Looking to trade up with a Negative Equity Mortgage

D

Doshdela

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We own a house but are not living there. The mortgage is €208,000, with 27 years to go, at tracker rate. Currently it is worth approx 105,000 so negative equity of 103,000.

We are renting close to where I work but wish to buy a family home. The cost of the house would be approx €220,000.

What are our chances of getting a negative equity mortgage with AIB? Are we better off continuing as we are?

Income details
Net monthly €4000. Private employment
Net monthly Spouse has no income
Amount of child benefit received: €270
Amount of Mortgage Interest Supplement received: None

Personal circumstances so we can calculate your reasonable living expenses
Two adult family
Do you need a car for work or do you use public transport? I generally cycle but we have a car
Number of children 0- 2 years old: 1
Number of 4 - 11 years old: 1
Monthly childcare costs:0


Investment property
Lender:AIB
Amount outstanding:208,000
Value of home:105,000
Interest rate: Tracker
Monthly repayment:750
Amount in arrears:None
Monthly rent received: 550


Other loans and creditors -delete those which don't apply to you
No loans or overdrafts

Other savings and investments
30,000 plus 10,000 in Treasury Bonds (due to mature 2022). I receive shares each year from work, worth roughly 15K per annum.

Do you expect any lump sums in the medium term future?
No

How important is retaining the family home to you?

I don't care about keeping the family home.

What is your preferred realistic outcome?
We want to buy a family home close to work and feel that any house bought here will increase in value faster than our existing property so that any negative equity we carry over will be paid off quicker.
 
It doesn't look like it.

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I estimate your gross salary to be around €60k a year.

You want to borrow 5 times.

The limit is 3.5 times, so I doubt if they will make an exception for you.


What are the Treasury Bonds? Can you cash them now without penalty?

Do you have any work shares which you can cash?
 
Thanks Brendan for your response.

My gross salary is 70K, 100K including bonuses. I will be able to cash roughly 15K in shares next April. We could cash the Treasury Bonds now but would rather borrow 10 - 15K from my parents. Does this improve the situation?T
 
Last edited:
If your gross income is €100k, you should have a net income of €64k or €5,300 per month, not €4,000
A gross salary of €70k gives you €4,100 a month.

I presume that they will disregard the bonus element.

300k is still 4.3 times €70k - so I am not sure that they would make this exception.

Why not cash the Treasury Bonds now or next April. If you do so, you will have €25k more cash when you cash the shares.
This would reduce your borrowing to €275k which is just under 4 times your income.

If AIB counts any part of the bonus as income,then you are coming within the limits.

Update
I forgot that the Central Bank guidelines do not apply to borrowers in negative equity, but, of course, AIB has its own internal guidelines.

I think you should cash the Treasury Bonds so that you have hard cash rather than a promise to cash something. Then you can use the borrowings from your parents to make your position even better.

Brendan
 
Thanks for the advice Brendan. I think our next step is to contact AIB and see what, if anything, they are willing to do for us.
 
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