Hi
Have any posters recently gone through the process of leaving their existing home to a new property where they were in negative equity and had to consider whether to sell the existing property (trade up negative equity mortgage) or rent it out instead (and then obtained a brand new mortgage) ?
I'm currently in a situation where my existing home is in negative equity, but I have a site where I would like to build a new home for more space for a growing family etc. What considerations should I be taking into account when deciding whether to cut my losses on the existing property or hold onto it and take rental income ? I was recently in to see BOI and they said they would give approval for a neg equity movers mortgage, current tracker rate + 1% for 5 years or a new mortgage and let me keep existing home.
High level figures are as follows :
Current Mortgage O/s = 200,000 and 27 yrs remaining
Rate = ECB +1.1% so 1.15%
House Value = Approx 150,000
Neg Equity = 50,000
Combined income of myself and spouse = 100,000 pa (both PAYE workers)
Savings = 50,000
We're looking to borrow 200,000 to build the new house so I guess at a basic level, the scenarios are :
Option 1
Sell house, use savings to write off a big portion of the neg equity and then roll
mortgage onto new build at a rate of 2.15% for first 5 years. This leaves less overall exposure and also removes the headache of managing a rental property.
Option 2
Keep existing house as an investment as tracker rate is so low. Monthly payment is currently 740 per month and rental income would be expected at 700 per month currently. Put savings against new build and have a reduced mortgage although at a higher rate. Based on LTV, we might get somewhere in the region of 3.5% at the moment. This option leaves us with an increased overall mortage exposure but allows for rental income to wind down the neg equity over a period of a few years and also the potential of house price growth/investment property.
Has anyone gone through anything similar recently ? Just interested in your views and final decision if you have. I've been mulling over this for a while.
Thanks
Have any posters recently gone through the process of leaving their existing home to a new property where they were in negative equity and had to consider whether to sell the existing property (trade up negative equity mortgage) or rent it out instead (and then obtained a brand new mortgage) ?
I'm currently in a situation where my existing home is in negative equity, but I have a site where I would like to build a new home for more space for a growing family etc. What considerations should I be taking into account when deciding whether to cut my losses on the existing property or hold onto it and take rental income ? I was recently in to see BOI and they said they would give approval for a neg equity movers mortgage, current tracker rate + 1% for 5 years or a new mortgage and let me keep existing home.
High level figures are as follows :
Current Mortgage O/s = 200,000 and 27 yrs remaining
Rate = ECB +1.1% so 1.15%
House Value = Approx 150,000
Neg Equity = 50,000
Combined income of myself and spouse = 100,000 pa (both PAYE workers)
Savings = 50,000
We're looking to borrow 200,000 to build the new house so I guess at a basic level, the scenarios are :
Option 1
Sell house, use savings to write off a big portion of the neg equity and then roll
mortgage onto new build at a rate of 2.15% for first 5 years. This leaves less overall exposure and also removes the headache of managing a rental property.
Option 2
Keep existing house as an investment as tracker rate is so low. Monthly payment is currently 740 per month and rental income would be expected at 700 per month currently. Put savings against new build and have a reduced mortgage although at a higher rate. Based on LTV, we might get somewhere in the region of 3.5% at the moment. This option leaves us with an increased overall mortage exposure but allows for rental income to wind down the neg equity over a period of a few years and also the potential of house price growth/investment property.
Has anyone gone through anything similar recently ? Just interested in your views and final decision if you have. I've been mulling over this for a while.
Thanks