Selling with a fairly small Negative Equity figure

Det Somerset

Bought a house in 2005, got married and we have just bought a second house which we intend to live in long term. We won't be moving for a few months, but when we do we'll want to sell the first house rather than have the hassle of renting.

Long story short, that first mortgage is currently at approx 160k. Realistic selling price seems to be around 150k, possibly as low as 140k which results in negative equity of about 10 to 20k. I appreciate that this is a far better situation than many others are in, but it's obviously still far from ideal. Does anybody have any idea whether bank of Ireland would be good to deal with in terms of arranging an unsecured loan for the shortfall if we sold at the expected price?

Both the mortgages we have are with BOI, and they approved the second mortgage based on the fact we told them we would rent out the first property (it's still an option but it's one we'd prefer to avoid). We know we can't transfer it onto the new mortgage, but it's not anywhere near a massive sum like 100k so we'd hope they would be open to discussing details on a personal loan.

Anybody know of anybody who went through a similar scenario in the last year?

riclad

i Know someone sold with ne of 20k in 2012, but it was a buy to let house was empty for 2 years .sold for 20k less than the mortgage.
BUT it covered the original mortgage,
owner had 2nd mortgage extension, on the house 20k.
eg loan was increased after 8 years.
I think you need to GO to bank and ask can i put the house up for sale ,
discuss how much do i need to get for the house.

You,ll know in a month or 2 ,roughly what offers you,ll get.
Bank can simply stop house sale if offer is too low.
AND it probably depends on your income now,
what savings have you got.
Could you borrow 5 or 10 k from a credit union.
the market in dublin or other citys is going up, in certain area,s.

Sleepy

Can't see why the bank wouldn't entertain it tbh. Interest rates on a personal loan would be higher than mortgage interest so presuming were you intended to sell it at exactly the point when the mortgage and OMSP was 0, they'd be making more out of you via the personal loan.

Would it not be worth investigating whether a letting agent could return enough in rent to get rid of that 10/20k shortfall over a couple of years with them managing the property and taking away the majority of the hassle of renting?

Det Somerset

Thanks for both of your replies.

If we rent we would almost certainly use a letting agent, but I think the rent we would get wouldn't cover the cost of the mortgage plus letting fees so we still be paying a small sum a month and waiting for the mortgage to eventually drop to the selling price in a few years. It's not the most attractive option.

We are afraid to discuss it with the bank just yet. We are getting renovations to the new house done and these are getting covered by the new mortgage, so we haven't drawn down the full value yet. We fear if we start to talk about moving the goalposts (ie not renting the first property like we said) the bank might stop us drawing down the remainder to cover the renovations.

We expect to have moved in by December, but we'd like to put the old house up on the market before then if possible. Is it a case that we can't do this until we know what the bank thinks of our intention to sell? If so, should we wait until we have drawn the new mortgage in full after the renovations before talking to them?

Det Somerset

riclad wrote: »

what savings have you got.
Could you borrow 5 or 10 k from a credit union.
the market in dublin or other citys is going up, in certain area,s.

Our savings have been wiped out from the new house purchase (perfect opportunity came up so we stretched ourselves to the max). We probably could get a loan from a family member on my wife's side if we were stuck and it enabled us to move forward, but I'd prefer to explore the options where we could stand alone rather than put the burden on a family member.

We are outside Dublin and the area seems to be fairly stagnant in terms of sales so we'd need to almost definitely sell for the 10 to 20k loss to have any chance of shifting it within 6 to 12 months I reckon.

gaius c

Have you considered VAT? That will take a chunk out of the sale price and therefore the amount that you'll be able to pay the bank back.

valleyoftheunos

Speak to the bank OP, some of them are now doing deals with borrowers but its rare enough. You may find it difficult in fairness as 20k is a large amount to have unsecured particularly when you have just extended yourselves on another mortgage.

Tigger

gaius c wrote: »

Have you considered VAT? That will take a chunk out of the sale price and therefore the amount that you'll be able to pay the bank back.

No vat on a house they purchased and are now selling

gaius c

Tigger wrote: »

No vat on a house they purchased and are now selling

Correct. My bad:

•If you are buying or selling an ‘old’ or existing property, you do not have to pay VAT

tigershould

A friend of mine has been offered a 92% mortgage + €50k NE carry over from EBS.

Det Somerset

Thanks to those who replied. I guess it's a case of talking to the bank when the time is right.

Henry Ford III

tigershould wrote: »

A friend of mine has been offered a 92% mortgage + €50k NE carry over from EBS.

That's jaw droppingly mental.

OMD

Henry Ford III wrote: »

That's jaw droppingly mental.

Why? His negative equity is now less than it was.

tigershould

Henry Ford III wrote: »

That's jaw droppingly mental.

I suppose if the numbers add up and the bank believe he has the capacity to repay then what's the problem. I know a tonne of people in negative equity but in need of upgrading their family home. This sounds a fair way for them to do it.

Det Somerset

Just to update in case anyone was interested, the new house is almost ready so we've been considering our options for selling/renting the first property and we decided to raise the topic with the bank. They said that for the type of negative equity sum we are realistically talking about 10-20k, they should be able to give us an unsecured loan over 3 to 7 years at similar rates to a mortgage. However they said they couldn't tell me specific terms until we actually formally presented the exact situation to them, as they deal with these on a case by case basis.

So we now need to decide if we want to rent, or try to sell first. If it's the latter, when we find a buyer and know the specific negative equity sum we are proposing, the bank will then work out a loan that won't bankrupt us but that will see the money paid back over as short a period as possible.

I'll post again with specifics if we ever go down that route