We understand that being in negative equity is a frustrating position to be in. It can be the source of agitation for homeowners that wish to move on with their lives.

The good news is that we can definitely help a significant percentage of homeowners in this unfortunate situation and have done so recently.

a checklist of negative equity mortgage

How do I know if I’m in negative equity?

In short, if the balance of your debt (which is loans and mortgages) is more than the value of your house, then you’re in negative equity.

Using an example, we can see what this means:

Purchase price of house: £120,000
Current value: £105,000
Outstanding mortgage balance: £110,000
Equity in the property: -£5,000

The above means that if you were to sell your house to the open market, you would achieve £105,000 (according to the current value) but you would still need to find an additional £5,000 from elsewhere to pay off the rest of the mortgage which amounts to £110,000 in total.

You will probably be in negative equity if you have any or a combination of the following thoughts:

I owe too much on the mortgage and can’t afford it

I owe more than my house is worth

I have an upside down mortgage

I am underwater with my mortgage

What should I do if I’m in negative equity or low equity?

You may not be in negative equity, but you may have such low equity in the house that if you were to sell it, then you’d be struggling to pay off the other associated costs with moving house.

This could include:

  • Solicitors costs
  • Van hire and removal firm
  • Deposit for the next house that you’re buying or renting
  • Other incidental costs

How can we help if you’re in negative equity?

Just because the debt against the house may be more than what your house is worth doesn’t mean we can’t help. We will happily look at buying houses as close to market value as possible in certain areas throughout Greater Manchester and Lancashire.

Of course, we’d like to buy at a discount if possible, but we understand that in certain situations that isn’t possible. If your house falls into an area that we want to buy in, then we will in most cases offer 100% of the market value.

I owe more than my house is worth

mortgage spelled out on monopoly boardAs mentioned earlier, it can be frustrating to discover that you have more debt than your house is worth, but this has happened to couples and families that purchased property at its peak or have taken on too much debt against. The anticipation at the initial point of purchase was that the asset would go up in value, but the reverse may have happened as it has done in different parts of England, Wales and Scotland. It is something that has happened beyond the control of the owner, so the reactive options are quite limited.

It can be quite disheartening to discover that the property is worth less than you paid for it, but other than to sell at a loss, what other solutions are there?

(1) Stay in your home and wait – You could just bide your time and hope that property prices do creep back up in the local area and look to sell then. However, in certain parts of the UK, some property prices are still at the level or below the level of prices from the last recession, so you could be waiting some time.

The benefits of this strategy is that you are able to pay off mortgage, which over time should put you back in equity.

(2) Rent out your property and rent elsewhere – You would need to get the permission from your mortgage lender to be able to do this, but it an option for you to move on with your life if the permission is granted. Bear in mind that this doesn’t resolve the issue of negative equity, but much like option (1), you’re biding your time with the hope that property prices will rise again at some point meaning that you are able to sell off the house with positive equity.

set of keys next to mortgage statementBear in mind here, that unless the rent you’ll be paying (in your new home) is lower than the rent you are charging for a tenant to move into your current home, then you won’t be paying down any of the mortgage debt than you would if you’d remained in your home.

A final remark here is the other factors to consider when becoming an ‘accidental landlord’, which is a whole different subset of questions you have to ask yourself before going down that route.

What solutions do we offer if I owe more than my house is worth?

If either of the two above are not to your preference, then we are happy to buy property in the Greater Manchester and Lancashire area using two solutions as described below:

(a) Buy the property for as close to market value plus an added 10% to 20% as possible in certain conditions

The way we may be able to do this is to determine if there is an opportunity for us to:

  • Add value to the property once we’ve bought it from you
  • Have a long term strategy to hold and hope that the price of the property does increase at some point

We take on the purchase above at our risk, so we can only work with homeowners in this regard that are more accommodating to our needs than a straightforward cash sale.

(b) The other option is to get a cash offer to you within 7 days and then purchase the property within a 21 day period. This will help you out in two ways:

  • Move you out of negative equity as much as possible
  • Help you to get on with your life

In this instance, using the example at the very top of the page, you would have to find the remaining £5,000 from elsewhere to pay off the balance to the bank.

So, have a think about what you want to do, but if you are struggling with negative equity issues then we would suggest option (a) above as it helps you to move on with your life and doesn’t ruin your credit rating. Please get in touch and see if we can help you in any way.