In Negative Equity but want to borrow to self-build

Y

Yossarian

Guest
Hi, Just looking for some initial advice on how to deal with a negative equity issue. Myself and girlfriend bought a new house at the height of the boom towards the end of 2006 and I estimate that we are now in negative equity by approximately maybe €60,000 although it is hard to estimate in today's current market. Recently I have been left a site which I should be able to get planning permission on this year. The site could be worth €90,000 with full planning permission. I would be interested in getting a self build mortgage to build a house over the next 2 or 3 years. I haven't had any discussions yet with the bank about this or even aware what banks are interested in these kind of mortgages. I'm just looking for initial feedback from anyone whether this is totally a non-runner due to our negative equity status. Both of us are working in stable jobs and we are comfortably meeting our current mortgage requirements. Would a bank recommend that we rent our house or maybe could we try and sell the house and take the loss into a new mortgage where hopefully the finished house would be worth more than our borrowings with the bank. Thanks for any ideas anyone might have !
 
You don't say what you are both earning. The current mortgage amount and the remaining term of the mortgage. How much would you be looking to borrow? This is information that people will need to assist you.
In saying all that it seems decisions are being made on a case by case basis. So you will not know until you go see them at the bank.
 
In general, banks aren't giving 2nd mortgages at present. You'd need to dispose of your house and clear negative equity to get another mortgage. You're already on the back foot, essentially.
 
I'm in a similar position, and have heard of a situation where the bank have asked for existing property to be sold (even at a loss) and for any outstanding debt to be mortgaged off the equity in the land.

Personally, I will be hoping to rent out the existing property - possibly in advance of dealing with the bank to demonstrate the rental income.
 
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