# In Negative equity....Should we sell ??



## Sprinkpark10 (24 May 2010)

Can anyone help us with our decision, were building a house & moving a distance away from our current property which will become a rental property. We can't decide whether we should sell or keep the second property:
Details as Follows;

Age: 32
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: Being made redundant!
Annual gross income of spouse: 60,000.00

Type of employment: e.g. Civil Servant, self-employed : civil servant

In general are you:
(a) spending more than you earn, or
(b) saving? Saving

Rough estimate of value of home: 315,000
Amount outstanding on your mortgage: 348,000.00
*What interest rate are you paying? Tracker Mortgage: 1.95%*

Other borrowings – car loans/personal loans etc: none

Do you pay off your full credit card balance each month? Don't have one
If not, what is the balance on your credit card? 

Savings and investments: € 25,000 + 50,000 redundancy
Do you have a pension scheme? yes

Do you own any investment or other property? The propoerty mentioned above would be the investment property & we are building a new house which will have a mortgage of 250k, so the question should we sell the house & pay off the negative equity with the redundancy or re-invest the money back into the house i.e making up the difference in the rent (€350 each month)& having money aside for months with no rental income. 

Ages of children: 0

Life insurance: yes

Thanks a million


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## Brendan Burgess (24 May 2010)

If I understand this correctly, if you keep your home, the position will be



Investment property| 315|
new house| 250|
site value| 50|(assumed)
Total property| 615|
Mortgage| (523)|(348 + 250 - 50 -25)
Net value| 90k|I am guessing that you got a gift of the site and it's worth 50k. 

With a salary of €60k,you are way overexposed having property at 10 times your salary. You should seek to sell the investment property. 

You face three big risks: property prices may fall, interest rates may rise and rent may fall. You don't have the flexibility to handle these risks.

Have you already drawn down the mortgage to build the house? I am surprised that you got a loan for it on a €60k salary.


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## Sprinkpark10 (24 May 2010)

Thanks a mill for ur reply:
We are in the process of building and have drawn down part mortgage, 
Got mortgage approval when I was employed. Still working for 2 more months. 
Would we have any hope of negotiating the negative equity with our bank?


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## Sprinkpark10 (24 May 2010)

You assumed right about the site situation


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## Howitzer (24 May 2010)

Sprinkpark10 said:


> Thanks a mill for ur reply:
> We are in the process of building and have drawn down part mortgage,
> Got mortgage approval when I was employed. Still working for 2 more months.
> Would we have any hope of negotiating the negative equity with our bank?


On that basis your original question may be somewhat moot. Your options will probably be worse than you imagine. 

Your numbers are predicated on retaining your tracker @ ECB + 0.95%. Ignoring tax implications, you're banking on losing 4K a year in the difference between rental income and mortgage. In your current situation I'd be surprised if your bank extended a further mortgage to you, but if they did, then I would expect them you push you onto a residential investment mortgage. That could bring your interest rate to approx 5% and, I'd guess a 15K loss each year.

I don't see how you're going to avoid having that conversation with your bank given you still need further funding.


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## Sprinkpark10 (24 May 2010)

thanks for ur advice, we have an offer on the house, so the best option is to accept i think, as u are probably right with the very valid points u made. 
thank you!
one mortgage on 60k is enough i think!


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## PaddyBloggit (24 May 2010)

Sprinkpark10 said:


> one mortgage on 60k is enough i think!



Wise decision!


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