If you bought your home in the last few years, you may now find yourself in negative equity. If you have no plans to move and you can afford your mortgage repayments, then negative equity shouldn’t be an immediate problem for you.
However, if you are looking to move up the property ladder (for example if you’re planning on having children or moving in together, or you need to move for work reasons) it can become a problem because you may have to sell your home for less than you owe.
So, what are your options?
Stay put and save
If you can put off moving for a little while and you can afford to do it, then you could stay put and try to set aside some savings in a regular savings account to cover the shortfall if you do decide to sell. Or, if you can afford it, another option is to overpay your mortgage. This will reduce the amount you owe on your mortgage, but may only be an option for you if you have a variable rate mortgage (this includes tracker rates). With a fixed rate mortgage, you can’t usually make additional payments without penalty.
Try to sell your home and buy another
You could also consider selling your property at a loss. However, you will need to make up the shortfall between what you owe on your mortgage and the proceeds you will make from selling. So, unless you have savings put aside, this will not be an option. And, if you do have savings, bear in mind that covering the shortfall will eat into the deposit that you would use to buy a new property.
Get more information on what to consider
Rent out your property and buy again
Instead of selling, another option is to rent out your property and buy a new one. Of course, whether this is an option or not depends on:
Rent out your property and rent another
If you cannot stay put, maybe because of a growing family or work, but selling is not an option, you could also consider renting out your own property and renting a bigger home or one in a more convenient location. Again, you’ll need to consider whether you can get enough rental income to cover your mortgage and allow you to pay monthly rent on another property.
Get more information on what to consider
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However, if you are looking to move up the property ladder (for example if you’re planning on having children or moving in together, or you need to move for work reasons) it can become a problem because you may have to sell your home for less than you owe.
So, what are your options?
Stay put and save
If you can put off moving for a little while and you can afford to do it, then you could stay put and try to set aside some savings in a regular savings account to cover the shortfall if you do decide to sell. Or, if you can afford it, another option is to overpay your mortgage. This will reduce the amount you owe on your mortgage, but may only be an option for you if you have a variable rate mortgage (this includes tracker rates). With a fixed rate mortgage, you can’t usually make additional payments without penalty.
Try to sell your home and buy another
You could also consider selling your property at a loss. However, you will need to make up the shortfall between what you owe on your mortgage and the proceeds you will make from selling. So, unless you have savings put aside, this will not be an option. And, if you do have savings, bear in mind that covering the shortfall will eat into the deposit that you would use to buy a new property.
Get more information on what to consider
Rent out your property and buy again
Instead of selling, another option is to rent out your property and buy a new one. Of course, whether this is an option or not depends on:
- how much rent you could get and whether it would cover the current mortgage and other expenses
- whether you will be able to get a second mortgage and
- whether you have a deposit to buy a new property
Rent out your property and rent another
If you cannot stay put, maybe because of a growing family or work, but selling is not an option, you could also consider renting out your own property and renting a bigger home or one in a more convenient location. Again, you’ll need to consider whether you can get enough rental income to cover your mortgage and allow you to pay monthly rent on another property.
Get more information on what to consider
Taken from:
FS
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