Negative Equity

FraudBuster

Citizens Advice guide to mortgage arrears can be found here:

http://www.adviceguide.org.uk/d_mortgage_arrears.pdf

silvercar

!!!!!!_here wrote: »

That doesn't make it irrelevant and unworthy of comment though. And adding it to the negative equity equation is new.

Someone now could be struggling to pay their endowment mortgage, unable to move as their property is worth less than they paid for it (and dropping in value still further), and they owe as much now as they did when they took it out - the key problem with endowment mortgages, aside from shortfalls of course. If rates continue to go up, they'll be completely boogered. At best they're facing a shortfall upon maturity.

So saying 'just keep paying the mortgage and there's no problem' is not always true, is it ?

It is true, negative equity and reduced endowments may be a story for NOW, but if you are not selling, over 25 years the value of the property is almost bound to increase. After 25 years they can sell up to repay the loan and buy a smaller place.

Badger_Lady

IF you were reposessed whilst in negative equity (for whatever reason), you would owe the mortgage lender the shortfall plus admin fees, selling costs etc...

MissMoneypenny

silvercar wrote: »

It is true, negative equity and reduced endowments may be a story for NOW, but if you are not selling, over 25 years the value of the property is almost bound to increase. After 25 years they can sell up to repay the loan and buy a smaller place.

They might already have that small place if they are first time buyers. They might have even been hoping to move into a bigger place in the next few years, to have room for a family.

maninthestreet

MissMoneypenny wrote: »

They might already have that small place if they are first time buyers. They might have even been hoping to move into a bigger place in the next few years, to have room for a family.

As previously stated in this thread, negative equity is only a problem if you need to move house. I was in negative equity for almost 8 years, but was never a problem until I needed to sell up and move house.

beecher

maninthestreet wrote: »

As previously stated in this thread, negative equity is only a problem if you need to move house. I was in negative equity for almost 8 years, but was never a problem until I needed to sell up and move house.

It will be a problem for those people who are on fixed rates and can't get a new deal - going onto the SVR could cripple many people financially.

Dick_here

MissMoneypenny wrote: »

They might already have that small place if they are first time buyers. They might have even been hoping to move into a bigger place in the next few years, to have room for a family.

Yes, that was exactly my situation in the early 90s.

You own a place that has decreased in value, you still owe what you paid for it with an endowment mortgage (or interest only), and as rates go up you struggle to pay even that. If it wasn't for family help financially, I don't know what we'd have done. It's a horrible situation to be in when it prevents you from being able to even consider starting a family, particularly.

Now of course you can add the endowment shortfall to the problem too.