Negative equity fears

Stace255

we bought our house in 2017 with a 5% deposit.

Our fixed term comes to an end in September and ideally we would like to remortgage with another fixed rate.

When we bought the house, I worked out that with our repayments and a little paid over the top, we would have 10% equity by the time we needed to remortgage. I based this on the (foolish) assumption that the value of our property would at least remain static.

We made additional payments as planned but according to Zoopla the value of our property as dropped to the point where we barely have 5% equity.

I am so worried about house prices dropping further and ending up in negative equity.

I know Zoopla is not the be all and end all but it has really freaked me out.

We have also had our son since buying the property so will have childcare costs on the mortgage application.

Does anyone have any words of advice in terms of factors considered by lenders?

We worked so hard to save for our home and I am worried we will lose everything if we have to go on to the variable rate and there is a significant rise in interest rates.

LRmortgage

If you can’t move to another lender Your current lender should offer you a client retention product without having to go through a valuation or any further credit checks etc. They usually offer them online and you simply click a few buttons to select the one you want. I’ve not seen any that don’t offer a fixed rate with these deals.

muhandis

Don't go by Zoopla. For a better idea, check the Nationwide price index here https://www.nationwide.co.uk/about/house-price-index/house-price-calculator

You put in the price paid and Quarter/Year that the house was purchased in, select the region and it gives you what the current value is. Assuming that your property wasn't bought as a new build and isn't particularly unusual, this should be more accurate that Zoopla.

What's the difference in value that it shows for your property?

Stace255 wrote: »

we bought our house in 2017 with a 5% deposit.

Our fixed term comes to an end in September and ideally we would like to remortgage with another fixed rate.

When we bought the house, I worked out that with our repayments and a little paid over the top, we would have 10% equity by the time we needed to remortgage. I based this on the (foolish) assumption that the value of our property would at least remain static.

We made additional payments as planned but according to Zoopla the value of our property as dropped to the point where we barely have 5% equity.

I am so worried about house prices dropping further and ending up in negative equity.

I know Zoopla is not the be all and end all but it has really freaked me out.

We have also had our son since buying the property so will have childcare costs on the mortgage application.

Does anyone have any words of advice in terms of factors considered by lenders?

We worked so hard to save for our home and I am worried we will lose everything if we have to go on to the variable rate and there is a significant rise in interest rates.

kingstreet

Existing lender, please?

Stace255

We are currently with Nationwide

muhandis

When I did a product switch in 2017 with Nationwide and asked them how I could calculate the new LTV for checking out available products, they pointed me towards the house price calculator on the website and said that that is what the system uses for automatic revaluation during a product switch. That could just be an ignorant customer service person though.

LRmortgage wrote: »

If you can’t move to another lender Your current lender should offer you a client retention product without having to go through a valuation or any further credit checks etc. They usually offer them online and you simply click a few buttons to select the one you want. I’ve not seen any that don’t offer a fixed rate with these deals.

Stace255

This shows just over a £5k increase on what we paid,

Nationwide are our current lender so if they would just base it on that I would be over the moon!

muhandis

Well that's possibly good news then! In your place I would do a product switch and stay with NW as long as there is no change in term or borrowing.

If my memory serves correctly, if your product is expiring on (say) Sep 30, you can reserve a product switch in the 4 month window preceding it ie from 1 June.

Edit: It's five months, as per the website -

You can choose a new deal if:
Your current deal is ending - you’re 5 months or less from the end of your Nationwide deal

Stace255 wrote: »

This shows just over a £5k increase on what we paid,

Nationwide are our current lender so if they would just base it on that I would be over the moon!

AnotherJoe

Stace255 wrote: »

We worked so hard to save for our home and I am worried we will lose everything if we have to go on to the variable rate and there is a significant rise in interest rates.

You should not have to go on the variable rate. As said, your lender will to a point approaching near certainty offer you retention deals which involves clicking a few buttons and options will include various duration fixed terms. My daughter did this end of last year for the second time running, she signed up to a 2 or 3 year fixed deal again. Click click click done.


p.s just seen the other posts so the above is somewhat redundant now, but just to say my daughter is with Nationwide.

kingstreet

Stace255 wrote: »

We are currently with Nationwide

You can ask them for the indexed valuation.

When you get closer to the expiry date, go online and the options open to you, based on your outstanding balance and indexed valuation will be visible to you.

Begsey

Stace255 wrote: »

This shows just over a £5k increase on what we paid,

Nationwide are our current lender so if they would just base it on that I would be over the moon!

Moved to Nationwide last year. When they asked for a valuation of our property, we put in the valuation given on their site.
They accepted that figure.