Remortgage when in Negative Equity

beecher

lisyloo wrote: »

I've never had a valutaion when switching (or heard of one) but I certainly agree that they could pay more attention to it in future and I speculated on how they could do that in post #5.

When I've changed product the Halifax have always skimmed over that part, but their systems certainly provide them with a supposed 'value' which they use to calculate LTV. I queried it because it was outrageously overvalued last time, and it'll be interesting to see if that has changed by the end of they year when I change products again,.

sympatex

Thanks beecher, lissylou & homerj. I think the long term fix could well stitch us up more if we ended up having to move through 'life changes' with ERC's and such, choose wisely i guess. Agreed it does solve the chance of having to remortgage and being in negative equity though, hopefully! house prices have risen for 10 years or something, guess they could easily fall for just as many (or more!) However dangerously veering towards house price discussion on the wrong forum! lissylou my comment you posted wasn't meant to come across rude but seemed to, sorry about that. Just trying to keep it specific to the product switch question.

lisyloo

No worries - it's your thread, I just wanted to make sure you were aware of it as to some people (myself included) it looks like it could get REALLY bad.

I have a feeling I might be a bit older than you (I'm just 40 and you're setting up home).
I've seen it before (when my house dropped 1/3rd and we were in negative equity) and I think some younger people (perhaps not yourself) are blissfully unaware or cannot conceive of such things happening. Whereas those of us who are a little more experienced know that it definitely can happen.

I think you've now been made aware of the major issues that you face, so it's now up to you to decide what you want to do.
Good luck in whatever you decide.

For balance we managed quite well with negative equity and many people do.
The problem is that you can never be sure you won't have to move.

Rick62

If you must buy (not a terribly good idea as it is not a case that prices will or might fall, they are falling and at the fastet rate ever recorded) then to take a 3 year fixed at 90% would be madeness, even a product switch, if they gave you one, might be very expensive at 100% + LTV.

The other option would be a term tracker with no ERCs (or only for first 3 years). You would be more vulnerable for the next few years, but would not then need to remortgage,

Has your broker not discused all these options with you?

sympatex

Rick62 good suggestion, during the mortgage process (we were approved in April time and given a 3 month valid date which is close to expiring) we chose the security of a fixed outgoing because we needed to be able to budget. So he would have excluded trackers. Interest rates only look likely to rise in my eyes if the BOE stick to the task they have been set of controlling inflation. Close to off topic!

sympatex

Lisylou, yes we're both mid twenties. hehe it's the balanced decision making which makes it that much harder. We have the view on one hand of "omg we're heading off a cliff don't ever buy until you can buy 10houses with your deposit" and the other "we can afford to enter the market now given X rises in interest rates, we're in the right stage of our lives, its time to buy".

lisyloo

Well we've had about 15 years of rises and a few months of falls, so if you believe in cycles then that should tell you something about where we are.
If prices are heading downwards (which is now a FACT and not speculation) then houses will only become more affordable for you in a few years.

I suggest you try the following exercise.
Work out 2.4% of the purchase price (the Halifax figure for May alone is -2.4%).
Imagine how you'd feel if you lost this money in ONE MONTH.

I know some of this is off topic but I'd like to mention one last thing that hasn't been mentioned.
If you are thinking of having a family then do remember to factor in the fact that you would have to go down to one income and have a lot more costs related to the baby. I am guessing but you may well have worked out your mortgage on one income.