Negative Equity Trade Up Mortages

Alrite Chief

I went searching for threads on this very topic and to my surprise there was very little discussion.

Given the amount of people (potential new mortgage customers) that bought in the boom that are in negative equity I'm surprised the banks haven't offered more attractive products than the current negative equity trade up product out there at the moment.

Under the rules using KBC's version as an example:
-Maximum LTV of 125%
-Maximum loan amount of €550,000
-Maximum term of 30 years
-Maximum age at maturity – 68
-Customers must not be in arrears or financial difficulty
-Minimum deposit of 10% (urban location) and 20% (non-urban location) of the new property purchase price required
-Minimum net disposable income requirements will apply

If you take the above into consideration i would imagine only a fraction of the potential market would qualify. Its the LTV that really plays effect. To put it simple you would need to be in only a very small amount of negative equity OR be trading up from a 2 bed apartment to a mansion.

An example of a qualifying customer would be:
Current mortgage 300k
Current property value 200k
Negative equity 100k
New property value 400k (6 bed mansion)
10% deposit 40k
New mortgage 360k+100k=460k
LTV is 115% in this case

A more realistic applicant that bought in the peak of the boom and now wants to have a family or has already started one. Lets assume applicant is in stable employment and has a perfect track record:
Current mortgage 300k
Current property value 200k
Negative equity 100k
New property value 250k (3 bed family house)
10% deposit 25k
New mortgage 225k+100k=325k
LTV is 130% thus disqualifying applicant

Now I appreciate the risk here if the LTV is too high for the bank. But surely by offering more attractive products it brings in more business. And by attractive I mean products that would qualify more of the realistic situations out there. Im talking moving from a small apartment to an average house here. How is a package that moves someone from €1000 p/m to €2500 p/m realistic? This is the example they use.

Trish56

Maximum loan to value with other lenders is 175%.

Alrite Chief

Trish56 wrote: »

Maximum loan to value with other lenders is 175%.

Really? I noticed with TSB they do a max LTV of 175 on trading down alright