Carrying negative equity into another house purchase

Senna

Jo King wrote: »

The mechanics of conveyancing rule out negative equity transfers at the moment. The deeds are only released on the solicitors undertaking to clear the mortgage on the existing property. The solicitor can only realistically do his when the full amount of money is in her hand. When a house in positive equity is sold the purchase money goes to the solicitor who clears the mortgage first before passing the remaining money back the the seller. That money goes with the new mortgage to purchase the next house.
In negative equity there will not be enough money from the purchaser to clear the loan. The solicitors undertaking to clear the loan can't be given unless the seller can come up with money to clear the loan.

The COULD be worked around as the bank COULD turn the remaining balance into a personal loan, leaving no balance tied to the house when being sold.

Victor

Subprime lenders love giving money to people as the people need to give them lots more money back.

Senna wrote: »

The COULD be worked around as the bank COULD turn the remaining balance into a personal loan, leaving no balance tied to the house when being sold.

I wonder are there tax implications?

Jo King

Victor wrote: »

Subprime lenders love giving money to people as the people need to give them lots more money back.I wonder are there tax implications?

How could there be. Why would a bank want to turn a secured loan into an unsecured one? It probably could be done using some kind of bridging finance but with the hassle banks have had with solicitors undertakings recently I do not see any of them developing new products in that regard.

pjuegos

Thanks for your posts Jo King, that is very important information that I did not think of.

So, what way does it work with NationWide in the UK to carry neg equity to another house? Does the UK have a mechanism for that?

Probably this does not make sense but, can a personal loan be used just as a temporary step on the day of the conveyance?
So, on that day, neg equity is moved to a temporary "loan", and then the "loan" is added to the new mortgage? Just as a way to transfer the money from a secured loan to another secured loan


cheers

D3PO

pjuegos wrote: »

Thanks for your posts Jo King, that is very important information that I did not think of.

So, what way does it work with NationWide in the UK to carry neg equity to another house? Does the UK have a mechanism for that?

Probably this does not make sense but, can a personal loan be used just as a temporary step on the day of the conveyance?
So, on that day, neg equity is moved to a temporary "loan", and then the "loan" is added to the new mortgage? Just as a way to transfer the money from a secured loan to another secured loan


cheers

ah hiding debt with a loan from somewhere else to make finances look ok. Taken straight out of the Anglo PTSB playbook ;)

On a more serious note, getting a loan of over 100% of the value of house B to allow the clearance of debt A to drawdown debt B is essentially the same thing as your proposing.

pjuegos

D3PO wrote: »

On a more serious note, getting a loan of over 100% of the value of house B to allow the clearance of debt A to drawdown debt B is essentially the same thing as your proposing.

That was my original understanding; getting a mortgage that covers house B price + NE house A, which essentially transfers NE of house A to house B if house A and B have the same value. Is that it?
I thought that the mechanics of conveyancing would not all that?

Senna

Jo King wrote: »

How could there be. Why would a bank want to turn a secured loan into an unsecured one? It probably could be done using some kind of bridging finance but with the hassle banks have had with solicitors undertakings recently I do not see any of them developing new products in that regard.

I would say in a few years time banks will come up with a way around it, the amount of people in good jobs but bought unsuitable houses is massive and only getting larger, coupled that with examples like the OP and people who need to move for work.
But the banks will profit from it and it wont be the answer for everybody in NE wanting to move.

pjuegos

I rang the solicitor that I used to buy the house and she confirmed everything that was said in this thread. It is just not possible to carry neg equity into another house mortgage...

Jo King wrote: »

The mechanics of conveyancing rule out negative equity transfers at the moment. The deeds are only released on the solicitors undertaking to clear the mortgage on the existing property.

I heard about a case that shows how rigid the current system is; one guy in neg equity wanted to downgrade and buy a cheaper house in order to ease the mortgage payments and pay the neg equity in a shorter time range.
He was told that it was not possible to do so, even though he clearly showed being a person accepting his difficult financial situation and trying to find a responsible solution.

Amhran Nua

antiskeptic wrote: »

There just won't be enough of you wanting to move sideways to warrant constructing a suitable mechanism

Actually I think that you can buy a better/larger property for €250k today than you could buy for €350k in 2006. This is especially relevant in the case of couples stuck in shoeboxes that might have kids on the way, an important social issue that we'll need to face sooner or later.

Jo King wrote: »

The mechanics of conveyancing rule out negative equity transfers at the moment.

Its not that hard to change legislation.

Jo King

Amhran Nua wrote: »

Its not that hard to change legislation.

How much of it have you changed? There have been legislative changes to property transfers going back hundreds of years. many have not had the intended effect.

pjuegos

Apparently, one of the budget points was:
"There will be some relief for householders in negative equity who want to downsize with a new stamp duty relief scheme"
http://www.herald.ie/national-news/lenihans-budget-misery-for-all-but-cigarettes-and-pint-escape-hikes-2450874.html

How can that be if the mechanics of conveyancing do not currently allow negative equity transfers?

cheers