advice re negative equity

A

annemarie

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Can someone advise me re negative equity mortgages. My mortgage is with Bank of Scotland and we are thinking of downsizing. Our house is in negative equity to the tune of 120,000. It is currently worth about 300,000. We would like to move and need about 250,000 for new house. We have no deposit. Would BOSI allow us to downsize in this manner by transferring the mortgage from one house to another

Many thanks

Anne Marie
 
I'm afraid no. For starters BOSI no longer trade here so they would not be involved in any re-lending deals. but think about what you are asking. You owe 420k and have an asset worth 300k. You are asking will they allow you to have an asset worth 250k but still owe 370k. They have nothing to gain. Not to mention the legal fees bith you and them would have to incur.
 
Thank you for your reply. Would the fact that the mortgage was more affordable not mean anything. We are struggling with our repayments currently
 
That makes it even worse - you are struggling with your current repayments but you expect a lending institution to reduce the value of their security without decreasing what you owe them? Makes no sense. And, as elcato says, this is irrelevant anyway as BOSI are not lending.
 
Michael3 said:
That makes it even worse - you are struggling with your current repayments but you expect a lending institution to reduce the value of their security without decreasing what you owe them? Makes no sense.
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This would decrease the amount owed. NE is currently 120K on a house worth 300K - so the mortgage is 420K. The OP wants to buy a house for 250K which would release 50K (sell current for 300K, buy new for 250K). The new mortgage would be 370K - which is a decrease on 420K. Mortgage repaymments would go down by 12% which could make a big difference to someone struggling with their finances.
The loan-to-value would increase however (from 140% to 148%). I also think a big problem with any potential NE transfers is effecting both transactions - if you can't sell and buy simultaneously, you will obviously need to sell first which leaves the bank open to the risk of you selling but not buying, leaving them with an unsecured loan outstanding of 120K.
 
Thanks Orka. Yes I was suggesting decreasing the amount owed by 50K which I thought might make this an attractive, and to my mind a very sensible option. Thanks all for your input.
 
I think thats a great idea, have you spoken to the bank yet? since i read your post I'v made an appointment for my house to be valued and with the valuation I'm going to approach the bank with a view to doing the same.
 
i just sent in my proposal today Dee with all my figures and paperwork. Will of course let you know how I get on
 
Don't give up yet Annemarie. I think BoS want out of Ireland. Would it be possible for you to sell, repay bank and rent and pay the negative equity as a loan with the same term and interest rate. If that's possible why not try the bank for that option. Or ask them for a solution to your predicament.
 
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