The dreaded negative equity

Despite at the time (that so happened to be heading towards the peak of the property bubble we were in!) placing a relatively decent deposit on a flat, i have watched month on month the value of the property fall. Now i’m left just about even…..if it continues i shall be in that god awful terroritry of negative equaity…..effin marvelous! Im assuming apart from keep paying off chunks when i can to keep it in positive equity (i hope!) theres not much else i can do?? How do i go on when i need to look for a better deal if on paper i no longer have a decent loan to value??

Happy Easter!! 🙂

You have my sympathy. We’re currently overpaying the mortgage by £250 a month to try and drag ourselves back into positive equity. Not a nice situation.

How do you know its value is dropping month on month? I’m personally only concerned with the value of my house when I bought it, re-mortgaged last year and when I sell it. Anything in between is just incidental.

However, is there any value to be got by investing in your own place – will a new kitchen cost less than it will add in value for example?

Its one of these converted mill apartments….all very nice, great location….a ‘young professionals’ type complex, fairly modern. I dont beleive that the additions are really necessary and i doubt very much it would add that much value to be honest. The general slide is accross teh board with my block and others in the area. I would love to sell it for a house with more space and that was always the plan as i was in mid 20’s and just saw what i could afford due to the initial boom putting properties further and further out of my reach.

I’m currently over paying too, but unfortunately i’m not made of money so can only pay off a couple of extra hundred a month, which only equates to about £2.5k a year….and the loss last year was £10k. The joys of property ownership eh?!

Ouch – apologies for the duff advice then. I bought an end terraced ex council house, and luckily the bottom end of the market is still performing where I am, and we reckon a new kitchen will definitely work in our favour when we sell up

Does it matter.? Pay the mortgage and use the property for it’s intended purpose, living in.

Just a thought.

Hopefully you would be able to remain on the banks SVR if you are on a fixed term deal at the moment. Thinking longer term it’s actually to your advantage that prices in your area are coming down e.g.

In ten years time, say prices have gone down 20% but you’ve saved enough for a decent deposit so you can afford to trade up.

Your £100k flat sells for £80k.
A £200k house sells for £160k.

So to move at current prices you’d need an additional £100k for the mortgage, but if the 20% drop happens, you only need £80k. Despite “losing” £20 k on your property, you’d come out £20k up 🙂

I’m personally only concerned with the value of my house when I bought it, re-mortgaged last year…

That’s the sticking point for us. Initial discount rate on our mortgage has long finished, so we’re stuck on the bank’s standard rate and can’t remortgage.

Neilsonwheels – of course it matters!! Do you not know that the British are obsessed with teh weather and house prices?? Seriously though, of course it does, the thought of being tied to somewhere when you want / have to move is pretty despairing. Plus, rightly or wrongly i would say the majority of people buy a house to make it home and also with the aim of making money to achieve that place in the countryside or wherever…so of course it does!

A colleague of mine sold his house to downsize, got his 5% deposit back, but the bank wanted 25% for the new place, even though he was looking to spend 100K less, he can’t buy again and has had to go renting…

Well, if you were geniunely affected by the recession/unable to get a mortgage/not a stw IT Audi driving professional, you’d only be renting anyway, which is an even worse return on your money.

So think yourself lucky that paying a mortgage is generally less than rent, and that you also are purchasing “protection” of not being turfed out by a landlord on a wim, and that ultimately, rent is “dead money”. At least your actually paying something off, which will be of a decently considerable % over time of what you paid. Your amount of negative equity isn’t going to equal the payments you made, so your still quids in, and have some control over your destiny.

It can only get worse, SVRs are on the way up regardless of BOE base rates
Inflation is also eating away at values

I’m lucky not to have a mortgage any more but I’ve seen a few ups and downs
When you do get to move, learn from this and make sure you choose somewhere you’d be happy to stay in and ride out any future dips if you had to.

So you have a nice home in a nice location which you can easily afford and you’re complaining?
Find a better hobby rather than watching your month on month property value.

Property is theft.

rent is “dead money”

A quote from someone who doesn’t understand finance. Rent is no more dead money than interest – and in a falling market rent is the better option.

Property is theft.

I’ve got 3, but I bought them. (in fact the council gave me 26K discount on the first one) It’s pretty hard to ‘steal’ a property.

) It’s pretty hard to ‘steal’ a property.

You need a really big coat…or friends in the City.

Or a big truck.

It’s pretty hard to ‘steal’ a property.

Is it comrade, is it?

There’s hundreds of thousands of interest only mortgages maturing in the near future
They reckon a very high percentage of these have no repayment vehicle in place and a lot of the properties with no or little equity in them, if owners can’t refinance, there’s going to be an awful lot of repos going on

Property is theft.

Ahh that old saying. My mate used to say that when he was skint & lived in a council house. Proper ‘anti everything’ was Sean, then he got a much better paid job & before long guess what he did? Yeah, bought his house off the council, just like me.

I feel it’s theft when I have to stump up my local taxes and the maire spends my money on an auto grand prix, a professional basketball team, a professional rugby team and… .

Similar situation myself-but I am content knowing I’m overpaying on my repayments, and better off than renting(return wise). It looks like you’re comparing things with several years ago, and not todays market. You may be worse off than some- but better off than others. It doesn’t look like you’re about to default or lose your property. 20 years ago, I was paying 12 per cent on my mortgage! as was everyone else.
Its a home. Live in it, and stop counting the cost-it’s all relative.

awful felling .. dig deep.. over pay if you can but dont get hung up on it.. its only worth what it is one the day you sell it everything in between is worthless.

lost heavily on one property but all you can do is look upon it as the cost of living in your beautiful home , which was why you bought it in the first place..

Does it matter.? Pay the mortgage and use the property for it’s intended purpose, living in

I knew some smart-arse would come out with this.

We want to move, we can’t. So yes it bloody well does matter.

Rent is no more dead money than interest

Obviously. But I pay about the same for mortgage as I would for rent. However about half (I think) of my payment goes to pay off the debt, and also my property will most likely appreciate in value in the long term. So I own more and more of an asset which is itself appreciating. That’s not dead money is it? If I were renting I’d be getting jack sh*t for my monthly payments, and I’d not be able to touch the house either.

Then again maybe I don’t understand finance.. 🙄

Rent in a falling market and own in a rising market. Simple. So far so good.

Another possibility, if your mortgage is less than the rental value of your flat you could move out and rent it and then rent somewhere else where you actually want to live? Just an idea, obviously won’t suit unless the numbers stack up.

It’ll be absolutely no consolation but I’ve been in a maga-negative equity situation, had a busines that was valued at 175K in 1985, had to sell for 60K in 1997 leaving me with **** all & a 9K debt. Lived in rented property for 5 years, paid debt off over that time. My ex property is now worth probly 175K again!
Chin up, you’ll be ok.

‘maybe I don’t understand finance’

Well you & me both mate!

Rent is no more dead money than interest – and in a falling market rent is the better option.

Ironically we rented for over a decade. People constantly told us it was “dead money”.

We always replied that our rent was less than the interest would be on a mortgage for the same property (Edinburgh prices!) and besides the bubble was bound to burst soon.

When we moved to Northumberland we decided to finally get on the property ladder. We had a reasonable deposit saved, but our IFA talked us into a low deposit mortgage so we’d have money left for a new kitchen and loft conversion.

Then the bubble popped. Barsteward!

We’re probably just about out of negative equity now, but we’ve not got enough paid off to remortgage and probably won’t have for quite a few years. Meantime we’re stuck here on Standard Variable Rate just waiting for the bank to crank it right up.

So you have a nice home in a nice location which you can easily afford….

Yeay yeah… white whine[/url]… I know. 😀
Plenty of people much much worse off than us so mustn’t grumble really.

Obviously. But I pay about the same for mortgage as I would for rent. However about half (I think) of my payment goes to pay off the debt, and also my property will most likely appreciate in value in the long term. So I own more and more of an asset which is itself appreciating. That’s not dead money is it? If I were renting I’d be getting jack sh*t for my monthly payments, and I’d not be able to touch the house either.

Well…you must be seriously overpaying to be paying half capital/interest with each mortgage payment. In the longer term it may well appreciate in value but that’s obviously not guaranteed, in the short-term negative equity can cause big problems. For your house to be a good investment it has to increase in value by more enough to cover the opportunity cost of the capital you have in the property and the interest you pay on the mortgage. Also there are maintenance costs and the costs associated with purchase which depending on the purchase price of the property can take years to cover. Really need to do an NPV analysis on these things if you really want to understand.

So anyway, long-term worth buying your own place for the benefits and assumption of appropriate capital growth but in the short or even medium term property ownership can be a costly business. I’m on my 3rd house since 1996 and have obviously done very well in that time.

Then again maybe I don’t understand finance..

Don’t be too hard on yourself, most don’t.

Rent in a falling market and own in a rising market.

Yep, except you don’t want to be moving every time the wind changes.

In the long term, the market will always be rising. The house I grew up in was bought in 1980 for £28,000. It’s probably worth £220k or so now. The mortgage payment was still £250 or something when the house was worth £160k in 2003 ish.

In the longer term it may well appreciate in value but that’s obviously not guaranteed

See above. I would be very interested to hear of someone who bought a house 20 years ago for more than it’s currently worth. I think it extremely unlikely.

But you are right – home and contents insurance is a lot more than just contents, so that needs to be factored in. And the fact that you CAN alter it means you are probably going to, which ime is the biggest cost after mortgage!

Ah but we’ve had much higher inflation/interest rates in the past so real term rises aren’t as impressive as you might think – compare to stock market returns. House prices v FTSE for 20 years to 2000 would surprise a few.

BTW, as interest rates are so low now you may well be paying about 1/2 capital these days if you have a low rate – usual proportion in the past would be 20 – 25% capital.

Property prices have risen in realtion to earnings long term, that’s the best indicator for most people. I4ve bought when prices were low relative to incomes even if interests rates were high (which didn’t concern me as I’ve nver borrowed).

Ah but we’ve had much higher inflation/interest rates in the past so real term rises aren’t as impressive as you might think

No, quite right – I am not suggesting buying houses as an impressive investment – merely saying that if you buy, some of your money works for you, rather than working for someone else if you rent.

A friend of mine bough a house (or should I say a penthouse flat!!) just outside of Dublin for 420k, he had it valued 8 months ago, one at 220k and one at 235k

Thats what I call Neg Eq !!!!!!

Poor chap! A lot of buy to let investors got hurt a few years ago thinking they couldn’t lose by buying tiny flats in new developments off plan. Prices crashed and many tried to get out of the purchase accepting they’d lose their deposits but then got taken to court and forced to complete.

Thats what I call Neg Eq !!!!!!

I’m not too clear on these things, but wouldn’t that all depend on how he paid for them?

?, He put down 23k deposit, borrowed the rest (mortgage), and his investment is now worth 190k less than what he owes.

Must have missed that in your other post. 😳

RagTi – Member

A friend of mine bough a house (or should I say a penthouse flat!!) just outside of Dublin for 420k, he had it valued 8 months ago, one at 220k and one at 235k

Thats what I call Neg Eq !!!!!!
Posted 37 minutes ago # Report-Post

Hang on! No I didn’t. 🙄

?