Sell house in negative equity and buy cheaper house

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peelaaa

Guest
My house at present is valued at 50k less than my mortgage.
If I sold the house and bought a cheaper house how do the banks deal with the 50k? Would it have to be paid back as a separate loan?
 
You would find it extremely difficult to get loan approval to buy another house with €50,000 debt outstanding and no deposit. You would also need to be in a position to pay stamp duty. Are you able to meet the mortgage repayments? If you are I would stay put.
 
missdaisy said:
You would find it extremely difficult to get loan approval to buy another house with €50,000 debt outstanding and no deposit. You would also need to be in a position to pay stamp duty. Are you able to meet the mortgage repayments? If you are I would stay put.
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Would the bank put me on interest only on original house instead of repayment then. I feel at the moment, paying repayment the money is going down the drain.
 
They will only use your money to bail themselves out(nama)you will be left to struggle in the mire they created for the lenders.The extra twist is they will now increase the interest rate you are paying to pay back your money they are using.
 
peelaa why do you feel that capital repayments are "going down the drain"? You owe the same amount of money that you owed when your house wasn't in negative equity. You borrowed the amount, you will have to repay it somehow, you don't get a value adjustment to your debt simply because the property market has bottomed out. The most logical way is to repay your debt as fast as you can, especially as interest rates are currently so low so you can accelerate your repayments more easily. Going interest only doesn't benefit you in any way shape or form unless you are having difficulty meeting the repayments. You will pay MORE not less for your debt!
 
so-crates said:
peelaa why do you feel that capital repayments are "going down the drain"? You owe the same amount of money that you owed when your house wasn't in negative equity. You borrowed the amount, you will have to repay it somehow, you don't get a value adjustment to your debt simply because the property market has bottomed out. The most logical way is to repay your debt as fast as you can, especially as interest rates are currently so low so you can accelerate your repayments more easily. Going interest only doesn't benefit you in any way shape or form unless you are having difficulty meeting the repayments. You will pay MORE not less for your debt!
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Fair enough but since I have had a wage cuts and extra taxes i actually cannot pay anymore. When the interest rates start rising then goodbye house.
 
So your problem actually is currently you can manage the repayments but are worried that in future you won't be able to cope?

I think in that case you need to start looking at how you can work around that situation. Discuss options with your bank including fixing your interest rate and going interest only.
 
peelaaa said:
Fair enough but since I have had a wage cuts and extra taxes i actually cannot pay anymore. When the interest rates start rising then goodbye house.
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You do realise it's not just a matter of handing back the keys. If you think that you are not going to be ablel to repay then you need to talk to your bank now about your options.
 
Peelaa, you need to talk to your bank about reaching a new agreement in relation to the discharge of the mortgage. If you have to go interest only for a period because of an decreased wage then do but don't go interest only because the value of your house has fallen - if it's your home that isn't the greatest consideration.
 
Thanks for the advice.
The reason why I had the house valued in the first place was that I may have a job abroad and was wondering what my options are. I could rent it but that would not even cover the interest only mortgage.
If I sold the house would I be able to pay the deficit off over a long duration or would I have to get a personal loan over say 5 years etc
 
If you have a job abroad and rent out your house could you afford to pay the balance due on the mortgage every month - you are looking at having to repay a €50,000 loan every month anyway. I think paying balance of mortgage rent can't meet would be a better use of your money than repaying a loan and having no house.
 
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