New mortgage options for customers in negative equity
Bank of Ireland announces that, in line with Central Bank of Ireland guidelines, it has launched a range of new product features that will allow much greater numbers of customers in negative equity to move home.
Trade Up Negative Equity – this will enable customers who are in negative equity to sell their current home and move to a higher value property, carrying over an amount of negative equity to the new mortgage. This may suit customers with a growing family who need to move to a larger home.
Trade Down Negative Equity - this will enable customers who are in negative equity to sell their current home and move to a lower value property, while carrying an amount of negative equity to the new mortgage. This may suit customers whose children have grown up and moved out of home. To avail of these new product features, customers will be required to undergo a full assessment and will have demonstrated that they can afford the new mortgage.
Examples of Each:
Trade Up Negative Equity - Changing/Growing Family A couple bought a 2 bedroom starter home in 2006, for €350,000 with a mortgage of €322,000. They have since had a child and now have a second on the way and want to move to a larger home closer to schools, facilities etc. Their existing home is now valued at €175,000 and the balance on their mortgage is now €290,000. (166% LTV) Their new property is costing €400,000, and 90% LTV would equate to €360,000. This new feature would allow this couple to borrow, €475,000, or 119% LTV, covering both 90% LTV of their new property and the shortfall from the sale of their starter home (subject to affordability and underwriting assessment).
Trade Down Negative Equity - Moving due to job relocation A single man purchased a 3 bed house in Dublin in 2007, for €420,000 with a mortgage of €386,400 (92% LTV at the time). He has been relocated to Galway in his current job, and would rather remain with his current employer than change jobs. His property is now valued at €240,000 and the balance on his mortgage is €363,000. Therefore, his LTV is currently 151%, and he has Negative Equity of €123,000. As his outstanding mortgage is greater than the value of the property, he considered renting it out, but the rental income will not cover the mortgage. He doesn’t have any desire to become a landlord anyway and his preference is to buy in Galway rather than rent. The new property in Galway will cost €170,000. This new feature will allow him to borrow €293,000, or 172% LTV, covering both 100% of his new property and the €123,000 shortfall from the sale of his house in Dublin (subject to affordability and underwriting assessment). While his LTV has increased, his total debt has reduced from €363,000 to €293,000.