House too small, in neg. equity, options for future?

S

Sar

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75
Age: 36
Spouse’s/Partner's age: 39

Annual gross income from employment or profession: 45K
Annual gross income of spouse: nothing

Monthly take-home pay: €2706

Type of employment: PRSI private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Neither - just about managing on what we have, sometimes have to dip into savings for unexpected expenditure

Rough estimate of value of home 180k
Amount outstanding on your mortgage: 320k
What interest rate are you paying? we have a tracker at a rate of + 1.25%, in year 7 of mortgage, currently paying 1070 per month. 23 years left to go on mortgage.

Other borrowings – car loans/personal loans etc No

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 50k approx

Do you have a pension scheme? No

Do you own any investment or other property? No

Ages of children: 3,2,0

Life insurance: Yes, approx. €600 per year


What specific question do you have or what issues are of concern to you?

Our current 2 bed house is too small now that we have 3 kids. We would like to move but rents of 3 bed houses in our area are at least 1400 per month which is too much for us.

Cost of childcare for 3 smallies means it's cheaper for us to have one parent at home minding so difficult to increase our income in the immediate future. We're not married so can't share tax credits.

We have never gone into arrears on our mortgage because we've used our savings when things got bad (we were both unemployed for awhile, then survived on 25k gross salary for a few years). We have cut expenditure right down, so no more savings to be made there.

Just not sure what we should do over the next few years to maximise our chance of being able to move. Should we be talking to our lender (ebs)? Is there any point when we have never been in arrears and can just about afford repayments?
 
Could you look at a possible trade down mortgage? Could be worth talking to lender about also?
 
Options are

1. Rent out the house, but probably rent will not cover mortgage and it's a big hassle.

2. Overpay mortgage to get the NE down asap, by for example paying off a lot of the 50K now this will happen faste and then overpaying the morgtgage. The idea being that just as the kids start school, you can move and you'll have two jobs hopefully.

3. Your bank won't do anything for you in a NE of that amount.

Make the best of your current space, bunk beds etc. You both should have probably spaced out the kids ages a bit better but you are where you are. You won't be the first to have to have 3 kids in one room for a while.
 
We faced a simliar issue, and considered converting the attic, or extending. However in the end, I decided to split the master bedroom in two, I understand this may not be possible in all cases, but worth considering.
 
Thanks to both of you.

Unfortunately the two bedrooms are the same size- small! So splitting on is not an option. The baby will be in with us for a while then we'll have to put all three in together.

Rather than paying down the neg equity now, would it make sense to keep the savings earning the best interest we can find until we were in a better position to move?
 
I'm guessing it may anywhere between 5 to 10 years before you can consider moving house without any negative equity assuming that house prices remain stagnant.

Have you considered building a small extension? I reckon a decent sized bedroom & an ensuite would cost you between €20,000 & €30,000. You could use part of your savings to fund it.

If you'd rather move to a bigger house, the only other option I can see for you is to apply for one the new negative equity mortgages when they become available. It doubtful whether you'd be allowed to keep your tracker rate though.
 
Sar said:
Rather than paying down the neg equity now, would it make sense to keep the savings earning the best interest we can find until we were in a better position to move?
Click to expand...

If you paid off a lump sum and overpaid, how long before you were out of NE?
 
I'm not sure. we can't really afford to overpay at the moment. Neg equity is approx. 140k, we have savings of about 50k, so that would reduce neq equity to 90k. I can't see us being able to overpay by that amount is anything under 10 years.

I have only started my job recently after several years out of work, so it's not 100% secure. I would be very reluctant to pay off all our savings as a lump sum in case we found ourselves back in the situation where our income was drastically reduced.
 
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