Real life negative equity dilemma
Discussion
Right forum? Wrong forum?
So my missus bought a flat at just the wrong time, for top money, on a 95% repayment mortgage for 35 years (FFS) and will shortly be coming up to the end of the 2 year introductory rate period and will need to remortgage.
I'm fairly sure she'll be in negative equity, based on similar flats in the same block are currently being marketed at 30k less than she paid. I don't have a figure for selling prices yet. I'd guess that her current lender, and any other lender for that matter, will revalue the flat downwards to a figure significantly lower than her debt.
Her mortgage currently is already about 50% of her net income, so I can see her struggling with increased repayments. No savings, no assets to speak of.
What are her options? And how much is it going to cost me
For example, I can see a quick, short-term fix of swapping to interest only, but she still won't have a repayment vehicle in place. And she'll still have to negotiate a reasonable rate to make that plausible. Please help
So my missus bought a flat at just the wrong time, for top money, on a 95% repayment mortgage for 35 years (FFS) and will shortly be coming up to the end of the 2 year introductory rate period and will need to remortgage.
I'm fairly sure she'll be in negative equity, based on similar flats in the same block are currently being marketed at 30k less than she paid. I don't have a figure for selling prices yet. I'd guess that her current lender, and any other lender for that matter, will revalue the flat downwards to a figure significantly lower than her debt.
Her mortgage currently is already about 50% of her net income, so I can see her struggling with increased repayments. No savings, no assets to speak of.
What are her options? And how much is it going to cost me
For example, I can see a quick, short-term fix of swapping to interest only, but she still won't have a repayment vehicle in place. And she'll still have to negotiate a reasonable rate to make that plausible. Please help
Dr_Gonzo said:
Sounds like she bought something that was way more than she could ever afford. 
No s
t Sherlock. I spent a night on the sofa when I pointed that out, "harsh bd" that I am. You could probably have heard our dicussion about 35 year mortgages from the moon Anyway, I guess I was exploring any potential avenues other than reverting to SVR. To be honest, not knowing the actual numbers of her current deal I don't know whether the SVR will be greater or less than her 'introductory' rate, but it sounds like the expectation is that it may well be lower. I much prefer her to have a choice rather than being forced into a decision though... I think this might end up being one of those expensive life lessons.
Scotal... it's the Alliance & Leicester.
I'd forgotten about this topic
As suggested, and as it stands, her mortgage will revert to SVR and there's no problems from the mortgage end. Slightly more worrying is that my suspicion of negative equity is now a cast iron certainty. The flat upstairs is currently on sale at £92,995. She bought hers for £150,000 in September 2007. Ouch. I haven't told her, the sofa's no good for my back
As suggested, and as it stands, her mortgage will revert to SVR and there's no problems from the mortgage end. Slightly more worrying is that my suspicion of negative equity is now a cast iron certainty. The flat upstairs is currently on sale at £92,995. She bought hers for £150,000 in September 2007. Ouch. I haven't told her, the sofa's no good for my back
It's not good for us, but fortunately it's not all doom and gloom. She's been 'encouraged' to change jobs and that's come off so fingers crossed she'll be able to overpay to the monthly limit for the foreseeable. I'm certainly not going to take charge of her finances, I can barely cope with my own, but we have an agreement in place... she doesn't waste her money on fripperies (clothes, handbags, food and whatnot) and I stop banging my head on the fridge in exasperation.
It's not even a particularly nice flat
It's not even a particularly nice flat
No, no, no... the original question was raised because I didn't know what would happen when her mortgage came to the end of the initial 2 year rate. In my simple mind, I thought that what would happen would be the mortgage company would say "Right, you want to remortgage for £140k, because you've paid off some of the original loan. Smashing. Unfortunately we now think the flat is actually worth £100k, so your collateral is worth less than the debt. So, if you want a mortgage with us, you need to pay off the £40k differential before we give you a £100k mortgage". I know my missus doesn't have £40k sloshing around. So, if her mortgage company wouldn't remortgage then she would have to go out to the market, at which point the same dilemma would occur - the value of the flat wouldn't cover the loan required to pay off the original mortgage company. Does that make sense? As I say, it was my lack of understanding.
I still think it's wk that she has a loan of £140k on an asset worth, say, £90k. And that's possibly optimistic. Sorry if the numbers are a bit duff, but you get the gist I hope.
I still think it's w
k that she has a loan of £140k on an asset worth, say, £90k. And that's possibly optimistic. Sorry if the numbers are a bit duff, but you get the gist I hope.Gassing Station | Finance | Top of Page | What's New | My Stuff