negative equity, fixed rate, thinking of downsizing, how would this work?

[nic123]

Hi all,
I am looking for opinions/advise please?

Myself and my partner bought our first home in 2006 as FTB with a 100% mortgage (I was 8 months pregnant at the time and looking back I think it was a panic purchase and we were naive).

I'm the first to admit I don't know a lot when it comes to mortgages etc so what I'm proposing could be a load of rubbish!

Anyway disregarding that, we are now on a fixed rate of 5.3% which we cannot get out of. My partner has been out of work since before Christmas and we are struggling big time on my wages to pay mortgage etc.

We've been thinking of possibly downsizing? At the moment we're in a 3 bed terrace and it's just us and our son.

Presuming we're now most definitely in negative equity and don't sell our house at the original price (€250K), what would happen if we were looking to buy a house for €130K (seen one), sold this house for €200K (wishful thinking?!) and owed the bank the other €50K? Could we put the other €50K on top of the €130K mortgage (with the same lender obviously)? making it €180K mortage (as opposed to the €250K one we now have, making our repayments lower and also maybe getting lower rates??)

I'm just trying to get every option possible to us and take it from there!

The fee to get out of fixed rate was way too high so at present we're also looking at getting interest only mortgage, but as I said want to have all options available so we can make correct decisions this time!

Thanks in advance (.....and apologies if I'm just dreaming we can do something to sort it!)

 

[Senna]

Have you considered renting out your larger house and yourself renting a small house/apartment?

If the bank do allow you to sell your house in NE, the remaining balance will be a personal loan and its very likely that you wont get another mortgage until this loan is paid off.

 

[Bronte]

Anyway disregarding that, we are now on a fixed rate of 5.3% which we cannot get out of. My partner has been out of work since before Christmas and we are struggling big time on my wages to pay mortgage etc.

Are you positive you cannot get out of the fixed rate, have you tried talking to your bank manager as a first step.

 

[demoivre]

.
Presuming we're now most definitely in negative equity and don't sell our house at the original price (€250K), what would happen if we were looking to buy a house for €130K (seen one), sold this house for €200K (wishful thinking?!) and owed the bank the other €50K? Could we put the other €50K on top of the €130K mortgage (with the same lender obviously)? making it €180K mortage (as opposed to the €250K one we now have, making our repayments lower and also maybe getting lower rates??)

The reality is you won't be able to sell in negative equity unless you can come up with the additional 50k because the bank won't release the security. Putting the 50k on to a new mortgage of 130k is a non starter also because you would be asking the bank for a 180k loan on a property worth 130k which is equivalent to a 139% mortgage !

 

[nic123]

Thanks all for your replies, kind of knew it would be a no go but am just trying to get all options. We tried for breaking out of the fixed rate but the fee was (get this!) €24,000!! Not happening!! Renting isn't really an option as it wouldn't cover the mortgage because there are houses for rent beside us which are a lot cheaper than what we'd need to charge. So it seems our only option is interest free for a while and hope our circumstances change re: employment for my partner. Thanks again! If anyone has any other ideas I'd welcome them! Nic

 

[MelF]

Nic123 if you plan to sell this house, a sale would effectively mean breaking the fixed mortgage also and as I understand it the breakage fee would still apply.

Think the advice of renting out your place and getting something smaller to rent yourselves is a good one, of course you will also need to get some advice re taxation on the rental income etc. Best of luck with everything.