Should I pay off the negative equity now or keep the cash?

harvsl

Hi 
I have a mortgage of 125k bought in 2007. The value finally  crept up and the week before the lockdown I got a valuation of £105-110k. I was v pleased with this and was prepared to pay off the negative equity (have been saving and also got a money transfer 0% credit card so have £30k cash available) . I wanted to pay off the 30k to be able to remortgage as I have been stuck on barclays svr interest only mortgage for a number of years , now at 4.74% as of yesterday. We were due to move to hsbc on a fixed deal of approx 2% for 2 years. The surveyor was supposed to come out the day after the lockdown. Needless to say hsbc are currently saying they cant do valuations and at present are not doing online valuations. I know by the end of even 3 weeks, but more likely 3-6 months, the house value is going to drop hugely. My question is what do you think I should do - pay the 30 k into the mortgage, even though it may still end up in negative equity. Or should I keep the cash because who knows what is going to happen. I should say I work for the civil service and am flat out at the moment with covid queries,  so am hopeful my job is secure.  I appreciate that this is not a big problem in the current climate, but I appreciate any advice. 
Many thanks 
L 

Thrugelmir

Rather than saving the cash. You should have been overpaying the mortgage. The interest saving will have reduced the debt owed. Focus on the debt owed rather than the negative equity. 

amnblog

Barclays SVR is now 3.59%

harvsl

Hi, thank you for your responses.  I wonder if I could ask for your advice on a couple of other points? 
1. Barclays SVR 
I received a letter from Barclays on 16 Mar to say the bank of england rate has changed and my svr was being reduced from 5.24 to 4.74%.  I assumed that this was correct and didn't question it, until I saw your message amnblog.  I could not find the current SVR on their website so I rang Barclays, and the advisor told me that the svr is now 3.74%,  and she could not understand why my letter said 4.24%.  She also could not find the svr on their website either.  She is going to investigate and come back to me.  It has made me wonder though, after all these years have I been overcharged? My original mortgage offer stated that after the initial deal I would go to SVR (which I am guessing is standard for most mortgages).  I should say that since I took out my mortgage in 2007, the original mortgage company went bust and has been bought over twice since then, and is now owned by Barclays. I don't have access to my Barclays correspondence where I currently am to be able to check it, but I would think / hope that I should be on the same terms as the original mortgage offer - ie on the svr. 
I have googled Barclays SVR rates for the past few years to try and get a list of the rates in order to compare them with what I have been advised of in writing over the years.  However, although I can find a few, they are not all available.  I am going to write to them and ask for a complete list. 
I will be annoyed if I have been overcharged as there have been times during the life of the mortgage I have been paying around 6% interest which was a struggle.  Also there were a few occasions where I asked them to review the rate, but because it was in negative equity they would do nothing. I also asked for a mortgage holiday once and it was refused.  I have never once defaulted or been late with a payment.  I will find it incredibly frustrating if I have been overcharged all these years, when there have been times I very much needed some flexibility. 
2. Increase in outstanding mortgage amount
Another thing I was surprised about was that when I asked for the total outstanding balance, it was approx £400 more than it was on 16th March.  I asked why this was given that the Bank of E has decreased and the advisor told me it was to do with my interest being calculated on a daily rate.  Can this be right? 
Any advice you can give is much appreciated!
Many thanks!

isthereanybodyoutthere

Who gave you the valuation of £105 - £110k?

if your mortgage is £125k and you pay off £30k, you’d still owe £95k so would be looking at around 90% LTV and that’s assuming that valuation holds up after this situation

Also, how much of the £30k is cash from a credit card? That doesn’t seem a very sensible way of funding negative equity

harvsl

isthereanybodyoutthere said:

Who gave you the valuation of £105 - £110k?   An estate agent gave the valuation, and was expecting a surveyor from mortgage co to come out just when lock down happened. 

if your mortgage is £125k and you pay off £30k, you’d still owe £95k so would be looking at around 90% LTV and that’s assuming that valuation holds up after this situation.  Yes Im aware that the valuation might drop, hence why I asked the question. 

Also, how much of the £30k is cash from a credit card? That doesn’t seem a very sensible way of funding negative equity.  10k is on the interest free card for 23 months. I am able to save £2k a month at the moment, so can more than afford if it means i can get off Barclays SVR. 

Hi there
Many thanks for your reply. 
I am actually going to post a new post in respect of my Barclays svr questions as a different topic.
many thanks

Thrugelmir

"Another thing I was surprised about was that when I asked for the total outstanding balance, it was approx £400 more than it was on 16th March.  I asked why this was given that the Bank of E has decreased and the advisor told me it was to do with my interest being calculated on a daily rate.  Can this be right? 
Any advice you can give is much appreciated!"

Interest is calculated daily and charged monthly. The interest will be added at the end of each month in arrears. 

harvsl

Thank you Thrugelmir 

clairebeth

Shouldn't you have just been overpaying instead of saving it,  too reduce the amount of interest you pay? Have you used the overpayment calculators on this site?

harvsl

thanks clairebeth. I have not been in a position to overpay until the last 6 months.  

harvsl

And yes I will be overpaying now £1500 a month.  Sorry I shoudl have put my most recent post into a new thread, as I have already decided to overpay.  at present I just want to try and get off the SVR. thanks for your advice but think I will create a separate thread on the svr question. 
thanks