Changing Mortgage when LTV is Terrible

W

WarrenBuffet

Registered User
Messages
173
Hi,

I bought my house close to the peak of the property bubble and got a 100% mortgage. Since then the value has decreased by up to 40% according to some sources.

Assuming i wanted to change my mortgage provider would i really have any options considering that the loan is proabably far higher than the value of the property, i.e. am i stuck with the mortgage i have? My partner and i are in very secure jobs but I am not sure where we would stand with regard to LTV.

WB
 
So effectively the thousands of people like me who bought near the top of the market are stuck with the mortgages we currently we have??

God almighty this may not be a massive problem now but i can foresee serious problems for people like me if interest rates start to rise - the banks will have people like me over a barrel.

Sorry to sound a bit thick but just to doubly confirm:
I have no mortgage options until the market value of my property is less than 92% of the loan?
 
Thanks for doubly confirming that.....

Damn - if interest rates go up i am screwed (as am on a tracker). Is there any point in me looking into getting a fixed mortgage with my current provider or will i be laughed out of the bank? Or should i sit tight with the tracker (which i know i am lucky to have in the current environment)?

WB

PS My own gut is that interest rates will begin to rise in Q1 2010 once the greater EU market starts to recover. I just cannot see a way out of this mess for Ireland inc and think its inevitable our recovery will significantly lag behind that of our European counterparts - interest rates will rise to suit the wider EU populace and the Irish, with our crazy property bubble, will be in for a rough rough ride.
 
WarrenBuffet said:
Thanks for doubly confirming that.....

Damn - if interest rates go up i am screwed (as am on a tracker). Is there any point in me looking into getting a fixed mortgage with my current provider or will i be laughed out of the bank? Or should i sit tight with the tracker (which i know i am lucky to have in the current environment)?
Click to expand...

The bank will be pleased to take you off the tracker and offer you a fixed rate. This in itself should tell you something.

If you're trying to time the market don't, many have tried and failed, stick to the tracker. I would only fix if I needed to be certain of my future repayments or if a series of interest rate increases would overstretch me.

You say you are in very secure jobs, personally I would advise sticking with the tracker.
 
Stick with the tracker. For what it is worth I dont see rates rising until well into 2010 (assuming a recovery of some sort in Europe by mid 2010 which is an optimistic scenario).

Even then the rises are likely to be in the region of .25% every two months probably so it will be into 2011 by the time you see it going up over the 2% mark. Again this is all just speculation.

Just yesterday the IMF has been recommeding to the ECB that they keep rates low, or if you read between the lines they are asking the ECB to think about reducing them slightly further.

Don't panic by jumping for a fixed rate, you cannot time the market and you probably wont save money. When rates come down again after the next rise (maybe 10 years time or whenever) then you wont get a tracker rate ever again. You wont do better than having a small margined tracker rate over the life of your mortgage versus trying to time the market with fixed rates.
 
I'm in a similar situation.

I bought a 1 bed apt late 06 (with 05's prices as off plans thankfully) but have a mortgage that was 90% LTV at time of purchase. I'm in negative equity now of anywhere between 40-60k on original asking price depending what source you read, so not sure what exact LTV it is now. My 3yr fixed rate of 4.69 expires in Dec. What options do I have? I know it's early in asking and anything could happen between then and now but at least trying to get an idea of the way things are early enough and perhaps plan or be forewarned.

I'm single and a public servant and on an ok but not great salary but it just about covers monthly bills etc and a small disposable income now (since levies), a now smaller credit card bill which any left over income from last quarter+ has been spent to clear it off (last yr and early this year, things just went a bit mad more than usual and really felt all the levies since), the CC will be cleared in 2 mths and no savings unfortunately left (bar emergency emergency few hundred in CU) to bring the LTV down. No other loans or debts btw.

I was hoping to perhaps switch if other bank willing to lend, or negotiate with current provider. Am I likely to be stuck with my current provider and what they decide once the fixed term is finished? Do you think I'd get variable or be able to fix again? The max fix I can afford is what I've got but if the variable rose to the peak levels over the last 2 yrs's I'd not be able to afford them.
I'm aware it's an open ended question, with the little info I've posted and the way things are at the moment and the way the thinking is of the banks.
 
If you're in negative equity you cannot move to another lender. Your current lender will write to you when your fixed rate expires and will probably offer you a variable rate and other fixed rates to choose from.
 
Cheers for that.
I went with a broker in the first place, even still was limited in lenders at time and it was current provider with fixed or no mortgage.

Darn it anyhow on the negative equity. I was hoping against hope that would be able to shop around. Ok will suck it up and hope that rates offered at time, aren't too bad.
As OP mentioned, there are thousands of others like the both of us, in a similar situation and with a savage budget coming up. Tis the pits! Thanks for the advice.
 
WarrenBuffet said:
this may not be a massive problem now but i can foresee serious problems for people like me if interest rates start to rise - the banks will have people like me over a barrel.
Click to expand...

You are so right. Contrary to what most other people on AAM think, I believe once NAMA is up and running that banks will start to increase interest rates, they need to increase their profits and the only way to do this is via their customers.

To sort out your situation you should overpay your mortgage as much as possible so that you do have other options should interest rates rise at your bank. If you are not able to afford much of an interest rate hike than you should fix for 3 to 5 years if it will give you breathing space and peace of mind. Don't forget there are penalties for breaking fixed rates, make sure you know exactly what these are before you fix.
 
Hi,

Any revised comments on this thread in light of the recent good economic news from Germany, France and Japan????

I really didn't expect the world economies to recover so quickly whilst Ireland, sadly, seems to be remaining in free fall. I hope my concern that interest rates will rise once the greater EU economy recovers are more a medium term (1 year +) rather than short term likely occurrence. If thats the case i might as well stick with the tracker and, as a lot of other posters suggest, avoid trying to time the market.

Overpaying on the mortgage is an option for me as to be honest i can well afford it. However it would sicken me to pay in more as with negative equity i would feel for every extra euro i throw at it i am immediately writing off 30 - 50 c. (Additionally i have a large sum of cash that i could lodge against the mortgage - however i have been saving hard on this for some time and again it would kill me to throw more good money after bad).

Personally i feel its more important to have cash on hand rather than a smaller mortgage in these economically very volatile times. Any comments?

Thanks,
WB
 
As far as long term interest rates are concerned, the fact that Germany and France are already recovering is likely to mean that interest rates will start rising sooner than was expected earlier, perhaps in 2010.

In the long term I would expect interest rates to rise because they are at an all time low at the moment and many Governements have been pumping money into their economies. This increase in the money supply worldwide can only lead to inflation which will have to be curbed by raising interest rates.


WarrenBuffet said:
Overpaying on the mortgage is an option for me as to be honest i can well afford it. However it would sicken me to pay in more as with negative equity i would feel for every extra euro i throw at it i am immediately writing off 30 - 50 c. (Additionally i have a large sum of cash that i could lodge against the mortgage - however i have been saving hard on this for some time and again it would kill me to throw more good money after bad).

Personally i feel its more important to have cash on hand rather than a smaller mortgage in these economically very volatile times. Any comments?
Click to expand...

Overpaying the mortgage is not throwing good money after bad because no matter what value your property is you are stuck with the loan and, the value of the loan will only go down when as it is paid off.

Yes having a cash balance is also important in a recession but you have to balance that off against paying off your mortgage and decide for yourself. For a start, compare the net interst that you are receiving from the cash deposits to the interest you will save by paying off the mortgage.
 
Um, Warren now is most definitely the time to overpay on tracker mortgage irrespective of equity in the property. The interest rates are particularly low so you have even more financial space in which to overpay. I understand what you mean that you no longer have that money you have paid in and can't recover it out of the value of the house but you are losing money overall in interest charges over the term of the mortgage. The interest you are earning on deposit is likely fairly low, it is then subject to DIRT to make it even less. I am not suggesting splurging all your savings on your mortgage but perhaps consider using some of it combined with overpaying on your regular repayment to start making a dent in it.
 
Can I ask a question which deviates a bit from this. I too am considering changing mortgage providers at present and fixing. I wanted to know if there is still a charge of €1 per thousand on your mortgage if changing providers? I have a general outline of the solicitors fees but there was no mention of this but I have seen it mentioned in some old posts on this website. Does anyone know what the situation is?
Thanks,
Lillyjoe
 
I think you are referring to stamp duty. If yes, that was abolished some years back and there is no stamp duty payable to Revenue on a mortgage deed.

mf
 
MF1 that is exactly what I meant. Thanks, that's a relief.
 
WarrenBuffet said:
i have a large sum of cash that i could lodge against the mortgage - however i have been saving hard on this for some time and again it would kill me to throw more good money after bad
Click to expand...

what rate of return are you earning on this money, net of DIRT?

what's your mortgage interest rate?

if you're earning less on the savings than you're paying on the mortgage then you're essentially lending money to the banking system at a lower rate and then borrowing the same money back off them at a higher rate. they are pocketing the difference.

lowering the mortgage will also improve your LTV which increases your options for refinancing.
 
You must log in or register to reply here.
Back
Top