How we got a negative equity trade up from EBS

There have been a few questions relating to negative equity mortgages recently so I thought I would give people a quick run down on how it went.

My wife had bought a 3 bed semi in late '05 before we were married.
Very nice house but we wanted something bigger before kids arrived. We were very lucky to have an offers within 4 weeks of advertising which met our expectation (but not asking price) which we accepted. This price left us with c.€75k of negative equity.

In order to allow the sale to proceed without a back-to-back purchase and new mortgage we had to put the €75k on deposit with EBS as security.

It took 7 weeks for conveyancing and we went sale agreed on our target property 3 weeks after closing. 13 weeks of conveyancing later we have the keys to our new home.

A delay of 3 weeks was experienced waiting for NAMA clearance from the vendors side. The vendor has not required us to pay the property tax for 2014 which they were entitled to do under the contracts. They believe the legislation means that they are not liable either [Sec 8.1 of legislation for anyone interested]

In relation to the negative equity mortgage

• it is for 113% of the property value
• it is 20% below our borrowing limit

In summary, negative equity mortgages are possible but you need to be fortunate enough to have 2 secure incomes, good savings and be able to put the negative equity amount up as cash security as it is almost impossible to get back-to-back sale and purchases.

In summary, negative equity mortgages are possible but you need to be fortunate enough to have 2 secure incomes, good savings and be able to put the negative equity amount up as cash security as it is almost impossible to get back-to-back sale and purchases.

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You are in a lucky position, were you able to keep your savings and get a negative equity mortgage?

Congrats . Well done. We are in the process of drawing down our mortgage at present as part of a negative equity trade up. We sold our apt in Oct leaving us with a 45k shortfall. As the prospective property to be purchased was not ready until now we had to put our deposit of 15k up as security. So we are nearly there.

Hi AJ

Great story thanks. It will be very helpful to others.

This price left us with c.€75k of negative equity.

In order to allow the sale to proceed without a back-to-back purchase and new mortgage we had to put the €75k on deposit with EBS as security.

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Did you have €75k of savings? Is it just a coincicence that the figure is the same as the figure for the shortfall?

If you had savings equal to the shortfall, why did you need a neg equity mortgage?

Would you mind listing out the actual figures for the benefit of others?

For example

Sold house for € 200k
Mortgage €275
Shortfall €75k

Savings: €x ( I presume the €75k is a typo)

Cost of new house: €400k
+ Shortfall €75k
Less savings : x
= Final mortgage

Brendan Burgess said:

Hi AJ

Great story thanks. It will be very helpful to others.



Did you have €75k of savings? Is it just a coincicence that the figure is the same as the figure for the shortfall?

If you had savings equal to the shortfall, why did you need a neg equity mortgage?

Would you mind listing out the actual figures for the benefit of others?

For example

Sold house for € 200k
Mortgage €275
Shortfall €75k

Savings: €x ( I presume the €75k is a typo)

Cost of new house: €400k
+ Shortfall €75k
Less savings : x
= Final mortgage

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we had most of the €75k and we borrowed the balance on a short term basis from parents - it will be returned next week - early christmas present

we didn't want to wipe out savings with baby on the way so we went for a 92% amount of value of new house + the negative equity on top of that. 299k + 75k = c.€375k over 32 years @ 4.45%. All going well we'll accelerate payments.

So, although you have a negative equity mortgage, you are not really in negative equity?

Is this correct?

Interesting. From the lender's point of view, you have reduced the absolute negative equity and you have reduced the LTV.

Was your old mortgage on Standard Variable Rate as well?

Sorry, for all the questions, but it will allow potential applicants prepare a good case.

If so, this would be a good argument for someone hoping to trade up not to pay capital off their mortgage. As they can use the cash to negotiate a negative equity mortgage later.

Brendan

Brendan Burgess said:

So, although you have a negative equity mortgage, you are not really in negative equity?

Is this correct?

House value |€325
Mortgage|€375k
Loan to value|115%
Negative equity| €50k
Savings left over|€50k

Interesting. From the lender's point of view, you have reduced the absolute negative equity and you have reduced the LTV.

Was your old mortgage on Standard Variable Rate as well?

Sorry, for all the questions, but it will allow potential applicants prepare a good case.

If so, this would be a good argument for someone hoping to trade up not to pay capital off their mortgage. As they can use the cash to negotiate a negative equity mortgage later.

Brendan

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savings leftover a lot less than €50k at the moment but the market is picking up quickly in our area so we should be out of Neg Equity in a couple years with new savings and house value increases.

Old Mortgage was SVR as well but at 4.58% as an existing customer.
We were paying off that mortgage at an accelerated rate equivalent to knocking 12 years off a 35 year mortgage.

We were treated as new customers for the purposes of the new mortgage as my name was not on the orginal.
We were offered a 1year fixed at 3.99% reverting to 4.58% SVR. I decided to go with the 4.45% SVR.

An additional requirement was that I get independent advice seperate from our solicitor as to the negative equity being added to the new mortgage. I instead gave a declaration that I fully understood what I was doing and waived my right to independent advice. It's not complicated and I didn't want to pay another solicitor.

Thanks aj

This gets more and more interesting and more useful to others.

I can see why this is very attractive to the lender as well as to the borrower.

They have reduced their negative equity.
They now have a much higher income paying off the loan as they have yours as well as your wife's.
They have increased security because they now have joint borrowers instead of a single borrower. ( This would never have occurred to me in making a case for a negative equity loan)

I can understand why you wish to keep your savings in case of emergencies. But as you have two good incomes coming in and as you are saving, don't overdo the rainy day fund. Set most of your savings against your mortgage and keep a very small fund.

Brendan