In negative equity - sell and rent v rent and rent

[inahutch]

Hi

Background live in 3 bed mid terrace small house in dub 15 on street parking and small back garden. We are family of five.

In what I estimate to be 30,000 to 40,000 negative equity, no other loans about 80,000 euro in savings. We have a tracker so mortgage very managable at present.

Based on review of property register of last two identical properties sold a year apart value has fallen by 50,000 euro over this period.

Kids growing and house not really practical in short to medium term. Can't look for neg eq mortgage at the moment as only one income of 55,000 as partner is studying to upgrade job prospects.

Questions


Talked to lender and was told that they may consider negative equity loan if were to sell and rent. I would have to organise a solicitor to make a formal proposal to the bank. Does anybody know what form such a loan would take would it be at tracker rate or higher rate and what sort of duration would bank allow for repayment? Could they insist we use savings to pay off mortgage?

Other half thinks we should rent out this house and rent a larger house until we are in a position to buy another property and if we are still in negative equity at that time just tag it onto new mortgage. My problem with this is that mortgage conditions state that we must be occupy the house. Would the bank definitely remove the tracker if we told them we planned to rent the house? I know a lot don't tell bank but with banks publically owned now surely there will soon be a mechanism to identify home owners renting out their properties.

I suppose other option is stick it out here until we are in position to apply for mortgage (maybe another 3 years) and try and continue to save as best we can as judging by amounts they are giving out for mortgages the bigger the deposit the better. Just the drop of 50 grand in a year kinda gave me a shock and made me wonder should we take hit now if we are going to have to take it at some point.

Sorry if above makes no sense but thinking about various options is wrecking my head

TIA

 

[ryaner]

Most people who have sold and had the negative equity turned into a loan have had it turned into a personal loan. There were a few cases that came up where people sold, got the personal loan, then ended up with higher repayments than they had on their house with its tracker rate. So definitely do check what rate they are offering _before_ signing anything. Personal loans tend to be circa 10%.

You are in a fairly good position regarding your savings, so you could probably avoid taking a negative equity mortgage.

As for losing the tracker if you sell. Anyone who has told the banks and has it in their contract seems to have lost their tracker rate. The banks have better things to do than check on every house to see if it is rented or not, more so due to the bad PR if they get it wrong. Where this gets messy is that you may be required to tell them it is rented, and by not doing so you'd become liable for bad interest and penalties. Again that is dependant on the mortgage contract.

 

[pc7]

Renting out your own house brings with it lots of charges/fees/taxes all of which will likely rise in the next budget so you would have to think about factoring that cost into any calculations you are working out. You seem in a good position and have a great nest egg, I think if it were me I would stick it out for the next few years, keep saving and when your partner returns to work you may be in a stronger position.