buying a house in negative equity...

loonybirdy

Hi all,

I am considering buying a house that has an existing mortgage that is worth more than the house...i.e. its in negative equity (due to arrears and redemption charges)...what issues could arise here? I'd hate to get all the way to completion just to find out that the owner cannot sell due to the lender refusing to allow the sale, which they are perfectly entitled to do!

the seller has approached their lender to negotiate, and the lender has indicated it will be acceptable, but they haven't confirmed in writing...

any advice? i really like the house which is within my budget, and i need to move quickly (ie 4-5 weeks) as does the seller...I just don't want to get any nasty surprises...!!!

lypsey

I will give you the same advice that I just posted on your other thread.

Why are they in negative equity .... because the markets falling....

Forget about buying and wait 6 months.

silvercar

Don't spend any money until the seller has confirmation IN WRITING that they will allow the sale to proceed.

It is difficult to get lenders to agree to this. If they do it will usually be by the seller taking out an unsecured loan for the difference.

Keep looking in the mean time; negotiations could take 3 months.

SquatNow

Prices are going to fall. A storm is coming.

Rent for a few months and get the feel of the market... it's all changed since mid-august.

Better than renting, consider squatting sociably. Plenty of empty "investment" properties out there. Find one owned by a big "property investment fund" and move in... generally they wont give a damn as long as you don't burn the place down or anything.

Use the money you would have spent on mortgage/rent to save up a big deposit to buy after the crrash.

loonybirdy

i don't want to rent or squat, i am looking to purchase...

any other advice anyone?

SquatNow

Buy a house.

Or put 1/3 of your wage every month in a waste paper basket and set fire to it.

Result is the same in a declining market.

Curv

SquatNow wrote: »

Or put 1/3 of your wage every month in a waste paper basket and set fire to it.

A bit like renting, then?

Not everyone is in it for the money. Some of us are trying to buy homes, as opposed to looking for investment advice.

SquatNow

Curv wrote: »

A bit like renting, then?

Yup

Curv wrote: »

Not everyone is in it for the money. Some of us are trying to buy homes, as opposed to looking for investment advice.

True, but few investments involve the possibility of NEGATIVE EQUITY.

If you put 1/3 of this months wages on red at the casino, the most you can lose is 1/3 of this months wages. If you rent the most you can lose is the 1/3 of this months wages you pay as rent.

Buy an overpriced house and you lose 1/3 of you monthly wages for the rest of your life, and if prices drop you can't stop.

teabelly

Get it in writing that the lender will accept the price you are paying too. It is not unknown for purchasers to be caught out and asked to pay more if the vendor owes more than the mortgage. This usually happens when you pay below market value though. Also make sure your solicitor is aware of the situation. The vendor is also liable for the shortfall between the selling price and the outstanding mortgage even after the sale completes. If I were them and it was the redemption charges that were causing the excess I'd get them to ask the lender to waive or reduce those charges so that they least sold with no liability left.

If you are going to live there for a few years then you should be ok. Check out prices of similar properties in the local area to make sure the price you are paying is realistic as there is a degree of volatility at the moment.

Curv

SquatNow wrote: »

Buy an overpriced house and you lose 1/3 of you monthly wages for the rest of your life, and if prices drop you can't stop.

How does this work, exactly?

Surely, if I buy an 'overpriced' house with a mortgage and I find the mortgage payments affordable, at the end of the mortgage term I'll own a house? Whether that house is worth half as much or twice as much as I paid for it, or even nothing at all* is irrelevant to me as I'll have lived in it for the previous however many years and (assuming I've maintained it properly) I'll be able to continue living in it.

Nowhere in that scenario am I 'losing 1/3 of my monthly wages for the rest of my life'.

Don't let your boundless passion for this subject interfere with your argument. I know you feel strongly that people will get a better deal if they wait to buy and your relentless enthusiasm for spreading the word is commendable. But for those of us who, for whatever personal reasons, are in a position where they really would like to move now, having it shoved down our throats doesn't make our situations any different.

I've read what you have to say.

I understand your message.

I agree with most of your points.

But I still want to move. That doesn't make me stupid, it just makes my circumstances different to yours.

* I know, how terribly un-MSE of me. I'll be drummed off the OS boards with filthy talk like that

Leighthal

Curv wrote: »

How does this work, exactly?

Surely, if I buy an 'overpriced' house with a mortgage and I find the mortgage payments affordable, at the end of the mortgage term I'll own a house? Whether that house is worth half as much or twice as much as I paid for it, or even nothing at all* is irrelevant to me as I'll have lived in it for the previous however many years and (assuming I've maintained it properly) I'll be able to continue living in it.

Nowhere in that scenario am I 'losing 1/3 of my monthly wages for the rest of my life'.

Don't let your boundless passion for this subject interfere with your argument. I know you feel strongly that people will get a better deal if they wait to buy and your relentless enthusiasm for spreading the word is commendable. But for those of us who, for whatever personal reasons, are in a position where they really would like to move now, having it shoved down our throats doesn't make our situations any different.

I've read what you have to say.

I understand your message.

I agree with most of your points.

But I still want to move. That doesn't make me stupid, it just makes my circumstances different to yours.

* I know, how terribly un-MSE of me. I'll be drummed off the OS boards with filthy talk like that

Excellent comeback:beer: