Negative equity - new mortgage

redmgar

Hi,

We have a house currently in negative equity of around 20k. Is it possible to get a new mortgage using that 20k counting towards deposit towards a new house?

ELM327

redmgar wrote: »

Hi,

We have a house currently in negative equity of around 20k. Is it possible to get a new mortgage using that 20k counting towards deposit towards a new house?

I don't understand, you want the negative money (ie money you lose on the sale) to count as a positive on a new application?
Doesnt make sense to me. A negative equity when applying for a new mortgage is not a positive

Confusedly
-ELM

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This post has been deleted.

GingerLily

Some banks will allow you to transfer your negative equity

You still need your 10% cash deposit for your new house

I believe the maximum LTV of the new mortgage with the carried over negative equity can be as high as 125%, but I don't know how many people qualify for such loans or what the additional criteria is.

WestWicklow1

redmgar wrote: »

Hi,

We have a house currently in negative equity of around 20k. Is it possible to get a new mortgage using that 20k counting towards deposit towards a new house?

Did you mean to say "Positive equity"?

davo2001

GingerLily wrote: »

Some banks will allow you to transfer your negative equity

You still need your 10% cash deposit for your new house

I believe the maximum LTV of the new mortgage with the carried over negative equity can be as high as 125%, but I don't know how many people qualify for such loans or what the additional criteria is.

Would that not be 20% as they are not first time buyers?

Michael D Not Higgins

The Central Bank rules do not apply LTV limits for negative equity mortgages, so a deposit is not necessarily required. A bank may however imply stricter rules than the Central Bank rules and require a deposit. LTI limits are still in force for negative equity mortgages, i.e no higher than 3.5 times income without an exception.

redmgar

I have read that borrowers in negative equity - where the value of their existing property is less than the outstanding mortgage - do not need to have the 20pc deposit for the new house. Although the 3.5 times salary still applies. Anyone have experience with this?

GingerLily

davo2001 wrote: »

GingerLily wrote: »

Some banks will allow you to transfer your negative equity

You still need your 10% cash deposit for your new house

I believe the maximum LTV of the new mortgage with the carried over negative equity can be as high as 125%, but I don't know how many people qualify for such loans or what the additional criteria is.

Would that not be 20% as they are not first time buyers?

I googled it and was only basing it off EBS - which states 90% LTV for negative equity mortgage. They actually state 175% LTV on the new mortgage but I imagine that would be difficult enough to qualify for if your paying a deposit on the new property

GingerLily

The maximum LTV appears to be different for trading up Vs trading down - which makes sense.

If your decreasing your overall debt they'll allow a higher LTV rather then increasing your debt.

Michael D Not Higgins

redmgar wrote: »

I have read that borrowers in negative equity - where the value of their existing property is less than the outstanding mortgage - do not need to have the 20pc deposit for the new house. Although the 3.5 times salary still applies. Anyone have experience with this?

Let's say you have a house worth 200k and a mortgage of 220k, there's your 20k negative equity.

Option 1
You sell your house and buy a more expensive house, say 250k. Assuming you meet the 3.5 times salary already, the bank may choose to ask you pay the 30k difference in cash or give you a 100% mortgage, however the former is more likely than the latter.

Option 2
You sell your house and buy a cheaper house, say 180k. After your 200k sale, you transfer the 20k negative equity onto the 180k mortgage for a mortgage of 200k. This is a smaller mortgage and a lower LTV, much more likely from the bank's side.

GingerLily

Michael D Not Higgins wrote: »

Let's say you have a house worth 200k and a mortgage of 220k, there's your 20k negative equity.

Option 1
You sell your house and buy a more expensive house, say 250k. Assuming you meet the 3.5 times salary already, the bank may choose to ask you pay the 30k difference in cash or give you a 100% mortgage, however the former is more likely than the latter.

Option 2
You sell your house and buy a cheaper house, say 180k. After your 200k sale, you transfer the 20k negative equity onto the 180k mortgage for a mortgage of 200k. This is a smaller mortgage and a lower LTV, much more likely from the bank's side.

Option 3: pay 10% deposit on the new house and transfer your negative equity onto the new mortgage - as per the rules of negative equity mortgages

Michael D Not Higgins

GingerLily wrote: »

Option 3: pay 10% deposit on the new house and transfer your negative equity onto the new mortgage - as per the rules of negative equity mortgages

There's nothing in the Central Bank rules about negative equity mortgages requiring a 10% deposit. This is a bank requirement and could be an extension of option 1. Instead of a 30k deposit it might be a 25k deposit with a 5k increase in the mortgage amount.

GingerLily

Michael D Not Higgins wrote: »

GingerLily wrote: »

Option 3: pay 10% deposit on the new house and transfer your negative equity onto the new mortgage - as per the rules of negative equity mortgages

There's nothing in the Central Bank rules about negative equity mortgages requiring a 10% deposit. This is a bank requirement and could be an extension of option 1. Instead of a 30k deposit it might be a 25k deposit with a 5k increase in the mortgage amount.

No there isn't - I'm just referencing what the lenders have written down rather then making up numbers like you have been.

You are allowed trade up and have an overall new LTV over 100%, which is not obvious from your scenario.

What banks do not require a deposit for the new house do you know?

redmgar

So its not required by central bank regulations but banks themselves may require it?

Michael D Not Higgins

GingerLily wrote: »

No there isn't - I'm just referencing what the lenders have written down rather then making up numbers like you have been.

You are allowed trade up and have an overall new LTV over 100%, which is not obvious from your scenario.

What banks do not require a deposit for the new house do you know?

If you're trading down you don't need a deposit. Most banks have advertised "up to 100% LTV" for negative equity mortgages when trading down.

I agree it wasn't obvious in my example that you could have a higher than 100% LTV in trading up. This only happens when your negative equity is higher than the 10% most banks enforce for trading up negative equity mortgages.

Michael D Not Higgins

redmgar wrote: »

So its not required by central bank regulations but banks themselves may require it?

Yes, are you trading up? Then you'll likely need at least 10% (plus don't forget professional fees and stamp duty).

redmgar

cheers, so it would be 10 % rather than 20 % for trading up

Michael D Not Higgins

redmgar wrote: »

cheers, so it would be 10 % rather than 20 % for trading up

It depends on the individual bank. I haven't checked them all but it looks standard to be 10%.

goofy141

We are in a similar position ourselves, negative equity of about 20k in the house and looking to trade up.
It seems to be dependent on where your current mortgage is as the central bank rules do not apply LTV limites for negative equity mortgages.

We are currently with EBS who require a 10% deposit, but there are plenty of other providers out there who are giving customers in a similar position to us a 100% mortgage.