Bought with a friend - now in negative equity

Hi All

Over two years ago i bought an apartment (two bed) in stepaside dublin for 455,000 with a friend.

My boyfriend at the time bought an apartment in south county dublin for 635000 with his friend.

We are now married and expecting our first baby and living in my apartment in stepaside, The problem is we would like to sell at least one of the apartments and buy a house for more room once the baby arrives. , but with the current housing market it is not looking likely we will be able to sell either without making a substantial loss.

Has anyone any suggestions , how to get out of this situation or move forward, would be much appreciated .

Sell the appartment and take out a loan for the negative equity. Rent a place big enough for your family for some years untill you have paid off the loan and saved a deposit for a place of your own.

Would renting the appartment(s) be an option? What are the mortgage payments compared to the going rent levels ?

I would avoid selling now. Why don't you rent the apartments and rent a bigger house yourselves ?

P..

renting is an option i would certainly consider . we are renting one anyhow and i think we could rent the other one succesfully .
do you think the banks would give us a mortgage for a house based on renting the other two?

I doubt it, both of you already have up to 540k in total borrowed (a guess based on the info you gave) so I dont think you should look to borrow more. All you would need is a few months where you can't rent the appartments and you will be in trouble trying to service 3 mortgages. In addition when you rent the appartments it is likely you will be moved to a higher rate "investment" mortgage which will cost a bit more per month.

Give it a few years and you might be able to sell 1 or both of the appartments.

You should look to rent in the meantime.

aristotle25 said:

I doubt it

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The Bank's will lend money depending on the ability to repay any loan. It really is no dependent on the price of the property. If the Banks (worldwide) had of used their own rules they would not be in the position they are now in.

To save money you might consider the Life Assurance policies on both of the existing properties as on Investment properties it is not a pre-requisite to have Life Assurance applicabe to the Loan. This is applicable to PPRs only where it is a must.

I know, I suppose I was guessing that with 540k approx borrowed they would also have to borrow another say 250k to buy a house. That would be 790 borrowed.

Based on borrowing a max of 4 times combined salary they would need a joint income of nearly 200k. I assumed this wasnt the case.

Anyways, just some very rough numbers.

thanks for all the advice , some good food for thought anyhow

Feel you pain, Pout1. I bought an apartment in 2005 as a starter home for myself and my now fiance. we will be in negative equity i would imagine realistically for the next 5 years anyway. hoping to start a family before then so will have to look at renting it out whilst moving into a rental house myself.

I am dreading the thought of having to become a landlord

Is it too simplistic to say "just wait"? Ok, so space wise with a baby coming you'd like more space / bigger house /garden but a baby doesn't need much space.

My sister & brother in law with a toddler and new-born are in the same situation - negative equity & want a bigger house. They have mulled over renting the house & trying to get a mortgage to cover cost of the new house but they have no deposit for a new house. It's unlikely that they can sell and even if they could they would have to repay the negative equity on the first loan. They have talked about extending the house but ultimately will want to move location anyway so it doesn't seem worth putting more money into the house.
My best advice is that instead of getting into more debt and becoming reluctant landlords (and there is no money to be made in that game at the moment either) or taking on more debt to extend the house, that instead they concentrate on paying down their mortgage as soon as they can or saving like mad to cover the negative equity. Hopefully then in a couple of years they will be in a better financial position and the market may show some recovery and they will be able to move. Yes, it means being tight on space for a few years but in the long run it would be worth it. Their negative equity is not a huge amount so it would be doable to pay it down in a couple of years.

So to tacos I really would wait. Why become a reluctant landlord and rent somewhere yourself when you have an apartment already? A baby can live in an apartment quite happily for a few years.

Pout1 - keep renting out the apartment that you've rented already and sit tight in the other for a couple of years. You really don't want the pressure of a young family and three mortgages as well.

Is the ownership of the apartments still with the friends? What is the mortgage relative to the apartment value. What rent do you receive on the apartment and does it cover the mortgage, what rent would you receive on the other apartment and would that cover the mortgage. Do you have savings, what are your salaries. It would be better if you did the money makeover section to see how this would make financial sense and it's too difficult to give proper advice based on what you have posted.