Selling when in negative equity

[onekeano]

Hi, sorry to read about your situation, I suspect we'll be seeing more of this over the next 12 months or so. Personally I would plan staying put for the forseeable future. A couple of points:

a) if you plan having 1 or 2 kids in the next few years, thats a serious hit on the cost of childcare from what I understand (maybe €1.2-1.5k + per month?). Can you afford that right now? If so, can you you afford to start putting that off your mortgage right now to reduce the chances of negative equity. If you can't afford to do that right now - can you really afford to have 2 children in the next few years?

b) your spouse earns 30k gross per annum - having an office which takes up a bedroom is a serious piece of real estate to generate an income of 30k. To be honest I coulnd't justify that myself for a salary like that.

c) can you or your spouse generate bextra income by changing job or getting a part time job which would help to drive down the outstanding mortgage. Years ago getting a part time job was pretty normal to help pay bills but it seems so 70s/80s now.

Apart from that suspending pension contributions to pay down mortgage sounds like a good idea but I do think you need to readjust your expectations and plans to take account of circumstances. You're still young, this will be one of several speed bunps you'll hit along the way and you'll need to be realistic to be happy.

Hope it works out
Roy

 

[Marianne S]

Again thanks for all the good advice. We're not on the breadline or anything, we're well able to pay the mortgage we have at the moment and save money and are living very comfortably so unless we go to sell the negative equity issue isn't an issue. People who bought 10 years ago would have raised enough equity to upsize within 3 or 4 years and i was wondering what happens when you don't have that equity. We'll be following advice and sitting tight and in the mean time will try to redirect as much money as possible into paying off capital so at least we have a bit more leeway.

 

[Daenis]

I know this is a while down the road but when you need the additional space, perhaps your partner could rent a room elsewhere for his office space, as he is self employed the cost would reduce his profit and therefore his tax bill.

 

[z109]

What is likely to happen is that you will drag the negative equity around with you. This is what I believe happened in the UK in the 1990s following the housing crash there.

The situation would be that you take the amount owing after the mortgage on one house and add it to the mortgage on the next house you buy. From the banks point of view, it shouldn't matter which house you are in negative equity on.

So, it is worth approaching your bank and seeing in what circumstances they would be willing to countenance this. They may say no. If they do, go back to them every three months and check again. In the meantime, the advice to reduce the negative equity by overpaying as much as possible is good.

 

[Complainer]

I know this is a while down the road but when you need the additional space, perhaps your partner could rent a room elsewhere for his office space, as he is self employed the cost would reduce his profit and therefore his tax bill.

What's the benefit in reducing your profit (=income)?

 

[gabsdot]

You could consider a sheomra type thing in the garden to house the office. That would free up some room in the house. Or if you can convert your attic

 

[Daenis]

What's the benefit in reducing your profit (=income)?

short term measure, having the extra space for a baby, pay less taxes and prsi which if they are in the high rate could be more cost effective than moving to a bigger house while accepting a 50,000 loss on their current house. I'm not suggesting a fancy office in the middle of the city just the same situation a room perhaps in a friends house or one in their locality.

 

[Cheeus]

Voluntary redundancy with HSE when they start that? Would it be worth your while and could you get a job easily somewhere else? If you're planning on having kids maybe you'd be thinking of not working anyway?

 

[Complainer]

short term measure, having the extra space for a baby, pay less taxes and prsi which if they are in the high rate could be more cost effective than moving to a bigger house while accepting a 50,000 loss on their current house. I'm not suggesting a fancy office in the middle of the city just the same situation a room perhaps in a friends house or one in their locality.

I see the point about extra space, but I don't see any benefit in paying less taxes/prsi, given that they would end up worse off in the end, i.e. less gross income and less net income.

 

[BoscoTalking]

If you redirect your savings to your mortgage and begin overpaying it, you should be able to erase your negativity equity to at least a zero sum so that you can sell if you need to in a few years.

It will be tough and scary but I think it probably is the best thing to do.

If trading up in the next few years is a real priority for you, you might want to rethink the wedding expense that you have been saving for - try a small wedding and plan a small, low key affair to save money.

Honestly this is a nobrainer. I have heard of at least 2 people this year who went on holidays and came home married completely sidestepping the whole moneygrabbing shindig that Irish weddings have become. If its not an option and my father was was devastated when I suggested it you can do the immediate family to the church and book a small room for dinner in a local hotel. My friend did that - the neighbours got over it, one odd auntie does not speak to her as a result (result)

Also, from the time that my husband and I tried to start a family and the birth of our first child, several years had passed. Sometimes things just dont fall into place as one hopes.

So true. Bigtime!.

 

[lanie]

What about taking a loan out to clear the neg equity amount (if affordable). I know it may be a bad idea to clear a debt with a loan but it may be an option.

 

[mainasia]

I'm not financial expert but it really depends on which way you think the wind is blowing, will prices go up or down. Now if you feel the wind of global recession blowing in your face you may guess yourself. At that stage it seems to be taking a loan out at the cheapest interest rate possible and selling the place and then renting and saving for a few years makes more financial sense. As I said I'm no accountant but can anyone point out if my logic is wrong here i.e. if she stays where she is she is only getting into a bigger hole if the trend is down. Almost all the above evaluations except the last poster seemed to ignore this logic, whereas to me it seems the negative equity will increase if you stay where you are. And in that situation it will take you much longer to be able to save for a deposit for a new bigger place, therefore I would take their advice very carefully, I don't see any bank in Ireland giving out loans to people with existing negative equity, they are hardly giving out loans full stop. Maybe you don't want to go back to renting and feel more comfortable in your own place but you may put your future dreams on hold that bit longer by staying put, as some of the posters said it may also an idea to adjust your own ideas of what size house you need.

I don't have property and live outside the country, I'm just trying to give a balanced view here.

 

[Susanna]

You are both young,don't sell now. Children appear to be your main priority and they are expensive,if you move you may be forced to do extra part time work to pay the bills and be caught paying childcare costs when you do so. As time passes your house will not be in negative equity and your wages should increase making mortgage repayments easier and savings easier.