negative equity - need to move - have savings

We have the same problem: Home in NE, need space. Contacted EBS. They said get a personal loan for extension from the credit union and said that they would consider reducing our mortgage by an amount per month. Their mortgage advisor said they would not even advise filling in paperwork, that if LTV greater than 80% it is a non-starter. Like you, we can afford a loan if over the mortgage's term but not as a personal loan over 5 years with no guarantee that the mortgage would be reduced accordingly. Any mortgage reduction, we were advised, would result in an extension of term (variable loan).
Also, no option to buy elsewhere and transfer the NE with us either, they won't allow it.
Also told us that we can't move loan to another bank as none will touch us with negative equity.
Funny that they were throwing money at us and gave us the loan when it was 6 times our joint gross earnings and considerably more than our net.

I should add that we have the money for the extension in savings but we actually want to use this on a deposit for a house at a later stage as the area does not suit us now.

Stairs said:

I should add that we have the money for the extension in savings but we actually want to use this on a deposit for a house at a later stage as the area does not suit us now.

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This doesn't make any sense, you are in negative equity, but want to do an extension with a new loan, and in order to fund that loan you would have to extend your mortgage term, meaning it would take longer to pay off your mortgage and slow down you getting out of negative equity, meanwhile you have savings sitting in a bank in the hope of moving soon. Plus your mortgage would be costing you more in interest.

Hi Bronte,

Thanks for your input, we already know that and how we are paying a higher rate on mortgage than savings (though it's in high interest account). We considered using savings but would still need extra, as 3 quotes for builders are not any less really than in boom, not sure if it's just where we live.

We want to move, to be honest the extending was a short term solution and we only went to discuss all options. I'm really just trying to point out to the OP, that eventhough we have money in the building society, they will not help with top-up as LTV >80%. They said that they will not top-up on property in NE, and advised that the credit union or personal loans would be the best way to generate the money.

As I said, they could reduce monthly mortgage but problem being that personal loans would be at a very high interest rate, and they could not agree to reducing mortgage by that amount as this would bring us close to the interest only amount, so it is not workable (so even if they could, we would not be reducing the mortagage for those years...so unliky that they would agree).

We have now resigned ourselves to staying here until the property gets back to a value whereby we owe a similar amount and in effect, we would just be starting again with our deposit that we have saved. We have used Karl Jeacle to figure when that's likely (crystal ball anyone?) . So effectively, about 15 years after we took out this mortgage, we expect to be in a position of being back where we started.

Stairs said:

. So effectively, about 15 years after we took out this mortgage, we expect to be in a position of being back where we started.

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And what if you put the savings against the mortgage and instead of saving you overpaid the mortgage where would you be time wise? Have you done the calculations?

I have heard rumours that some banks are allowing the transfer of negative equity mortgages from one house to another. Would your house sell do you think? If so maybe you could approach the bank and ask them can you sell your property and move your negativty equity mortgage to another house in an area you would prefer to live in??

Totally forgot I posted. Thanks for further replies!
Putting our lump sum off the mortgage would be a drop in the ocean. Yes would be worth doing if we intended on staying here (still no move!) but not worth it for the monthly decrease.

Since then, I did indeed contact about a NE mortgage. Funny how their tune changed! Yes, it is now a runner. But from what I gleaned, we would be taking out a totally new mortgage. The transactions would need to be done back to back and considering our house in not particularly sought after, this is unlikely to happen (going sale agreed in a good area at low price, while selling our own).

Hi Stairs

I presume you are on a SVR mortgage? If so, then it makes financial sense to put the money against the mortgage as the interest rate saved would be higher than the interest earned. If you save money, this is the quickest way of exiting negative equity.

Extending the house makes no sense. Extensions rarely add value to a house, so you would just be delaying the return to positive equity.

If you need to move, have you considered letting out your house and renting another one? This would seem like the solution to your problem. The rent you pay will be higher than the rent you receive, so your monthly expenditure will rise. But a bigger house is more expensive than a cheaper house.

1st thing to do is put your house on the market and try to sell it.
You'll need your lenders consent to sell with negative equity.

Once house is sold or sale agreed (with contracts signed)you can either buy
another house in desired location or rent a house in desired location.

A back to back sale/purchase will be nigh on impossible to achieve in your circumstances.

Do not consider extending your current house in a location that no longer suits you.

Do not consider reducing your NE with your deposit money.

We are in a similar position - house in NE, too small for our growing family and would like to move. We also have some savings but not enough to cover NE. If we were to put house on the market and try to sell as DR. Debt suggests, would the lender not insist on taking our savings to pay off some of the NE? (savings and mortgage in same institution)?

Stairs, what exactly have you decided to do? An extension would likely cost a lot, and you can buy now for less than build costs.

Sar, yes of course they will want your savings for the NE. But you need to get your banks permission to sell. Is it likely, you'll have to post a lot more details.

Sar said:

If we were to put house on the market and try to sell as DR. Debt suggests, would the lender not insist on taking our savings to pay off some of the NE? (savings and mortgage in same institution)?

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Not necessarily. Does your bank do negative equity mortgages? Our bank (BOI) does and we are in the process of applying for a new mortgage, it will also include having a separate loan on the negative equity part of the original mortgage,our bank does the tracker +1% for 5 years and then it goes to a variable (not exactly ideal but don't have much choice). We have savings which wont cover the negative equity but will be a 20% deposit on the new home but i dont think they even require 20% deposit it is all about the total borrowings and the ability to pay.

I didn't start this thread though it looks like I did!

Brendan, Yes standard variable. House is currently not rentable. We would be lucky to get 900, mortgage 1400. We could not make up that shortfall and pay the approx 1600 to get a house we would want.
We met with bank, they would not allow interest-only to fund this, not while we had money in the bank. We could use the 'deposit' money for the shortfall, but then would be left in a few years in a worse position.

Sar, They would consent to sell ours in NE/take loan for the NE/buy another house. But our houses are not selling so cant see it happening. They would take our savings off the new house, like a deposit rather than covering NE.

Bronte, we have had quotes for extensions almost halve in the two years since we had plans drawn. Again I really don't want the extension as would mean we would also need to convert attic, we'll never get it back, and will have no money for future. We would also be tied to an area that we never wanted to be in long term (as though we can afford to be picky).

Still in a quandry, house too small for our needs but may be pushed into the extension route as other ideas just don't seem to work.

mro said:

Not necessarily. Does your bank do negative equity mortgages? Our bank (BOI) does and we are in the process of applying for a new mortgage, it will also include having a separate loan on the negative equity part of the original mortgage,our bank does the tracker +1% for 5 years and then it goes to a variable (not exactly ideal but don't have much choice). We have savings which wont cover the negative equity but will be a 20% deposit on the new home but i dont think they even require 20% deposit it is all about the total borrowings and the ability to pay.

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I'm in a similar situation with ICS so just wondering if you could clarify what you mean by your earlier post.

Am I correct in my understanding that you currently have a NE mortgage with BOI (+1% rate). BOI will allow you to trade up, carrying the negative equity portion after house sale at the tracker rate for 5years then variable, then getting a new BOI house loan at the variable rate? If so, did BOI force you to put savings against the negative equity, or against the new house purchase (obviously latter more favourable to you).

Cheers