New homeowners caught in negative-equity loan trap

And?

People who bought with 100% mortgages in 2007 are now financially worse off to the tune of as much as 50K. What a shocker.

How is this different to families buying a BMW X5 or a Porsche Cayenne on Hire Purchase that they couldn’t afford?

Buying with a 100% mortgage in a falling market is a bad move. You end up stuck and paying off a 10s of thousands of debt just to get your net worth back to 0. deal with it.

-Rd

Here’s one for you,

People that struggled and put their lives on hold to save 20k or 30k are still in negative equity,
I’d be much more pissed off if i was in their situation.
In the end you are still losing money either way but only if you want/have to sell up in the next 10 years.

But yer mammy will be delighted that you’re ‘on the ladder’ :wink:

I would say its quite a lot more. I look at this way. For every 50k you pay over the odds for a house the cost to you is approximately 200k(not discounting inflation)

You pay 50k to much and you end up paying another 50k in interest. If you are earning at the higher tax rate you have to earn 200k to pay 100k back.

There are many people who bought a 1-2 bed apartment, but didn’t intend to spend the next 10 years there. If they don’t sell up, what price do you put on those people having to put their life on hold? What’s the “cost” of delaying having children, or turning down potential job opportunities elsewhere because they can’t sell-up or trade-up to a larger property elsewhere?

Indeed, these people are more deserving of newpaper articles and hand wringing.

Although again, so what?

When you buy a house with a bif mortgage there’s a chance you’ll end up in negative equity. All you can do is give yourself an edge by saving up as big a deposit, make sure you borrow as little as possible so you have room to breath, and if the market is falling then keep renting etc.

It’s certainly good to hear these stories of how negative equity can stop you shopping around for a lower rate. Personally I’d prefer if we had had these kinds of articles BEFORE the tens of thousands of people got into trouble.

-Rd

I am sympathetic toward the people caught in negative-equity but the article is a bit of a non-sequitur to me. It surely does suck to be those people but other than a bailout (and with a few exceptions that isn’t a popular idea around these parts) I don’t see that there is much that can be done to help these people. :frowning:

It worse than just not being able to shop around for a cheaper rate. Anyone in negative equity has fallen into a sub-prime catagory and lenders are within their rights to charge a premium above their normal variable rates.

How can you find out how many 100% mortgages were provided over the last 3 years?

**EVERYBODY WHO BOUGHT ON A 100% MORTGAGE IN IRELAND, EVER IN ALL OF HISTORY , IS IN NEGATIVE EQUITY **

seeing as 100% mortgages have only been around since about mid 2005 in Ireland .

True, but you can put up pictures where you want. Handy this you will need something to look at for a long long time.

EVERYBODY WHO BOUGHT ON A 100% MORTGAGE IN IRELAND, EVER IN ALL OF HISTORY , IS IN NEGATIVE EQUITY

Not necessarily.

Guaranteed RD !

Unless they remortgaged since , if they still have the original mortgage they are all in negative equity like I said !

Nobody who took out a 100% mortgage in Ireland, since the introduction of the product , and who has not remortgaged since , is in POSITIVE equity today .

…unless they sold before the crash hit.

It’s possible some of the 100% mortgages have had some of the capital paid off independently of the main mortgage payments. Some people pay off the capital when they can - bequests, overtime, good day at the bookies, etc.

I seriously doubt there are many of these.

My earlier post seems to have gotten chopped by gremlins.
But this is basically the point I made.

A considerable number of people who’ve taken 100% mortgages may now be in Negative Equity, but not all.

House prices went up considerably in 2005 and 2006, at the same time these people were paying down the capital portion of their mortgages.

At least a few would have paid a lump sum of some kind. Some may have taken 100% mortgages knowing they had other money coming their way etc.

I have no idea what the figures would be, but I’d say it’s certain that at least some people who took out 100% mortgages are not in NE. It might not be enough to be meaningful though.

-Rd

Is there also an offset to be made on the other side for those who once raising a small amount of equity from capital payments, immediately released it, thus plunging them back into the NE triangle? I know of enough people who couldn’t wait to build equity so they could get their hands on it. Top Ups, mortgage chequebooks etc, all meant that even peple who started with less than 100% mortgages could now be facing NE by virtue of equity release at peak.

Yes, and I wonder if that’s not an even more serious problem.

Perhaps our friendly Mortgage Broker can chime in here.

If I want to buy my first house and my income suggests I can borrow 400K. And Canny McSavvy has the same income, but already owns a house and owes 300K, but his house is worth 500K.

How much will we each be able to borrow.

I would home that since we have the same income we’d both be able to borrow the same maximum amount 400K. Since that’s all we can pay back.

But, could the guy with the house “worth” 500K have gotten more than 400K in a refinance?

If so then serial refinancers are liekly to be in a lot more trouble than the 100 percenters.

-Rd

I know a fellow who bought a house with a 100% mortgage that was close to a wreck when bought. He was able to do most of it up himself so I am not sure if he is in negative equity. If he is it would be very close as he has also been paying off the mortgage over 2 years now