Negative Equity, want to move in a few years time, save or pay off existing mortgage

T

tipping

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I assume a lot of people are in the same boat and hope that this is the correct forum. Bought apartment 2006, got married, had baby a little sooner than expected, will need to move a little sooner than expected, guessing in about 3 years.. Better schools, closer to home etc..


Amount outstanding: €294k over 28.5 years.
Am currently in negative equity, current value is approx €270k ish.
Currently saving approx 1k per month

So with a view to moving should we continue as are or start overpaying on the mortgage... Here are the rough figures..


Continue paying mortgage as is, save 1k per month
Dec 2011:
Amount Outstanding: €278k
Savings: 41k

Over Pay mortgage by 1000 per month
Dec 2011:
Amount Outstanding: €240k
Savings: 5k

Over Pay mortgage by 500 per month and save 500 pm
Dec 2011:
Amount Outstanding: €260k
Savings: 23k

What do you guys think is the best strategy?
 
Re: Negative Equity, want to move in a few years time, save or pay off existing mort

Unless your savings are earning more than the interest rate on your mortgage (remember to deduct DIRT) then I think the best thing to do is pay off the mortgage.

Jeacle's calculator is great for looking at mortgage prepaymenst etc
 
Re: Negative Equity, want to move in a few years time, save or pay off existing mort

I'm not thinking of this from a best return on money/interest rate point of view. I'm trying to think of the best way to have the capacity to move on in 3 years time. Supposing prices continue to decline it may not be an option to sell in 3 years time but we'll still have to move.

Hence thinking that having money on deposit is the way to go, as may not be able to release equity to move if I keep paying into the mortgage (which would otherwise be my preferred option).
 
Re: Negative Equity, want to move in a few years time, save or pay off existing mort

I would suggest that if you wish to move you will need some deposit as the days of 100% mortgages and no contract deposit are really over and sellers will I think look for deposits in the future.
 
Re: Negative Equity, want to move in a few years time, save or pay off existing mort

You cannot sell encumbered property. You would have to fully repay your mortgage if you want to sell. So, if you are in negative equity that means possible purchase price plus additional amount necessary to fully pay off the mortgage.
 
Re: Negative Equity, want to move in a few years time, save or pay off existing mort

I understand that you can't sell encumbered property and then when property is sold outstanding mortgage must be cleared.
I am thinking of keeping the money out of the mortgage. The difference between a competitive interest rate over three years and mortgage rates is probably not enough to justify putting it into the mortgage, as it completely ties us to this property.
If we can't clear the mortgage on the existing property when we go to sell in a few years time then we may look at keeping it and renting it out, should have enough income to cover any shortfall in rent. Then sell it on whenever it will pay itself off.
 
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