the odd month but over a year - no way. What rate are you on out of interest?

bigfoot1983

appreciate the comment of paying off capital that is what was meant by saving hard to pay off lump sum. we dont have the capability to guarantee x per month on top of the mortgage so will save as much as we can and potentially pay off bits per year.

in terms of rate 2.25% above BOE rates.

I am aware that lloyds an i think natwest have some provisioning for existing negative equity holders but nothing to help others.

the rental value for the property is £475PCM and that is max for the area, I had no choice to rent it when my employment moved.

HappyMJ

You sound like my landlord. I pay £475 in rent per month and is the maximum for the area and type of property. The property was purchased for £130k and is now worth less than £100k. I'm sure the LL is losing money every year on it too but would now be unable to sell due to negative equity. £400 a year isn't too much of a loss so as long as you can cover that then I'd keep going like that. The value of the property one day will exceed the outstanding mortgage and you can then get profit out of it and recover your £400 annual loss.

I personally wouldn't pay any more off the mortgage than you need to. The interest is a tax deductible expense so maximizing that will save you ever having to pay tax on the rental income. I would put any spare income you have into a savings account and earn interest instead. Santander pays 3% gross on balances up to £20,000 which exceeds the interest you pay on your mortgage. Other banks pay up to 5% so I'd save there first.

Thrugelmir

HappyMJ wrote: »

The interest is a tax deductible expense so maximizing that will save you ever having to pay tax on the rental income.

Looking ahead the rules have changed with the July budget announcement.

To remove the millstone around your neck you need to start paying off the capital owed. Then you'll pay less interest. With interest rates likely to rise time is against you. There's been 6 years to start addressing the issue. So possibly you've left it too late.