Negative Equity but want to self-build

Hi, I'm looking for some advice on my current situation and potential courses of action. In summary, myself and wife bought a house in 2006 for €240k which is now approx worth €140k were it to go up for sale. The o/s mortgage balance is approx €205k giving negative equity of €65k. We're on a tracker rate of 1.3% on the mortgage.

I've recently been given a half acre site by my parents. An estimate would be that a decent sized 4 bed house built on this site could be worth €300k. Lets assume that the build cost is around €220k.

Myself and my wife have €50k in savings currently and have a joint income of €100k per year, both PAYE workers. We have an expanding family so would be very keen to try and build our own house and move from our existing home.

My main questions are if we were to rent our existing house, could we apply for a brand new mortgage with any institution and use part of the €50k savings as a deposit towards a new build ? Our current mortgage provider is BOI. Would they advance us a new mortgage if we were to rent our existing house ? Also, if we were to sell our existing house and try and get a negative equity trade up mortgage with BOI to build a new home, what way would they approach our savings ? Would they look to clear out all our savings against the negative equity ?

Thanks for any feedback and opinions about how we could try and build on our site.

It can be done. We were in a very similar position with existing mortgage with 100K neg equity, site gifted, savings, good incomes etc.

We applied for a self build mortgage late last year via a Broker and were approved through Haven, moving into new house soon.

I would recommend negotiating a fixed price contract with the builder, obtain full planning permission and arranging a rental appraisal/valuation on your current property before approaching banks. A valuation of the site, and finished projected value of plans is also a must. Best of luck.

Given your income and level of existing mortgage I don't see this proposal as being a runner. I.e. end result would be total mortgage debt of c400K. However, you won't know until you try. Approach your bank with the proposal. They will certainly be able to give you a quick decision on whether the figures stack up without having to progress to a formal proposal.

Let's look at the numbers


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So I imagine that BoI would be quite happy to allow you to transfer your tracker to the newly built property. But you will have to sell your existing home first.

I doubt if they would give you a mortgage for a new house, while keeping the old house. But even if they did give you a mortgage, you should not take it, as you are taking on too much risk.

Thanks Brendan.

Sounds like maybe we should look at postponing this for a couple of years and aggressively pay down our mortgage to narrow the negative equity gap. I wouldn't want to lose control of or have all our current savings taken away.

They won't take away your current savings. You will be applying these to the new build. Why would you want to retain your existing property/mortgage which would be extremely stressful to service if a new mortgage was also agreed. You need to assess whether you can retain the tracker rate on the new build restructured mortgage and transfer the remaining negative equity element over to the new property as per BB's posting above!