Refinancing your way out of negative equity

Refinancing your way out of negative equity

Refinancing your way out of negative equity

Refinancing your way out of negative equity – The return of the 125% LTV Mortgage. In order to have some form of normally functioning property market, people have to be able to trade their homes. The residential property market relies on this to function correctly, both to free up starter homes for new first time buyers coming … into the market and to provide demand for homes further up the price scale. In many cases people are prevented from being able to trade in the market, even if they have the income and ability to repay a larger loan and they cannot move because of the negative equity.

In the UK, the Nationwide Building Society currently offers a “service” (not a mortgage product) to existing customers which allows them to remortgage and carry forward negative equity debt to a new property, effectively a 125% mortgage in certain circumstances.

Given the increasing number of people falling into negative equity in the Irish market, should something similar be made available at some point in the future in Ireland to facilitate trading in the market for people who meet the very strict lending criteria?

  • Or would it simply be a case of refusing to learn from the mistakes of the past and another example of reckless lending on behalf of financial institutions?
  • Or is transferring property debt into a type of personal debt going to be a necessary evil that we will have to consider in order that people can move?
  • Should the couple who are Teachers or Gardai be prevented from relocating for work purposes because they are in negative equity – would that be of benefit or detriment to society and the economy?

Have your Say

  • Should there be a facility available for home owners in negative equity who are looking to remortgage?
There are 21 comments for this article
  1. John at 11:07 am

    I would agree with Owen above. Perpetuating unsustainable debet can’t be good

  2. paud at 6:32 pm

    leave well enough alone, is that some kind of joke. I would say there is very little well about the irish housing market and the estimated 300,000 people in negative equity.

    I would vouch the people saying well enough alone are the same people criticising the government for lack of leadership.

    This idea is far from perfect. Also I would have to say the UK has a much bigger, longer established and more realistic property market which will rebound a lot quicker than a small country like ireland.However any innovative ideas such as this are to be commended. There are no easy exits or quick fixes but doing nothing gets us nowhere. The best part of this idea is that there is no soft options being sought. In my opinion if you borrowed the money and bought the house then you have to either pay back the money or lose the house. There are no easy opt-outs, otherwise why would anyone bother repaying their mortgage.

  3. john at 5:36 pm

    Affordability, having assessed and provided for the risks, such as increased interest rates, is the key. As a general rule applying to all I would not recommend it. However, subject to strict criteria laid down by, and this time monitored by, the financial regulator, there is no reason why on an individual basis such an agreement can not be drawn up between an individual and his mortgagor. The important thing is for the individual to be able to prove he can meet the repayments in all but the most unpredictable circumstances.

  4. Cars at 5:44 pm

    Maybe we should have 80 year mortgages, which we can later transfer.:)

  5. Anne at 4:49 pm

    Personally it’s something I would love to see here. I’m currently in negative equity & want to move from an apartment to a house. I would have no problem carrying forward my negative equity if I knew I’d be able to buy a house that I potentially will spend the rest of my life in so I’d have no problems paying it off over a number of extra years if need be. BRING IT IN!!!!

  6. Pat Connolly at 8:08 am

    Leave well alone,it’s a bad idea.

  7. Jim at 7:58 pm

    Why not have this. You don’t have to avail of it just because it’s there but for anyone in the unfortunate position of being stuck in a house just because their mortgage so happens to be larger than what their house is now worth, sounds like an option for consideration. If you don’t like the idea of it and are happy where you live then don’t avail of it and stay where you are.

  8. fran at 12:30 pm

    As regards Bob in Usa biggest banana republic in the world. Who keep on printing money as there way out of recession with trillions not billions dept and who are prone to corruption too, get a grip! This is a good idea and will kick start the market and get things moving. Once people have the means of affordability whats the problem?
    cheers Fran

  9. ieshoes at 10:50 am

    RE:I think it is a bad idea….leave well alone…it is an interesting take on the situation but again the only profiteers will be the banks. If we cannot afford to trade up we should stay where we are and not get into deeper debt.

  10. ieshoes at 4:48 am


  11. Tony at 12:33 am

    They should do something like this in Scotland. Better than what we are doing now….. NOTHING!

  12. Austin Henry at 6:10 pm

    The problem I see is whether we have learned from past mistakes or not. The freely availablility of money from banks in the past, led people to behave like it would never have to be paid back, or what to think of what may happen if they were to lose their jobs or if there was a market down turn. It could be that the amount of negative equity they would be transferring on to a new home could indeed increase if we were to experience a futher downturn in house prices. Personally, I would not be taking up this offer, even if it was available, and I still think there are possibly too many twists and humps in the Irish economy to come, and I would not have the confidence to enter into the housing market again. My fear is that making such a scheme available would lead to people taking futher risks, when really now is a time to sit it out and see.

  13. Michael Baker at 5:17 pm

    We all know two wrongs don’t make a right. Carrying forward negative equity is madness. As I said in my previous article you’ll find it in my Blog the right thing to do is devalue. If you drive up a narrow lane and find you’re at a dead end looking over a cliff, what would do?
    Reverse or keep going forward?
    We are where we are, values are what they are, realism has to be faced by everyone, we have to share the costs and the banks must be the first to acknowledge this and take their punishment too.

    Michael Baker

  14. Owen Thomas at 3:42 pm

    Anything of this nature that facilitates people perpetuating already unsustainable debt is a terrible idea. The property market has yet to reach a position where housing is affordable despite the significant drop in prices. Supply far outstrips demand – a situation which was inevitable along with the inevitable property crash. But in Ireland you were not allowed say such things. Well who was right? The developers and the government or those that said the situation was unsustainable and was bound to end in tears. The only soft landing was the one Bertie got – getting out before he had to face the mess we are now in! Anything that creates artificial demand for property is wrong. It is an unfortunate fact that we have to let the market find its bottom and things will gradually improve from there. Just for the record, I’m speaking as someone who has bought and sold in the space of a month during “Summer” 2009. I have very much felt the effects of the property crash and despite a drop in prices, I still have a large mortgage for a slightly above average 4 bed.

  15. Jamie at 3:29 pm

    didilidy potatoes, thats all I have to say on the matter.

  16. derek at 3:22 pm

    it is essential that some sort of stimulus package is made available to home owners in negative equity to get the market moving again. personally i think that any negative equity should be allowed to be offset against stamp duty or else freeze mortgage interest rates at a minimal band so that the home owner is not lumped with interest on top of a loan that will take 30 to 40 years to pay. this should be applied to people who can prove that they have purchased their property within say the last 7 years and that the property being sold is their principle private residence. this hopefully would allow people who purchased homes / apartments and are trying to trade up to do so and act as a kick start to any upward movement in the property market.

  17. Al White at 3:11 pm

    If we allow further debt to accrue on a property it still has to be paid back,at current interest rates and adequate income this is fine,but when interest rates rise ,as they inevitably will and salary increases are no longer a given then Debt will be carried well after an individuals retirement age

  18. grainne Koberl at 2:46 pm

    I think it is a bad idea….leave well alone…it is an interesting take on the situation but again the only profiteers will be the banks. If we cannot afford to trade up we should stay where we are and not get into deeper debt.

  19. Bob at 2:20 pm

    Banana republic, corrupt political system. The housing market will never recover. Stop living in dreamland.

  20. Dean at 2:11 pm

    The Nationwide were slated in the UK press when they launched this service. It is only available to their existing mortgage holders not new customers so they are simply transferring the negative aspect from one mortgage to another. Any situation which prevents people from being able to move house is wrong particularly when there is a lot of unemployment and you have to go where the work is. Would it be better for a couple who have lost their jobs to move and get new jobs taking their negative equity with them or stay put and not be able to pay the mortgage and therefore get in more negative equity.

  21. Steve at 2:06 pm

    I would definitely recommend this refinancing measure.Another good tool would be to also lengthen the duration of the mortgages to perhaps 50 years.Finally,once nama is up and running,the Department of Finance should get those bulldozers out and get demolishing all the developers’ empty properties in the State.The banks meanwhile are strengthening their balance sheets and soon will be able to get our economy up firing on all cylinders again.These measures will also solve the negative equity crisis.

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