negative equity

ned ryorson

Dear All,

This is my first post, and i would appreciate your advice on an issue.

Im currentlly in negative equity of approx 50k..now dont get me wrong, im not whingeing- it was my decision to buy it, im paying mortgage with no problem and im not getting into a rant about how the politicians f*cked us etc...what my problem is that my partner and i now want to build a house.

we have a site,that has been given to me by my parents.My bank has approved me for a mortgage for up to 200k, but they will only loan me the cost of building it,so how (or can i) build a house for 150k, and pay off the neg equity from mortgage. I have asked a fair few professionals this question,and none of them have a comprehensive andswer. The house, once built, will be worth approx 400k,so on a LTV basis a bank shouldnt have a problem financing it. i also dont have the 50k in savings, in case your wondering! my specific questions are these

(1)Can i get my mortgage for more than the "build" cost?if so,is this done formally when submitting figures,or informally by overstating the build cost?
(2)Should we just apply for planning, and if we get it, just sit tight for 2 years and hope that market recovers so as to reduce the neg equity we have to face?

many thanks for your help.

chris85

ned ryorson wrote: »

Dear All,

This is my first post, and i would appreciate your advice on an issue.

Im currentlly in negative equity of approx 50k..now dont get me wrong, im not whingeing- it was my decision to buy it, im paying mortgage with no problem and im not getting into a rant about how the politicians f*cked us etc...what my problem is that my partner and i now want to build a house.

we have a site,that has been given to me by my parents.My bank has approved me for a mortgage for up to 200k, but they will only loan me the cost of building it,so how (or can i) build a house for 150k, and pay off the neg equity from mortgage. I have asked a fair few professionals this question,and none of them have a comprehensive andswer. The house, once built, will be worth approx 400k,so on a LTV basis a bank shouldnt have a problem financing it. i also dont have the 50k in savings, in case your wondering! my specific questions are these

(1)Can i get my mortgage for more than the "build" cost?if so,is this done formally when submitting figures,or informally by overstating the build cost?
(2)Should we just apply for planning, and if we get it, just sit tight for 2 years and hope that market recovers so as to reduce the neg equity we have to face?

many thanks for your help.

Ok on question 1 it is unlikely they will finance more than the build cost of the home. For instance EBS offer only 80% of the site value and 90% of build cost as mortgage. Will vary between banks but not to more than 100% of build cost.

Question 2 depending on when you bought it may be sometime before you return to positive equity. Theres a few more variable that need to be looked at on that. If you bought in the height of the boom (2007) you could realistically be looking a 7-10 years before you get positive equity. This being based on improvement in value of property and reduction in capital owed based on you paying each month as agreed. Thats not exact by any means but a very rough look at it from my view.

ned ryorson

thanks chris,

the figure i have been given is 92% by AIB, and they base this figure on a build cost of €90 per sq ft. We have a contactor who is lined up to build it for approx €65 per sq fr. The contractor will be paid in stages by us,and will have no direct contact with my bank or solicitor. If the bank calculate the build cost at €180k for a 2000 sq ft house, and we build it for €130k, does that then allow us put the 50k towards our negative equity.

Our engineer has told us he'd be happy to sign off the relevant stage payments & certs of compliance, as so far as hes concerned hed also be working off the €90 p/sq ft rate. Am i just over simplifing this?

careca11

ned ryorson wrote: »

Dear All,

This is my first post, and i would appreciate your advice on an issue.

Im currentlly in negative equity of approx 50k..now dont get me wrong, im not whingeing- it was my decision to buy it, im paying mortgage with no problem and im not getting into a rant about how the politicians f*cked us etc...what my problem is that my partner and i now want to build a house.

we have a site,that has been given to me by my parents.My bank has approved me for a mortgage for up to 200k, but they will only loan me the cost of building it,so how (or can i) build a house for 150k, and pay off the neg equity from mortgage. I have asked a fair few professionals this question,and none of them have a comprehensive andswer. The house, once built, will be worth approx 400k,so on a LTV basis a bank shouldnt have a problem financing it. i also dont have the 50k in savings, in case your wondering! my specific questions are these

(1)Can i get my mortgage for more than the "build" cost?if so,is this done formally when submitting figures,or informally by overstating the build cost?
(2)Should we just apply for planning, and if we get it, just sit tight for 2 years and hope that market recovers so as to reduce the neg equity we have to face?

many thanks for your help.

with a negative Equity of just 50k , i'd nearly bide my time ,
the market should make some recovery in the next 18mths ...........in the meantime try get some serious savings together for a deposit, making it all round easier to get your next mortgage for the site/house.

or you could pay more of your current mortgage each month for the next year , thus reducing the neg equity

chris85

careca11 wrote: »

with a negative Equity of just 50k , i'd nearly bide my time ,
the market should make some recovery in the next 18mths ...........in the meantime try get some serious savings together for a deposit, making it all round easier to get your next mortgage for the site/house.

or you could pay more of your current mortgage each month for the next year , thus reducing the neg equity

Wish full thinking to think the negative equity of €50k may be recovered in next 18 months. That will not happen. There is no short term fix to the housing market. There is still an oversupply of properties and lack of demand due to low mortgage approval

kevindominguez

niiice~!