Negative Equity Trade-Up Scenario

S

Seabass

Registered User
Messages
19
Scenario
Married Couple. Combined Gross Income 60k + 48k = 108k
Savings ~45k
Living in a property that the wife owns jointly with her brother.
Property value 300k, Mortgage 320k = 20k Negative Equity
Brother is happy to walk away from the property and allow the couple take ownership of the property and negative equity (prices are rising in the area where the property is so the couple are happy to take the NE).
Bank are happy to accommodate this change as well subject to a max mortgage of 305k (so 15k to be paid down on existing mortgage and a new mortgage to be issued to the couple for 305k)

This house would not be first choice in terms of the couple's preferences and long term plans for family, larger living space etc. They would prefer to be in a position to buy something costing closer to 400k. However they would be subject to 20% deposit if purchasing any other property

Could a Negative Equity mortgage work for the couple in this scenario to use the loophole of 10% deposit and would it be entertained by the bank ? (The bank in question do appear to have a policy doc online re NE mortgage offerings)
Could the fact that one of the parties doesn't actually own the existing property count against them in this process ?
 
Negative equity mortgage would not be available in this scenario as only 1 party to the existing mortgage will want to transfer to the new property.
 
44brendan said:
Negative equity mortgage would not be available in this scenario as only 1 party to the existing mortgage will want to transfer to the new property.
Click to expand...

Thanks for your reply. Is this based on documented bank policies on NE mortgages or how you think they would answer if asked. In other words is it worth having the conversation with the bank manager ? The only real difference I see from standard NE scenario is that the unsecured debt would be carried forward to new mortgage by one of the existing mortgage holders (+husband) instead of both.
 
By all means seek further clarification from the bank. However I could not see how this particular scenario could fulfill the criteria of a negative equity mortgage given that the new mortgage will need to be in the joint names of husband & wife. The whole concept of transfer of negative equity mortgages relies on the loan counterparties remaining unchanged. A bank always has the ability to agree to an exception but I doubt that you will have success in persuading them on the basis of the circumstances as outlined.
 
Noted. I guess its worth asking the question to ensure all possibilities are at least investigated. Thanks for your input Brendan.
 
You must log in or register to reply here.
Back
Top