NE of €140k but €160k cash - want to buy a new house?

[Dlgal]

We would like to sell our apartment which is in negative equity of €150,000 and repay this at the existing mortgage terms (circa 25 years left). However the bank want us to repay this over 7-10 years. We are on SVR not tracker.

We are not in an arrears situation but having to repay the negative equity over 7 to 10 year would prevent us affording to buy a family home in the area we are currently renting. Do we have any rights to force a sale and keep the existing terms


Personal and income details
Net 5700 private sector(i.e. after tax) Income self: nature of income e.g. self-employed/public servant etc
Income history: e.g. "I was made redundant in June 2011 and have not had any work since..."
Net 2700 private sector income partner/spouse: nature of income
Income history:
number of children 2
Amount of child benefit received 260
Amount of Mortgage Interest Supplement received
Home loan
Currently renting 2300


Investment property - this was our home but we needed to move due to children
Lender: aib
Amount outstanding: 490000
Value of home: 350000
Interest rate: 4.4
Monthly repayment 2600
Monthly rent received 1625

Other loans and creditors - delete those which don't apply to you
0

Other savings and investments
€160,000

How important is retaining the family home to you?
Which of the following best describes your situation?

I don't care about keeping the family home.

Any other relevant information

What is your preferred realistic outcome?
I would like to sell the apt and repay the NE at the existing terms

 

[Brendan Burgess]

I don't know why AIB would allow you to sell the apartment and keep the mortgage at all. You have the cash, so if you sell it, you should pay off your mortgage shortfall in full. It makes little financial sense to have money on deposit at 1% while paying 4.4% on a loan of a similar amount.

Why did you need to move out of an apartment worth €350k for the children?

It must be a fair sized apartment if it's worth €350k.
It might make sense to move back into the apartment , pay down the loan and start building up a deposit again. Not ideal, but it makes great financial sense.

How much would a house in the area you want suitable for your children cost?
This is a key question.

Option 1 - Consider keeping the investment property

Think of it as two loans - one the value of the home and the other for the negative equity.

Rent received| €1,625 |
Interest cost| €1,300 |€350k@4.4%/12
profit before costs|€300

So this is a profitable investment based on the current value. But probably not profitable enough to retain it.

You are repaying around €800 capital every month, so you are gradually paying down this mortgage.

Option 2 - You could apply for a negative equity mortgage

Sales proceeds €350k + cash €160k = around €500k to buy a house

You should be able to meet the repayments.

Have you asked the bank for this?

Option 3 - you could apply for a mortgage to buy your new house and keep the old house

You have €160,000, so how much do you need to borrow? It will be difficult if you already have a mortgage but check with them anyway.



Option 4 - just sell the apartment and rent
There is nothing at all wrong with this option.

Financially you are better off moving back into your former home and buying a new property when you can afford to do so. But if you don't want to do so, then you are better off renting.

 

[orka]

Option 2 - You could apply for a negative equity mortgage

Sales proceeds €350k + cash €160k = around €500k to buy a house

You should be able to meet the repayments.

Have you asked the bank for this?

I don't understand why this would be a NE mortgage. It's effectively asking the bank for a near-100% mortgage but there shouldn't be any NE if the house costs 500K and they just keep their existing mortgage amount of 490K.

 

[Brendan Burgess]

|before |after
House|€350k |€450k
Cash| €160k |0
Mortgage|€490k|€430k
equity|€20k |€20k

Hi Orka

I did this table to explain it to you in simple numbers terms, but ended up explaining it to myself.

You are quite right, it would not be a negative equity mortgage, which means that this is clearly the best solution and one which I think AIB would probably go for.

The mortgage is reduced.
The negative equity is reduced.

Brendan