Negative Equity Trade Up Mortgage - How to approach EBS?

OK, as you are in negative equity, the LTV rules do not apply to you. The LTI rules do apply though, but they are allowed to make exceptions for 20% of loans, so there is a reasonable chance you might get one.

House price: €350k
Negative equity: €50k
Less savings: €50k
Loan requiredL €350k

Income: €87,400

Loan to Income: 4 times

CaptainCat said:

First Question:

Is the LTI for negative equity mortgages based on the cost of the new home minus the negative equity or the cost of the new home plus the negative equity?

Click to expand...

I presume it is your total new mortgage to your income.

Second Question:

Have EBS ever entertained the idea of waiving the fixed rate early redemption charge? Our policy states we “May” be required to pay this but I received confirmation from an EBS rep that if we transferred to a new fixed rate then the charge would be refundable. It would obviously be easier for this to be waived but I haven’t read anywhere that EBS have ever done this.

Click to expand...

I don't think that they would waive it as such. If they give you their SVR rate, your rate would fall from 5.15% to 4.15%, so that is unlikely to happen. They should be able to continue charging you 5.15% on €395k for two years, so you would not have to pay a fee.

Third Question:

What is the best way to approach EBS to encourage them to support us with a negative equity mortgage? Because of our lifestyle (don’t drink, smoke, socialise etc etc) we know we will be able to afford the new mortgage but obviously underwriters have strict rules. Furthermore our LTV will significantly drop from 116% to hopefully less than 105% with a new home meaning less risk for the banks.

Click to expand...

Why would EBS make an exception for you?
You have a good record
You are paying a high rate of interest
You will be reducing the negative equity from 116% to 105%
You are just over the limit

Thank you Brendan. You've reaffirmed a lot of what we thought but as we're not 100% au fait with the sector we were worried we were making a lot of wrong assumptions especially with the tightening of regulations which we're not against and obviously need to work with.
We're hoping to speak to the bank soon.

I had read on the EBS negative equity trade up booklet that fixed rates can not be moved to the new mortgage but since our current rate is fairly high we were hoping that it could be a possibility and hopefully then the fee wouldn't apply. The more finance we have to contribute to the new mortgage the better and the fee would put a big dent in our savings.

Thank you again, we really appreciate it.

CaptainCat said:

I had read on the EBS negative equity trade up booklet that fixed rates can not be moved to the new mortgage

Click to expand...

OK. Well then you will have to pay the penalty, and maybe they would refund you on the new mortgage? The only thing you can do is apply and see what happens.

Maybe leave it a little while as I think that the lenders will make Negative Equity mortgages a lot easier as the LTV limits don't apply to them.

Good point. We're hoping we'll be able to put our house up for sale at the beginning of Summer so this will give us enough time to understand how banks are approaching Negative Equity mortgages and what EBS need or want from us to make this happen.

We're hoping to arrange a meeting with EBS in the middle of march to talk about a negative equity mortgage. I was wondering what documents would be advisable to have ready to negotiate with them?

* 6 month statements for all accounts
* 6 month statements for credit card
* mortgage loan statement
* car loan statement (stupid question - do these exist? and would I need one?)

would it be beneficial to give a clear outline as to our monthly incomings and outgoings. I use a monthly excel document for our personal finances. would it be advisable to have this to hand for them to see?

Is there anything else apart from the actual application which we would need for this initial meeting? I'm guessing we'll have to try and make a strong argument with EBS for them to give us the greenlight to sell the house and avail of a negative equity mortgage so I just want to make sure we're in a strong position from the very beginning.

Thanks

You need to take into account the cost of moving too as these will come out of your savings.

You will have to pay for the estate agent fees on the sale of your house, say approx. €6,000 based on a fee of 1.5% + VAT on a sale price of €295,000, plus about €400 + VAT for advertising charges (you can get this reduced, but using this as an example).

You'll need to allow €3,500 for stamp duty.

You'll need a BER cert for your home before putting it on sale, approx. €100.

You'll need to pay for a valuation on your own home, plus the home you're buying, say €125 each, that's another €250.

You'll need to pay solicitor fees on the sale of your home, then the purchase of the new one, say €3,000 including the charges.

You should get a surveyor on any house you buy, not sure what the current rate for this is, but say about €350.

So before you do anything with the house, or buy any furniture, you need another €13,200 for the cost of selling and buying. It's a lot when I write it all down like that.

So your minimum deposit on a €350,000 house is €35,000 and you need the further €13,200 for costs, so that's your savings gone. That would leave your new mortgage at €365,000, which would be about 4.18 of an LTI.

Oh and to your recent question, if you're going in for an initial discussion, you don't really need any documents, you just need to have all the figures in your head or on paper for yourself as the bank probably won't look for anything solid at this stage.

If you went beyond discussions and had to put in an application then you'd need the following:

2/3 of last payslips for both of you
P60's for the two of you
6 months bank statements for all accounts
12 months loan statements
Valid ID for both of you
Proof of address for both of you (bank statements should double as this)
Salary certificates from your employers

The bank will probably get you to sign some forms too allowing them to access private data and confirming that you've no credit union loans.

Thanks Sprocket77. That's great having everything outlined separately above as to where all our savings will go throughout this whole thing and to see that we should be able to cover everything. There is also the possibility of a fixed rate early repayment charge which should be refundable by EBS but we may be able to get family support for this.

EBS have taken down their negative equity mortgage brochure so they're probably in the midst of changing the way they do these mortgages, hopefully not to our detriment.

I want to start gathering the documents together so i'll work on the P60s and payslips and request the statements closer to filling out the application.

Do you think its possible that EBS would agree to a 4.18 LTI? The new rules have me nervous that they wont allow us more than the 3.5 LTI.
(sidepoint: My husband actually got a small payrise since I posted my initial query so his salary now stands at 50k)