# Should we approach bank to do a deal on negative equity tracker mortgage?



## Burner11 (18 Mar 2015)

We currently own a house we bought in 2007 for 200k on a tracker mortgage. It is now worth aprox 140k with 167k still left to pay.
We want to sell it as we are moving to a different county for work and want to buy a house and settle there. We approached the bank the mortgage is with (BOI) to see about moving our tracker with the negative equity but they told us we would not qualify for a new mortgage as we do not earn enough.
We approached a different bank who have approved us in principle for the amount we need on the condition we sell the other house and clear the loan.
We have a good bit of savings but not enough to clear the negative equity and a deposit for our new mortgage.
So my question is, if we sell the house for 140K and are left with 27k aprox to clear, should we approach the bank to see if we can do a deal on what's left over and get it reduced or written off or are the banks not so worried about tracker mortgages anymore? 
Can anyone give us some advice on how to proceed with this or any other options.

Thanks


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## Brendan Burgess (18 Mar 2015)

There is no point in approaching Bank of Ireland. They will not do a deal. They have such a low cost of funds, that tracker mortgages are not loss making for them any more - especially if they are not in arrears. 

You should rent out the house. 
The rental income will probably be around €800 a month.
The interest on your mortgage is probably around €100 a month
So it is a very profitable investment. 

When your tenant has paid off the negative equity for you in about three years, you could consider selling it then. It would still be a very valuable investment but it might suit you to get rid of it.

Brendan


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## Burner11 (18 Mar 2015)

Thanks for your reply Brendan,

Renting it out is not an option unfortunately. The rental income would only be about 550 a month for the area it's in so it would not cover the mortgage repayments.

The bank want it sold.


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## Brendan Burgess (18 Mar 2015)

€550 a month is well in excess of the interest you are paying, so renting is the best option by far. 

Brendan


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## oysterman (19 Mar 2015)

Burner11 said:


> Renting it out is not an option unfortunately. The *rental income* would only be about 550 a month for the area it's in so it *would not cover the mortgage* repayments.
> 
> The *bank want it sold*.


You need to change your perspective...stop thinking that you have a liability of €27k negative equity. In fact you have an asset...€167k of capital at the lowest rate of interest you'll borrow at in your lifetime. At rental income of €550pm you'd be getting a gross yield of 4% on capital that you're borrowing way cheaper (<2%?). Brendan's advice is gold...the rental income will buy you out of negative equity over time even if property values were to remain flat.

As for the bank wanting it sold? Of course they do...they could lend the proceeds out at double the rate of interest (at minimum).

If it's another bank you're talking about that wants you to sell (i.e. a potential lender for your next purchase), then you should consider using a broker to arrange the loan.

By the way, are you sure you should buy at all? You already own a property so there would be a lot to be said for renting in the area you need to move to: your current house (and its highly attractive low rate loan) might provide all the exposure to property that would be sensible for you at this stage.


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## Burner11 (22 Mar 2015)

Hi,

Thanks for the reply, sorry for the delay in replying was away with work.

We will try a broker and see how we get on.


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