So - negative equity?

mattb001

As a FTB with a 95% mortgage (102,000) in July 2006 it seems quite likely that in the next few months/years my house will have negative equity.

Obviously with hindsight I would've done things differently, but I'm trying to work out what my options would be - or even if there are any.

If, in 2 years time I want to move house, still owe £90,000 on the mortgage, but my house is only worth £60,000, is there ANY option of moving, even if it's to a similar property also worth £60,000? I wouldn't need to borrow any more money from the mortage provider in this situation.

I presume I would be unable to move to a more expensive property as that would be the equivalent of taking out a 120% or whatever mortgage.

If you inherit/save up money can you pay off the negative equity?

Anyone who lived through the last price drop care to give advice?

I know it's not going to be great news...

DawnW

If the worst happens, you may not be able to move in 2 years. BUT if you can afford your mortgage ok, why not just sit tight and wait for prices to recover? They do over the longer term, as happened before.

PasturesNew

During the last crash, lenders created new mortgages that would allow qualifying applicants to port their negative equity across to a new property.

mattb001

Got some new neighbours and it's not looking (sounding..) good.

mattb001

PasturesNew wrote: »

During the last crash, lenders created new mortgages that would allow qualifying applicants to port their negative equity across to a new property.

Thanks. Was there a penalty for this? Hideous rates, fees etc?

pamaris

If I recall correctly I read that "last time" many lenders eventually ended up allowing their borrowers to transport their negative equity. I
am not sure how this worked but it allowed them to get on with their lives.

Yes I am sure that you can pay off the negative equity if you inherit/ save up money. Essentially it is just a shortfall on a loan. Pay the loan and move on is usually how it works.

All that said, if you are for example thinking about starting a family but in a property that is wholly inappropriate for a family, and you KNOW that you will need to move in the next 1 to 3 years, it might behoove you to think about whether it would be better to get out of the property now. However if the property is suitable for you and you do not need to move then just stick it out; it won't make a bit of difference to you.

silvercar

If you are convinced your property will drop from 100k+ to 60k in two years, the time to sell is now, not in 2 years.

Rent for 2 years and then buy again.

In answer to your question, you can pay lump sums off your mortgage to erradicate the negative equity, though beware of any ERCs on your mortgage.

mattb001

It's an ex council terrace, so probably the most susceptible of property for price falls, and not suitable to live in for more than a few years. I am thinking of if/how to get out, but I believe I will already be facing some negative equity.

To elaborate on that - If I were a FTB now (and that's who my market would be) I would wait for a year or so, so I guess I would have to drop the asking price considerably.

Running_Horse

Do you know you want to move in two years time? I bought for £47,000 in 1988, and the value dropped by about £10,000. I stuck in there and sold for £100,000 "profit" this year.

Ignore the rise and fall of prices and think of your house as a home to live in. If you have a repayment mortgage, any negative equity will reduce every year. Just out of interest, where are you getting this 40% fall figure from?

mattb001

2 months ago I would've been happy to stay in this property, but circumstances beyond our control have changed and we're thinking of moving.

I'm basing the 40% drop on some analysts predictions that houses are currently overpriced by 30%, and as that includes more desirable property than ours, we're probably worse off.

SquatNow

DawnW wrote: »

If the worst happens, you may not be able to move in 2 years. BUT if you can afford your mortgage ok, why not just sit tight and wait for prices to recover? They do over the longer term, as happened before.

Please note that normally this will take, on average, 18 years (inflation adjusted) but it could take 36.

(Edit: As running horse demonstrated!)