Negative Equity Mortgages
What is negative equity?
What is negative equity?
Negative equity is when the value of your property is less than the amount owed on your mortgage. This means that if you wish to sell your house, the sale amount will not cover the amount you need to clear your mortgage. In other words, if you do sell your house you will still be left with an outstanding loan.
Many Donegal people in negative equity see this as a barrier to moving. Some lenders recognise that you may have a need to move to a different home depending on your circumstances and they have a solution for you, even if you are in negative equity. We may be able to source a mortgage for your next home where you bring the negative equity portion of your current mortgage across to your new mortgage.
Who is this solution suitable for?
Apartment holders in negative equity who want to move to a bigger house.
Parents whose current property is in negative equity and need more space for a growing family.
Those in negative equity who need to move location due to job opportunities/family circumstances etc.
Those with negative equity on their current property who want to build their own home.
Negative Equity trade up or trade down mortgages are available to home owners only. This option is not available to Buy to Let mortgages.
Your current lender is the only option available for this and you must have a satisfactory repayment record of the previous 2 years
How does it work?
For those trading up you can sell your existing property and carry forward the negative equity (the difference between the sale proceeds of your existing home and the current mortgage balance) onto your new mortgage. Limits apply.
Those trading up must contribute at least 10% of the new property purchase price plus stamp duty and other costs such as legal fees, estate agent fees and so on. In other words, you can borrow up to 90% of the new property purchase price.
Those trading down can borrow up to 100% of the new property purchase price
Max term - 30 years or to max age 70
If you have a tracker mortgage, the lenders have different options available. It does not necessarily mean you lose the Tracker rate.
Standard new business, fixed and variable rates are also options.
Here’s an example of how the negative equity feature works:
|Value of current property||€180,000|
|Price of new property||€350,000|
|New mortgage (90%)||€315,000|
|Plus negative equity carried forward||€65,000|
|New mortgage sought||€380,000|
Like all lending, certain lending criteria apply to a Mortgage and there are terms and conditions. You must be over 18 and security and insurance are also required.
We’ll make sure all of this is clear to you up front.
If you need more information or help, give us a call.
The above if for information purposes only and does not constitute financial advice in any, we recommend that you speck with us before making any financial decisions. We recommend a holistic approach to financial planning and we can help you put your plans in place.