At what point does a tracker become more expensive?

P

Pique318

Registered User
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I'm curious about this scenario but I don't know enough about how mortgages are calculated to work it out.

How much does a property have to decrease in value before its worth selling, taking the hit in NE and then buying a now substantially cheaper (possibly nicer, or better located) property at a higher SVR?

Or is it worth holding onto a tracker until the bitter end, even if the mortgage is far higher than the value of the property?

The SVR will definitely rise but in a smaller principal sum.
However in the long term, the higher priced house might recover to close or even above it's original price and the tracker becomes golden again.

I haven't thought too deeply about this, it's more a musing.

Thoughts?
 
NE is only a real problem if you cant afford your repayments.

thats not meant to be insensitive if thats the case it just sounds more like you dont like the idea of being in NE rather than you are struggling because of it. Also if you're on a tracker your payments probably havent changed much

You were thinking about buying a house that added to your NE costs less than your original house?
 
The only way it could possibly make sense is if you sell the tracker house, then prices drop by a percentage high enough to offset the extra NE you are tagging onto the second house.

You may be looking at it as
300k house @ 2% tracker
vs
150k house @ 4% SVR

but if you already own the tracker house, you owe the money. Mortgages in Ireland are (or at least are meant to be) full re-course mortgages.
 
Pique318 said:
Great contribution, thanks.
Makes it so much clearer now.
Click to expand...

Sorry but I couldn't understand your post - too many hypotheticals to give any clear advice on, you're asking us to compare imaginary apples with imaginary oranges or they might be mandarins or grapefruits and they might be here or in China?
 
Im not clear on how you would buy the 2nd "substantially cheaper" property?

If you sell the original property for half the value of the mortgage (for arguments sake lets say you sold the house for 150k with a 300k mortgage) what do you buy the 2nd property with? You owe the bank 150k, so they wont lend you anything, if you proposed using cash saving, then it would be better to use it to pay down the N.E. in the 1st place.
 
Hi Pique

I think you need to give a concrete example to illustrate the point you might be making.

It really is difficult for us to understand.

I think you might be thinking that if you sell a house in negative equity which has a tracker mortgage that you will not owe any money? Therefore it would be worth getting rid of the house. Unfortunately that is not the case.
 
Maybe Pique is assuming you can cover the negative equity from savings? So perhaps it is sell house A, settle the difference with savings (ignoring a lender discount for giving up the tracker), buy house B at a lower price?

Sounds expensive to me. Loss of earnings on savings (maybe) plus the higher cost of borrowing. Agree it needs an example though.
 
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