Startling research recently by mortgage administration company HML has revealed that half a million UK home owners are living in properties that are worth less than the outstanding mortgage.
Northern Ireland fares worst in the recent survey, where a staggering 41% of homeowners are in negative equity, with Northern England the next hardest hit.
The revelations are particularly worrying given the recent upturn in the property market, thanks in no small part to the government’s ‘Help to Buy’ scheme.
Taj Kang, Business Development Director at Contractor Mortgages Made Easy has some advice for any Contractors finding themselves in a similar situation.
“Negative equity is only a problem if you’re looking to sell the property. For many Contractors it could prove more prudent to hang on to the property and look to rent it out, rather than take the hit and cut your losses.”
“Most lenders are sympathetic to situations like these providing you’re up front with them. Some will even look to try and ‘port’ the existing mortgage if you’re thinking of moving home.”
Porting an existing mortgage can be a useful way of overcoming the effects of negative equity. In the process, you effectively pick up your existing mortgage, and take it with you to your new home.
It can also be a very useful way of retaining a preferential interest rate, and avoiding hefty Early Repayment Charges.
It is not, however, a process which is particularly straightforward, warns Taj Kang.
“Porting your existing mortgage carries many benefits, but it is fraught with difficulties. Similar to those situations whereby you approach your existing lender to try and obtain a better rate, they don’t tend to deal with Contractors very often and this can lead to them misrepresenting your income to their underwriters.”
“Due to the change in property, when moving an existing mortgage the entire new amount is subject to new underwriting; and with the changes due to take effect imminently from the Mortgage Market Review, this will become even more difficult when going directly to your local branch.”
“By instead speaking with a specialist broker, not only can you ensure that the application is assessed correctly, but avoid a declined application leaving you with nowhere else to turn.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080