Can you add "negative equity" from sale of one house to the purchase of another house

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newfarm

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My son has a mortgage of 152, 000 on a house now worth 120, 000 with 27 years to run. His mortgage is with AIB. He has no significant savings but is in full-time employment with an annual salary around 55, 000.

His work necessitated a move to a different town to a new job where he intends staying.

In this new town he can purchase a house for about 130.000.

Is there any to sell his house and add the "negative equity" portion to the purchase price of the new house ? Or are there options we haven't considered?

Thank you.
 
If he has no savings, it means he can just afford a mortgage of €152,000. He won't be able to afford a mortgage of €162,000.

AIB does allow negative equity mortgages, but the borrower must have at least 8% of the purchase price of the new house i.e. €10,300 .

If he has a tracker mortgage, he may have a better chance of qualifying, but he will still need to the €10,000.

http://www.askaboutmoney.com/showthread.php?t=185909

Brendan
 
Going to use approx. figures here for illustrative purposes, though these should be a good indication. Assuming a fairly straight forward tax situation for a single person, a gross income of 55k should mean a net monthly income of around 3,100. Any other debts?

Based on the level of mortgage monthly payments would be around 725-800 on a 150k mortgage over 30 years at 4%/5% interest rate respectively. That's a very manageable per cent of current net income (c25%).

On a purely financial basis I can't see a huge difficulty in being able to sell the existing and buy the new one and being able to fund the mortgage.

The extra ten grand of a mortgage over the existing one wouldn't cost that much extra assuming that the go forward interest rate is broadly similar. Bit trickier if he has a tracker as he would really need that to move or the repayments would be quite a bit higher.

A potential alternative of renting the existing house and renting in the new town where he works is also going to cost. The rent on the existing house will be taxable, net of allowable expenses, meaning in practice some level of tax payment if likely. So this should be factored into the equation.

Brendan is right in indicating that if there are no savings that is a problem as a Bank will look closely at spending and saving. Also needs a deposit.
In theory sounds do'able if it is the right move and the location he wants to live in for a sustained period and with better management and control of finances it should be affordable.

In practice more difficult given current situation, flux in the banks, etc. I recommend he gets all his facts and figures together (income, details of all expenditures monthly), makes an effort to save over the next 3-6 months to show a savings capacity (unless significant expenses I can't see why he can't save a bit, not judging though!).

As usual non financial matters are very important, what stage of life is he at, married/partner/kids (??), location, job stability, etc. Take a read of this also, may give some ideas and food for thought.

http://www.askaboutmoney.com/showthread.php?p=1318784#post1318784
 
Thank you Brendan and Gerard for sharing your knowledge with me. I may not have fully grasped all that you said so please excuse me in it takes a bit longer for the penny to drop!!

I understood that if he sells his house for 120K all of this money goes to AIB and that he continues to owe them the balance of 32 K ( Outstanding mortgage balance less sale price of the house).

I don't even know if the bank would allow such a sale as they would have no security on the remaining debt of 32K. While I say he has no significant savings, he has about 6 or 7K, but definitely not 32K !

Would he have to come up with the 32K to completely clear the mortgage, or can this be added on to the sale price of a new house. I understand that he would have to come up with the 8-10% of the new house as a deposit.

Sometimes I think he should rent somewhere to live , and forget about house ownership, and sell his former house as soon as it breaks even. But that's another debat

Thanks.
 
Google AIB negative equity mortgage for details. Appears that they do allow you to take the negative equity to the new house, i.e. add to the mortgage on the new house, though of course would need to be agreed and your son would need to meet affordability criteria and other conditions.

Suggest go talk to them and see what they say. Given the circumstances you have set out I would be surprised if they didn't give your son a good hearing, though expect a high level of diligence and checking by them so be prepared.
 
Thank you very much Gerard. It should be possible and makes some sense but common sense is often in short supply.
 
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