Case study €80k negative equity with Bank of Scotland, what are our options.

Income details
Net monthly €3100 ,private sector , full time with company since '04.
Net monthly income spouse: €2300, full time with company since '07.
Married ,both late 20's.

Do you need a car for work or do you use public transport? We have 1 car
Number of children 0- 2 years old: First baby due in a few weeks

Home loan
Lender: Bank of Scotland, 28 years left
Amount outstanding: 260000
Value of home: 180000
Interest rate: tracker , ecb +1.5%
Monthly repayment € 847.54 ( the most recent June ecb cut has not been applied yet, so this amount will reduce in August)
Amount in arrears- no arrears, we have never missed a payment.

Credit Union (both have accounts and history with CU , currently have no savings or loans but have used in the past)
Amount of shares €0
Amount of loan outstanding €0

No other loans , both have credit cards but small balances are cleared every month.

Other savings and investments as of July
Rabo €56500

Do you expect any lump sums in the medium term
No

How important is retaining the family home to you?
Which of the following best describes your situation?

I don't care about keeping the family home. -we are happy to stay here for the next few years.

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it. - We don't care about keeping it,would prefer not to be landlords in the future so ideally we could sell up in a few years. We will keep it though if that makes the most financial sense.

Any other relevant information

What is your preferred realistic outcome ?

We would like the freedom to be able to move/build a new home within the next 2/3years . We like our house which is in suburbia but our preferred option is to live and raise our family in the countryside,in a modest home before child starts school.
Budget required for move would be about €150000

I would like advice on how to best reach our goal .

Is it even worth applying for a mortgage with another lender as we are in negative equity with BOSI.

Do we keep saving for the next few years, fund the move ourselves and rent out our current home?

There isn't very much you can or should do about it at the moment. Your current accommodation costs are very low because of your cheap tracker. The interest cost is around €360 per month (€[email protected]%/12). You are repaying around €6,000 a year off the capital and this will rise in time as you reduce the capital.

When you need to move, you could rent out the house. As it's a cheap tracker, it's likely that the rent will just about cover the repayments. In other words, the rent received will slowly evaporate the negative equity for you.

As you don't need to move for a few years, you should forget about it until then.

It's possible that Bank of Scotland may, at some stage introduce an incentive for people to pay off their tracker early. For example, they may accept 90% of the outstanding amount or around €230k in your case. If this happens, you will be able to sell your home and clear the shortfall in full. They have said that they won't do this, but they might sell your mortgage to a buyer would would have a different policy. So it's important to conserve your savings to take advantage of any such opportunity.

Hi Brendan , thank you for your reply.
If we want to build a new home this may take 2/3 years from planning to completion. Do you think any lender would consider us for a mortgage with our current liabilities ?

Hi Laura

I don't think so, but the only way to know for sure is to apply.

Can you not buy the site and apply for permission now and be ready to build when the permission and lending comes through. Having said that, I think you would be better off holding onto your savings to take advantage of any offer which might come through.

Hi Tommy,

I am in a similar situation to yours with have a low tracker rate with BOS. You can see my several previous posts on the topic.

They don't seem to have sold mortgages where the monthly payments are up to date.

I have finally found an advisor who seems to know what he is talking about, and his advise is to sit tight and keep paying, you may eventually be offered some form of deal.

I would ask a mortgage broker.

Find out what rental is like in your area.
With 56k in the bank you are clearly savers
Your joint income is good.

All the broker can say is no.

Thanks Frank. Rental is very good in our area. There are a shortage of family homes for rent and we would expect €850-€900 PCM in today's market. We have decided to meet with broker for a chat. I would rather know our chances either way so we can start planning for our future