trade up negative equity mortgages to be allowed

Brendan Burgess

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Charlie Weston has reported this in today's paper.

If anyone is thinking of availing of this and would be prepared to talk to RTE about it, please email conor.hunt@rte.ie asap as he would like to record an interview for the 6 pm news.

I have recorded a piece saying why it's a bad idea.

Brendan
 
Would be really interested to hear your thoughts Brendan if you will be posting them on the site. Won't be home for the news unfort, will try catch it on line.
 
It Said on Morning Ireland that it is only for existing customers of the Banks (BOI and PTSB) will PTSB charge them the new SVR or the rip off one of 5.19% for existing customers. Technically the are not new Customers. Just a thought
 
Can I ask why this is a bad idea? I am in an apartment with €319.5k left on the mortgage- we would someday like to move to a house, and to me this looks like a good idea. If we could sell and take the negative equity with us we would get a very nice house for less than that?

Am I missing something?
 
We are in a similar position. We're lucky that we have a lovely house but about 25miles away from our friends, family and jobs.

We only bought so far away cause we got caught up in the bubble and were encouraged onto the property ladder... silly now in hindsight!

We were always planning to move back to where we wanted to be but with neg eq it seems like it will be 10 years away at this stage.

This carrying neg eq idea seems like a good idea especially now that house prices have almost bottomed out, we would still have the same amount of a mort but would be living where we wanted to live. The neg eq wouldn't bother me so much then as I think it only becomes relevant if you want to move home.

Only problem I would have would be if I lost my tracker mort and thats probably a definate. saying that we are carrying about 45% in neq eq at the moment and I read somewhere that they would only allow you carry 25% max with you....
 
From both Bank and customer the concept is not a bad one. However, the fairness of the proposal (to the customer/s) is reliant on some level of agreement by the Banks in rspect of retention of the tracker mortgage. I haven't seen full details of the proposals, but it would appear equitable if the banks were to facilitate those on tracker mortgages by applying a SVR only to the extent of any additional borrowings. Brendan B's commentary would indicate that no such facilitation is proposed!
 
I think its a positive step and shows somebody in the banks are trying some outside of the box ideas , with some tweaking I think it would suit some people .

Say If I bought a house for 300k with 100% mortgage during the bubble ,which would fetch only 100k in the current market
I see a house I like ,and would want to settle in, and its on the market for 100k now.
So I apply to the bank for a 100k mortgage for the new house and they "port" 200k negitive equity from the old mortgage to the new one.

After my circumstances have been stressed tested for the ability to service the new payments on 300k on SVR I've moved from a house I hate to a house I love .
Bank has a happy customer and performing mortgage.
Customer is happy in new house and able to pay mortgage.

At the start I had a 300k mortgage on a house I hated ,worth 100k
At the end I have a 300k mortgage on a house I love , worth 100k

Only penalty being the difference between my old tracker and new SVR interest rate,A price some would be happy to pay IMO.

Does the Customer have to apply for a mortgage for the 100k purchase price or would the figure be 300k (purchase price & negetive equity ) ?
 
If the banks will only allow you to transfer the equvilant of 25% of the new property price in negitive equity and you are 200k in negative equity then I assume the property you would need to be buying would be in the region of 800k (ignoring deposits etc).

To purchase a property for 100k, you could only bring 25k NE with you?

I don't think this scheme will help many.

In fact, it could have the effect of pushing people to buy more expensive properties to accomodate the amount of NE they want to absorb.

I can't see this working at all.
 
The only problem if they calculate your new mortgage on say the 300k... most people wouldn't qualify for that amount anymore even if they are servicing their existing mortgage of 300k. I know we wouldn't anyway!

But I don't think the banks have much to loose there will still be neq eq whatever house you are living in!
 

Its more like if you have a property worth 200k and an outstanding mort balance of 300k they will only let you carry 25% of the 100k of neg eq with you so you would only be able to carry 25k in neg eq with you not the full 100k, you would have to come up with the other 75k from somwhere else.
This is what I took from it anyway, I'm sure eventually banks will arrange this on a case by case basis... that is if they all go for it!
 
No, The amount of NE you can carry is based on 25% the purchase price of the new house (according to the Independent Article this morning). This makes sense as the security is based on the new property not the old one.
 
So if I have an outstanding mort of 260k, i sell the house for 150k. neg eq of 110k. I buy a new house for 150k, I can only bring 27.5k of neg eq with me?

Where in the name of god do i get the other 82.5k from?
 
doubledeb said:
So if I have an outstanding mort of 260k, i sell the house for 150k. neg eq of 110k. I buy a new house for 150k, I can only bring 27.5k of neg eq with me?

Where in the name of god do i get the other 82.5k from?
Click to expand...

Exactly. This is why it will only help a minority of those in NE. Those who bought either just into the boom or those near the end of the decline.

e.g. You bought a property in 2010 for 200k - Now worth 150K - You can buy another house for 200K and carry the 50K NE.

Where as if you bought in 2006 for 300k - Now worth 150K - You would have to buy and be able to afford a house for 600K and I would guess with a hefty deposit too. Still as screwed as before this nonsense scheme.


I note that the 25% is not a definate figure and only from the indo this morning.
 
Effect on the market

I would be worried that the effect of this on the market would drive up the price on those "trade up" properties and drive down the price of 1 bed / 2 bed apartments.
 
I can't see thi scheme as having any effect on the market. it would only apply to a minority of borrowers.
 
This could be a workable example. I’d assume that some saving would be necessary.

Current Home value €180k
Mortgage €255k
N/E €75k
New House value €300k
Mortgage €270k (90%) Savings 30k
N/E Transfer €75k
Total amount of debt €345k
N/E €45K
The assumption would be that the property prices have levelled out (?) and the Borrower is unlikely to move again in the short term.
 

The customer might be happy to forfit their old tracker for the new SVR interest rate so as they have a home they can live in long term - but this can have a big impact on your total repayments to the bank. I lost a tracker mortgage with PTSB and I am on their SVR - for me I will probably make over an extra €180,000 in interest payments to PTSB because of this (on €300K mortgage over 35 years) - so €180K is a hell of a lot of extra money to pay in interest for swapping your current tracker mortgage onto a new property for more or less the same mortgage amount over the same years with their SVR!
It is basically around €450 extra per month in interest on you mortgage repayments
 
I don't have a tracker mortgage so its not something I'm afraid of losing if I went for a neg equity mortgage. In the last year we have paid lumpsums against the mortgage so we now have n.e. of approx €50k.

Is my thinking right that based on a shortfall of €50k on the sale of my current home, that the maximum purchase price of my next home would be €200,000 (the €50k being 25% of the purchase price)? Therefore leaving me with a new mortgage of €250,000 - provided we are approved for such an amount and that it is affordable.

In the above example where does a 'deposit' for the new place figure into it all? The previous comments here say the negative amount carried forward can only be a max of 25% of the 'purchase price' ... does that really mean 25% of the mortgage for the new property? If, for example, I have €20,000 in my savings account do those savings get used as a 10% deposit for the new property, or are they something that reduces the shortfall on the sale of the old place? Or am I simply splitting hairs.
 
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