Negative Equity / Trading Down / Tracker Mtg

Q

qs222

Registered User
Messages
15
Looking for some advice in relation to what Banks are willing to look at. Currently in a situation where we are in negative equity and have to move location due to work and family circumstances.

I have read some of the previous posts in relation to the Expert Group on Mtg Arrears/Personal Debt where trading down debt was discussed but not sure that that Expert Group ever reached a conclusion/final recommendation other than advising the Banks to look into creating such a product? Have the Banks started to implement any of the findings/action plans?

Current Mtg 300k
Current value 175k
Negative Eq 125k

Potential house to buy 162k
New Mtg Required (less savings) 145k............total new mortgage plus negative equity carried over 270k in total will be less than current mtg.

Looking to see if anyone has any experience of Banks in this situation:
(1) will Bank consider above
(2) currently have a favourable tracker so ideally would like to keep tracker on the negative equity portion. As it stands we have a tracker on the full amount so it would be beneficial for the Bank to reduce the amount of tracker debt

Any advice/experience of the above would be welcome.
 
It may not be what you would prefer to do but have you investigated renting rather than selling and buying?
 
Renting would be an option but would rather not and given it would work out with less debt if the Bank would agree then it makes sense. Not looking for any forgiveness etc.
 
Unfortunately you are the only one to benefit in this scenario. I sincerely doubt that any facility that might be put in place would facilitate you in this way. Based on your first post in effect you would be getting a bank to give you a 100% mortgage based on current valuation of 162k at current market rates (which given the market would be quite an achievement) plus an unsecured loan of 108k at an extremely low rate over a very long term. It doesn't make sense for any bank to lend in this fashion. Unsecured debt normally attracts a higher interest rate because it is unsecured. How would you propose the bank finances such an arrangement?
I don't know and haven't heard of any down-trading facilities being put in place but I would doubt if they would ever be that favourable to the borrower. As you have a tracker, it might be worth investigating what getting rid of that tracker might be worth to the bank. Currently you cost them money as the loan agreement they have with you precludes them from passing on their current cost of borrowing to you. Your negative equity by your calculation is 108k (negative equity is your deficit not your house's so (value of assets + cash) - (money owed) is 108k) which is a little over 33% of the mortgage. If you had time and were not in a rush to move, you could try looking for the bank to give you a capital reduction in exchange for you moving to a standard variable rate. Given your circumstances though that probably isn't feasible.
 

If the banks don't start changing how they lend, then hardly anyone will be buying/selling and we will be in this situation years from now.

Banks need to be more flexible, renting isn't going to help matters.

As for who is benefitting, everyone will, including the state.
 
Renting will help matters as it is a more flexible use of property. However, I don't disagree with you, the banks will need new approaches for lending. I do not believe though that banks creating massive unsecured loans at very low interest rates over very long terms as the OP has suggested is a workable approach.
 

But people have to live and not everyone wants to stay here, often home owners need to move abroad so selling and taking an unsecured loan is the only option.
It cannot be expected that everyone who has a mortgage, in negative equity and wants to move, has to rent. This is not viable for people who have no option but to move abroad to work.
 
My situation is slightly different - negative equity of 90k , i have planning permission for a one off house - post build the mortgage i have would be less/at worst the same as my current mortgage. Are the banks lightly to be more interested given the value of the house will be more than the mortgage ( based on recent one off sales in the village). i have deposit of 20% in savings
 
I cannot see any bank being agreeable to this. But do ask them and see what they say. If they say no think of other options such as using your savings to pay down your mortagage and increasing your monthly payments to get yourself out of the negative equity earlier.
 
You must log in or register to reply here.
Menu
Log in
Register