Sell & Buy or Sell & Rent - Need Advice

Hi All

Here is our situation

1. My wife and I are both 35 and have 3 kids
2. We really want to move back to Dublin and have sale agreed our house
3. There is 25K negative Equity outstanding
4. We have 37K in savings

we are in the process of applying for a negative equity mortgage but I am not sure if this is the right move. Maybe we should pay off the rest of the mortgage with our savings and save for another two years for a deposit on the house.

Part of use feels we have been home owners for nearly ten years and by not buying now could leave us facing the unknown however we also feel like we are rushing back in to buying another home because a negative equity mortgage is our only choice.... is using our savings a really bad idea to pay off the negative equity portion of the mortgage?

We are really in a bind about this and would appreciate some good practical advice.

Thanks

It's very hard to know what to do.

If you have an Ulster Bank cheap tracker, you can transfer it to another property. The availability of such a cheap loan would be a deciding factor for buying now.

Do the rent vs. buy calculations. For example, if you are planning to buy a €300k house, it will cost you around €13,500 a year in interest.

How much would it cost to rent such a house? If it's a lot more, then you should consider buying it.

Of course, it's not enough to compare the existing cost of renting vs. buying. You also have to anticipate how interest rates and rents are going to move. While both are very difficult to forecast, interest rates are artificially low at the moment and should return to more normal long term averages in the medium term.

If you sell your home, you will have to use your savings to discharge the negative equity. You won't have a choice in that.

If the bank gives you a negative equity mortgage, you could hold onto your savings. You should do so for the time being at least, until you buy and settle into your new home. When things settle down, you should pay any cash left over off your mortgage as it's likely that the mortgage rate will be a lot higher than the rate you get on your savings. It's possible that the bank will stipulate that you put your savings against your new mortgage anyway.

Brendan Burgess said:

If you have an Ulster Bank cheap tracker, you can transfer it to another property. The availability of such a cheap loan would be a deciding factor for buying now.

Click to expand...

The quote above would be the deciding factor for me. If you were lucky enough to have the above type tracker and able to transfer it to a property that suited your work and family and the house was affordable I would go for it. Best of luck

Not at all a fan of negative equity mortgages, even if you had a great tracker I think it's madness. You have the money to pay down the debt. You rent close to where you are thinking of buying to get a feel for the area and whether you are making the right decision, try and rent something that allows you to save. Get as large a deposit as you can and then opt for a mortgage that is about 20 years.

Agree with Bronte other than the bit about 20 years.

If you are borrowing close to 100% of the house value, get as long a term as possible - even 40 years. While you are settling in, make the normal repayments. When things settle down, you can start overpaying your mortgage and bring the term down to 20 years if that is what you want to do.

It is a question of balance - while you have young children, you should not be making unnecessary sacrifices to repay the capital on your mortgage.