# Does this NE trade up sound feasible?



## Working mam (6 Jul 2012)

Ive been having a good think about options that could possibly be open to us, and I wonder could anyone advise on this before I speak to the bank. 
We currently have approx €180k NE, mtg with ptsb. We originally borrowed €381k in 2006. We've just spotted a house for €200k in the area we want to move to, and I'm wondering if the bank might consider this NE mortgage as the new loan amount would not be more than we previously borrowed when you add the NE to the price of the new house. We also have savings to cover the stamp duty and other costs. We qualify for the amount based on income and repayment capacity etc. The bank would also get our coveted tracker rate back! Does this sound like a reasonable proposal?


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## Brendan Burgess (7 Jul 2012)

permanent tsb should jump at it. I don't know if they are doing negative equity mortgages yet.

But, I think you should wait. If permanent tsb sell off their trackers to some other state entity, the new owners might be more practical about doing a deal. You could sell your home and have the mortgage written down by 10% to 20%. 

In fact, you should be proposing this to them now. They will refuse, but you lose nothing by trying.


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## Working mam (7 Jul 2012)

Hi Brendan, thanks for the reply. I know that ptsb are approved by the regulator to do NE mortgages, however they haven't announced an actual product yet. 
How realistic do you think it will be about a write down of the mortgage if ownership of the tracker book changes hands? I'm not sure if waiting for that to happen will benefit me as this house is a fantastic price for the area (ex-rental and needs a lot of work.) if we wait for a potential write down we could slip further into NE and we may not get as good a deal on a house. 
I think I will just approach the bank and see what they say and I will report back so other people wondering about NE mortgages will also have some info.


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## Brendan Burgess (7 Jul 2012)

> this house is a fantastic price for the area (ex-rental and needs a lot  of work.) if we wait for a potential write down we could slip further  into NE and we may not get as good a deal on a house.



While this may appear to be a great bargain, there will be further great bargains to come, so don't worry if this doesn't work out for you.

But, in any event, I think you will have to sell your house first. If you buy the new house and are unable to sell the old house, you would be in serious trouble.

Brendan


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## Working mam (7 Jul 2012)

Absolutely, we would be counting on a lot of things like selling our own etc. we spoke to an estate agent who has sold 4 houses here in the last couple of months and he gave us best and worst case scenario for price, but he said he could have it sold within 6 weeks as there is good demand for houses here. I suppose I'll wait and see what the bank say and take it from there. As regards the new house, I'm a firm believer in the saying "what's for you won't pass you!"
Thanks again for the advice


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## oldnick (7 Jul 2012)

Oh ,Brendan - "there'll be further great bargains to come ". Bit of property-price speculating there......
Am I allowed to say that I doubt whether Dublin surburbia will produce quite as many bargains in the near future? Outside Dublin,maybe.


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## swauna78 (8 Jul 2012)

Working mam, please do post back here on the response you get from PTSB.  This is exactly the scenario we put to them last year and they turned us down and even refused us permission to sell our house with such deep NE saying they would not release the title deeds!

Now, we are on the SVR not the tracker so this could be the difference but I will be extremely interested to see what they say either way.


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## Working mam (8 Jul 2012)

swauna78 said:


> Working mam, please do post back here on the response you get from PTSB.  This is exactly the scenario we put to them last year and they turned us down and even refused us permission to sell our house with such deep NE saying they would not release the title deeds!
> 
> Now, we are on the SVR not the tracker so this could be the difference but I will be extremely interested to see what they say either way.



I will of course, hoping to speak to them tomor or tues do will post back then


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## Brendan Burgess (9 Jul 2012)

oldnick said:


> Oh ,Brendan - "there'll be further great bargains to come ". Bit of property-price speculating there......



Hi Nick

It certainly was not intended as price speculation.  

I know countless people, at all stages of the property cycle, who felt that they had to buy a particular house because "houses like this come up very rarely".  Where they failed to get the house, they nearly always got an even better house. 

But perhaps I should have prefixed my suggestion with "Assuming that there is not a sudden upsurge in prices ..." 



> Am I allowed to  say that I doubt whether Dublin surburbia will produce quite as many  bargains in the near future? Outside Dublin,maybe.


No, but the invitation to write a balanced summary of where house prices are is still open. 

Brendan


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## Working mam (12 Jul 2012)

Just wanted to update, we have no definite decision yet from the bank but what they are initially looking for is that we do not increase our existing mortgage exposure and have the deposit ourselves which we do. 
Not increasing our mortgage exposure is fine in the case of the house we saw but seems unfair when we qualify to borrow a lot more on our salaries. If we weren't looking to move the negative equity we would be allowed borrow more. 
I think from the criteria they really do not want to do NE mtgs. Afterall, how many people would have both the deposit saved plus find a house that means they are not increasing their mortgage exposure.


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## Brendan Burgess (12 Jul 2012)

> Not increasing our mortgage exposure i... seems unfair when we qualify to borrow a lot more on our  salaries.



You have a house worth €200k and a mortgage of €380k. PTSB will have had to make a provision in their accounts for this as if you lose your job or just throw back the keys they face a loss of €180k. Why on earth would they increase that risk.

And you should not be looking to increase that risk either.

You are dramatically increasing the risk by this move - you will incur extra costs; you will spend your savings and you will lose your tracker. 

It would be in your own interest if ptsb refused you. 

Brendan


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## Working mam (12 Jul 2012)

Brendan I respect your opinion however, if everyone was refused mortgages for those reasons we would all be living in rented accommodation. If I was a ftb or a trader upper with no NE I would get a higher amount so job risk would not come into it, unless either of us worked in a high risk sector. 
Unless the govt and banks start assisting people with NE to move in a sensible way there is going to be a huge number of people left stuck in starter houses unsuitable for raising families.

ETA: After looking at my figures again Brendan, where is the increased risk to the bank? Worst case scenario the bank have to repossess then the NE on existing house is 180k so that is the loss to the bank. If bank allowed us increased mortgage for example of 300k and we carry the NE of 180k, bank repossess and the loss is the same. Am I missing something?


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## Working mam (12 Jul 2012)

Brendan Burgess said:


> permanent tsb should jump at it. I don't know if they are doing negative equity mortgages yet.
> 
> But, I think you should wait. If permanent tsb sell off their trackers to some other state entity, the new owners might be more practical about doing a deal. You could sell your home and have the mortgage written down by 10% to 20%.
> 
> In fact, you should be proposing this to them now. They will refuse, but you lose nothing by trying.



You have changed your tune from your initial response!


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## Brendan Burgess (12 Jul 2012)

Hi mam

Your figures are confusing...



> Not increasing our mortgage exposure ... seems unfair when we qualify to borrow a lot more on our  salaries.



You want to increase your mortgage exposure. So presumably you are increasing your mortgage? 

In the first post, I answered the question you asked.  I think it was this focus on increasing exposure i.e.risk which triggered a more thoughtful response from me.


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## Working mam (12 Jul 2012)

The house we were looking at which as I mentioned was a bargain for the area would have meant we would not be increasing our existing exposure however I found out yesterday the house is sale agreed. Any other house in that area would mean an increase to our mortgage but as I pointed out, of our salaries match up there is no added risk to the bank so it's frustrating they won't allow it.


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## Brendan Burgess (12 Jul 2012)

There is a risk to the bank unless you are trading down. 

You will be borrowing more.
You will be using up your saving 

Brendan


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## Working mam (12 Jul 2012)

Brendan I could go out tomorrow and blow my savings on a round the world trip, so I have to disagree. 
Also, the NE remains the same regardless if it is on this address or another and that NE is the bottom line risk for the bank. Our ltv would be reduced by moving and also there is (in time) more chance of the NE lowering quicker on a house in the other area as historically it is a much higher value area. 
I think we will have to agree to disagree but l am basing my opinions on fact.


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## so-crates (13 Jul 2012)

Working mam said:


> ... and that NE is the bottom line risk for the bank.


What exactly does this mean? There are several risks for the bank.



Working mam said:


> Our ltv would be reduced by moving and also there is (in time) more chance of the NE lowering quicker on a house in the other area as historically it is a much higher value area.
> I think we will have to agree to disagree but l am basing my opinions on fact.



That is an assumption based on a very short-term view rather than a fact. You have at best a biased observation (biased because a desire to invest hinders objectivity) based on x number of years which you are extrapolating into the future. Taking a longer term view, areas cycle between desirable and undesirable surprisingly frequently, there are no safe bets.


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## Working mam (14 Jul 2012)

so-crates said:


> What exactly does this mean? There are several risks for the bank.
> 
> 
> 
> That is an assumption based on a very short-term view rather than a fact. You have at best a biased observation (biased because a desire to invest hinders objectivity) based on x number of years which you are extrapolating into the future. Taking a longer term view, areas cycle between desirable and undesirable surprisingly frequently, there are no safe bets.



Hi so-crates, when applying for a mortgage the bank will assess risk such as repayment capacity (we have double the proposed mortgage amount in repayment capacity), they will do a nets calculator (we meet that very comfortably). They are a couple of the main risk assessments but the bottom line is, can the applicants pay back this mortgage and if not what is the loss to the lender? As the negative equity amount would not be increased by moving and the ltv would be reduced the NE is what the bank stand to lose in the event of default and repossession. Therefore, my whole argument is what difference does it make to the bank whether I am carrying the same amount of NE on house x or house y? 
Yes I can see your point I perhaps have a biased view but are you saying that a house in say dublin 24 could ever be worth more than a house in Dublin 4? I mean absolutely no disrespect to anyone by saying that, I am just using an example relevant to my proposal that certain areas will always hold a higher value than others.


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## Brendan Burgess (14 Jul 2012)

Mam

Would you do a table or listing of the actual figures involved.  You seem to have a house worth €200k in Dublin 24 but you are going to buy a house for €200k in Dublin 4 instead. 

How much cash have you to pay the costs of moving? 

What are your salaries? How secure are your jobs? 

As I said in my first post, if I was ptsb I would facilitate this as switching a loan from a cheap tracker to an expensive SVR would outweigh the risks. 

However, if I was you, I would not do this. You should stay put and use your savings, your high salary and your very low tracker rate to eliminate as much as possible of the negative equity. 

It might be a bit academic anyway. You will have to sell your own house first before you can buy another house. 

Brendan


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## Working mam (14 Jul 2012)

Hi Brendan, there is no question marks over our salaries, ability to repay, savings to cover deposit plus legal and estate agent fees etc, in fact the bank said it was "a perfect application but they just have no set product yet for moving NE.". We would qualify for approx €430k based on the last nets carried out inc stress testing. Add to that because there is no actual product in place, therefore no set policies yet they cannot allow us increase our existing exposure to purchase a more expensive house. 
I do not want to overpay the mortgage in order to reduce the NE as we are getting a higher deposit rate than our tracker is. Plus if the banks are only allowing you borrow to your existing exposure it would put us in a worse position to reduce our mortgage balance quicker. 
Regarding selling our house first, banks will not allow you sell your house and leave the NE unsecured. The best information we can get from the estate agent is that he has 3-4 people ready to purchase in this estate who have been outbid on other houses. Presently it seems like a good estate to be selling in as there appears to be a steady demand for these houses. 
I just gave D24 and D4 as examples in response to so-crates post to me regarding areas.


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## blueskies (18 Jul 2012)

Brendan, I find youre last email condescending. Working Mam already is very clear as to her capacity to pay, the costs etc associated with moving.She seems to be concerned with why the banks are not prepared to allow her to sell and buy in such a way that the net extra cost to them is nil.And I agree with her.The bank itself has said it is a perfect application but they dont have any products available.So the issue is with the banks who are basically holding up families social mobility even though it has no monetary impact on them.I find it a tragedy. And in this case where the 'application' is perfect and where there is double the proposed repayment in their actual monetary capacity, it is nonsensical.


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## goingforgold (18 Jul 2012)

I think it is a terrible situation that somebody who is willing to stand by their debts and responsibilites, and just wants to move on in life at the same time is not allowed to do so. There are enough people trying to avoid their responsibilites so fair play to you working man for what you are trying to achieve


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## Brendan Burgess (19 Jul 2012)

blueskies said:


> Working Mam already is very clear as to her capacity to pay, the costs etc associated with moving..



Hi blueskies

We have 60,000 families in arrears over 90 days who were happy with their capacity to repay their loans. What is worse, the banks were happy with their capacity to repay their loans.

We probably have about 60,000 more who are in arrears of less than 90 days or who have rescheduled.

Working Mam seems intent to buy another house while retaining her own house with a view to selling it. This is based on "the estate agent ...has 3-4 people ready to purchase in this estate "

Working Mam has serious negative equity reduced somewhat by some savings. She has a valuable tracker mortgages.  She should not be increasing her risk by trading up. 



> Brendan, I find youre last email condescending.


The purpose of Askaboutmoney is to give people independent information and advice. Even if they don't like what they hear. If you want to classify that as "condescending", fine.  I have asked Working Mam to put up all her information so that we can help her further, but she has not done so yet.


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## Working mam (19 Jul 2012)

Brendan Burgess said:


> Hi blueskies
> 
> We have 60,000 families in arrears over 90 days who were happy with their capacity to repay their loans. What is worse, the banks were happy with their capacity to repay their loans.
> 
> ...


I have not given figures as I have stated before, qualification is not the issue - a suitable product is.


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## Brendan Burgess (19 Jul 2012)

I am pointing out that a borrower who is in deep negative equity is a risk. This is accepted by most people.  

The banks would not give a first time buyer a loan of 130% of the value of the house. 

You are at serious risk even if you can't see this. That does not mean that you will default, it just means that you are at serious risk and you seem hell bent on increasing that risk. 

Brendan


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## Working mam (19 Jul 2012)

Brendan, you don't seem to want to take my point that the NE remains the same regardless if it is on house x or house y. If I walked in as a ftb I would qualify for the amount needed to purchase the new house. My ltv is already through the roof on my existing property because of the NE, it would in fact reduce if I moved. 
Yes I am hellbent on moving as I have stated before, it is for a better quality of life for my children. This is about getting them into school in that area as if they go to school where we are currently living I would have to give up work as I could not get them to school and get across the city in time for work. Their childminder is in the area we want to move to, plus family.


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## Working mam (19 Jul 2012)

Brendan, I came across a post you started on 28/03/12 regarding UB allowing people trade up with a tracker. You were very positive about this wonderful idea that you might have NE but guess what you can now keep your tracker and borrow more!!  at a SVR. Why is the prospect of anyone else getting this a great idea but yet you continually tell me I'm "hellbent" on doing this and wrong for wanting to borrow more. 
Make up your mind, its either risky or it's not. 
Apologies I cannot post the link as I'm on my mobile.


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## Brendan Burgess (19 Jul 2012)

Hi Mam

Here is the link 

Ulster Bank is allowing tracker mortgages to be transferred to a new house

I think it is a great product.  It will be brililant for people who want to trade up who are not in negative equity and who will not be in negative equity after the trade up. 

I think it's a great product for people in negative equity who want to trade down. They will keep their tracker. 

If you are in negative equity and you want to move, it's a great product in that you keep your tracker.  It's certainly better than trading up from a cheap tracker to a very expensive SVR mortgage with ptsb. 




> I have no doubt that most people applying for negative equity mortgages will be refused on affordability grounds.
> 
> I would guess that there be two big users of this new product
> 
> ...


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## blueskies (19 Jul 2012)

why should negative equity property owners be equated with mortgage arrears. That is almost insulting. What determines the persons ability to pay is his salary level and salary security.Or is it implied that if you are in negative equity you are less inclined to pay which is insulting too. Two doctors in negative equity will be of very low risk of default so to class all negative equity people together is incorrect.Every case needs to be considered on its individual merits and for a bank to come out and say that it has no products available for negative equity owners is a complete cop out and a denial of the economic situation that we now face. Indeed , they fueled the boom and now they fuel the bust and still remain as short termist and reactive as ever


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