Can I "park" the negative equity element of our mortgage until I am ready to pay it?

My husband and I purchased a second property (holiday home) out of equity which we released from our main residence - we did this back 2005. We have just recently sold that property, it wasn't an option to hold on to it - if we rented it -the rent wouldn't have covered the mortgage. The property was sold at a loss to us of E90,000. What we have received from the sale of the property we intend paying down off our mortgage but this will still leave us with a substantial mortgage. Both of our wages have been reduced by 50% over the last 3 years. By reducing the mortgage it will mean we can start paying down the capital once again as for the past 11/2 we have only been paying interest only. Having worked out budgets we will still be tight and find we are not able to save for emergencies. It would be ideal if we could park the E90,000 negative equity - as under the Deferred Interest Scheme to give us a chance to get back on track. This scheme from reading it only relates to people who can only pay a certain percentage of the interest only - so it would not relate to us in that we will be paying down the capital. I have contacted my bank twice in the last week via email about parking this negative equity of E90,000 or if there was a split mortgage product, no answer todate. I am not asking for a write down just to park this until we get on our feet again. Anyone with advice I would be grateful. The bank I am with is PTSB.

Angela59

Unfortunately your like many people waiting on clarity from the Government and banks , the word out there seems to be hold tight until legislation is published and passed and then plot your route out .

Hi GDUFFY,

Thanks for the reply, I'm wondering whether to pay down the amount I have received or do I put in on deposit until there is more clarity with the banks.

angela59

But in this case the second property negative equity is kind of irrelevant I would think, the mortgage you took out was on your main residence I presume so while that is not in negative equity and I presume it is not then there is actually no negative equity in this situation. Maybe, maybe not???

Hi wbbs,

I have to carry a E90,000 negative equity as this is the amount we lost when we sold the property.

angela59 said:

I have to carry a E90,000 negative equity as this is the amount we lost when we sold the property.

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The way that the term negative equity is generally used is when the value of your property is less than the mortgage outstanding on that property. If your home is worth 90K less than the current mortgage then you are in 90k of negative equity.

It doesn't really matter that you spent the money that you got from the equity release on another property and lost money. You could have as easily spent it on house improvements, bank shares or a holiday and lost that money.

Even though you lost 90k on the investment property, you may still have equity in your current home which may give you options. On the other end of the scale the 90k shortfall from disposing of the investment may mean that you have really bad negative equity, far beyond 90k if you remortgaged your home for it's full value at the top of the market.

Hi ontour,

The negative equity figure E90,000 still has to be paid and adds a hefty sum to our mortgage together with 50% wage cuts over the last 3 years. If there was an option to park it aside so that we can put by for emergencies and make our income work better than it is working at the moment.

What is the value of your house that the mortgage is on and how much is the mortgage? This is what determines whether you are in negative equity or not. As Ontour said the fact that you spent the equity you released on your own home on a property and lost out does not mean that the shortfall on that sale necessarily becomes 'negative equity' on your existing property.

Wbbs,

It is hard to put a value on any property at the moment as it is only worth what someone is willing to pay and what the banks will loan that individual. A very realistic value of what I would achieve would be perhaps 250,000 before any professional fees would be taken out. The mortgage that I am left with after selling the second property is be E257,000. What I can afford to pay i.e. capital and interest going forward until things improve is E170,000.

Our property was last valued 2006/2007 at E750,000. A property sold in December 2010 just near me E230,000.

Angela59

angela59 said:

A very realistic value of what I would achieve would be perhaps 250,000 before any professional fees would be taken out. The mortgage that I am left with after selling the second property is be E257,000.

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Hi Angela

You have a mortgage of €257k on a house worth €250k. As ontour pointed out, that is all that matters. You are not in signficant negative equity at all.

What I can afford to pay i.e. capital and interest going forward until things improve is E170,000.

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Over 20 years at the permanent tsb SVR of 4.7% , that is €1,093 per year

€257,000 over 30 years would be €1,332 per month.

The interest only would be €1,000 per month.

permanent tsb won't park part of the loan. And I don't see any reason why they should? If you can only afford €1100 per month, ask them to put you on interest only for a while.


Brendan

Hi,

Ok so from reading your posts I am assuming that:
1. Main residence mortgage = €170K outstanding
2. Main residence top-up = €90K outstanding, after you clear off the money from the sale of your 2nd home.

So you count the €90K outstanding as really negative equity remaining over from your 2nd home after you sell it. However, the bank see do not see it that way, they see it as against your main residence so it is secured debt against that.

Although they come across as two mortgages on your statements etc.. (and might have different interest rates) - they are both against your main residence, which is only slightly in negative equity.

So with regards your question of can you park the payments on the top-up & only pay the main mortgage? I would say this is unlikely. I think the best you could hope for is interest only, reduced payments agreement or some sort of short term (3-6 months) moratorium. They will not agree to you making payments on one and not the other, but rather some sort of reduce payments across both I would say. But these would only be agreements for 6 months or so, maybe 12 months for interest only (not sure whether they agree to 6 or 12 month interest only periods).

Hi Kaza,

The outstanding mortgage on my main residence when I pay off what I receive from sale of 2nd property is E257,000.

It would be an option to go interest only but have been interest only for the last one and a half years so at this stage would like to start paying down capital but as suggested it might be an idea to pay part capital and interest. We are on 22 year mortgage at the moment, husband is 50, I'm 46 so extending the term of the loan is not an option.

Had a reply from person I know in the Bank and he suggested to sit tight until end of June when the Banks Proposals and recommendations for dealing with arrears and negative equity are published - there might be something that suits our needs.

Thanks for all the replies so far.

Angel59