Pay off mortgage shortfall or continue saving?

Discussion in 'Mortgage arrears & negative equity case studies' started by rosswind, 19 Feb 2019.

  1. rosswind

    rosswind Registered User

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    Last edited by a moderator: 20 Feb 2019
    Looking for some advice re the following.
    We sold our house at a loss of 37,000 in 2015.
    Currently stands at 35,000 over another 17 years.
    We have savings of 31,000.
    We are renting and saving approx 500 per month.
    We would like to buy sometime soon in or around the 300,000 mark.
    Combined income 94,000.
    So the question is should we continue saving or start paying off the negative equity a bit quicker?
    Thanks in advance.
     
    Last edited by a moderator: 20 Feb 2019
  2. RedOnion

    RedOnion Frequent Poster

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    What interest rate?
     
  3. Brendan Burgess

    Brendan Burgess Founder

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    Are you saying that you have an unsecured loan of €35,000 which you have agreed to pay over 17 years?

    In other words, this is the shortfall you owe the lender after you sold the house? (It's not negative equity any longer.)

    Which lender?

    Is your ICB record clean?

    What ages are you?

    Brendan
     
  4. rosswind

    rosswind Registered User

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    Yes house was sold in 2015 so it is an unsecured mortgage loan over originally 20 years. 17 years left. Don't have interest rate to hand. Will dig it out latet.
    Credit rating is perfect.
    Wife is 42
    I'm 43
    We have an offer of a mortgage for 235,000 but would need a little more.
    Which would look better in the eyes of a lender. More savings or bringing down the above loan?
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    As you are second time buyers, you will need a deposit of 20% of the price of the house.

    So if you are buying a house for €300k, you will need €60k.

    If you have the offer of a mortgage, why are you worried about which is better?

    Is it the same lender as the one which you owe the money to?

    Brendan
     
  6. rosswind

    rosswind Registered User

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    Same lender.
    The mortgage offer isn't enough to buy what we want.
    There is a discretionary type application which doesn't require the 20% deposit so assuming we have enough with the 30k should we continue to save or start increasing the payoff on the loan? Which would be more likely to increase a mortgage offer from the lender in the future?
     
  7. Brendan Burgess

    Brendan Burgess Founder

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    36,813
    This is such an odd situation that no one can really tell you the right answer.

    I doubt any other lender would give you the money, with a large unsecured loan outstanding.

    I would hold onto the cash for the moment.

    What interest rate are you paying?

    Brendan
     
  8. RedOnion

    RedOnion Frequent Poster

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    Last edited: 20 Feb 2019
    Did the lender indicate they would be willing to offer this to you? They are selective about who gets them, although loan to income is the more difficult one.

    Your shortfall loan is costing you about 300 per month repayment. This reduces the amount you can borrow by over 50k.

    Paying an extra 500 per month off it won't make a huge difference. Reduce loan by 5k, might increase mortgage offer by 6k...

    Edit: suggest if you want to buy a place you need to keep saving. You'll need at least 10% deposit, plus legal fees and stamp duty.
     
    Last edited: 20 Feb 2019
  9. rosswind

    rosswind Registered User

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    It is a bit unusual but then I'm lucky to have a very strong negotiator in the house!
    We'll keep saving so and see what Brexit does.
    Thanks for your quick and helpful input.