Hurrah! Now you just have to hope house prices level out or continue to increase, rather than levelling out and then going down, plunging you into the depths of negative equity. It's a charming game, isn't it?
On the subject of house prices, one might think that their increasing is a boon to the homeowner. Well, it is, but not in the case of my sister-in-Law. They moved house about 2 years ago, buying at ?100,000. The house is now valued at about ?150,000. Quite a tidy profit. Trouble is, SiL and husband are getting divorced. SiL doesn't earn enough to take on the mortgage, but hubby needs the money. The solicitors have been at work, and the upshot is that she has to buy him out of the house by coming up with half the profit; i.e. ?25,000 =/
My house is mine, all mine. I'm not going to share it lest such horribleness befalls me. Sympathy to the sister in law.
As for negative equity, well, it sounds nasty but I think I should be safe, plus I plan on staying there a good while and it's cheaper in the long run than renting.
Went through the same thought process nearly five years ago. Was lucky in that I bought just after the bottom of a price dip and the house has probably gained 40% in those five years (from 103k to about 140-ish) and that I've kept the same job (well, different roles in the same company) which is 3.5 miles away. Could have made a lot more on the house if I'd bought one of the other options at the time but this house was nicer/bigger (there was a bigger house in a worse area and a smaller house in a nicer area so it was just finding the one that I liked best). The plan was to live here for at least five years (or to own the house that long if I got transferred to the US office, and rent it out) but inertia and rising house prices mean that I'll probably hang on here a while longer and convert the loft or replace the crap conservatory with something that's useable year round, extends the kitchen and provides a downstairs w.c.) Won't add *that much* to the house value, but will add a lot to the house useability (for example the extra loo will be great when my lodger is using the bathroom in the morning and I wake up with the usual requirement apon waking!)
The problem with negative equity the last time around came because house prices actually sank in many areas (by upto 30% in some areas) so the fact that you're ok now and ok next year doesn't mean you're safe from negative equity unless you can pay off more of the capital than the house price has dropped at the time you need to sell. If you don't need to sell then you can hold on and hope the prices recover (as they always have so far!) or that your salary will keep increasing (with inflation and promotion) reducing the amount of your salary required to pay the interest and leaving more to pay off capital or invest, and other sources of revenue (lottery wins, inheritances, stock options, marrying a millionaire, long term investments) show up and help to pay off the house.
Depending on the mortgage (endowment/repayment) and whether it can be passed over to her, then that sounds, unfortunately, fair. She gets a 150,000 house, with 23 years left on a 25 year mortgage. The alternative is the house is sold, the solicitors etc. take their cut, rent is paid for the time it takes to complete the sale (average of 3 months in the UK at the moment, which means half of them take longer (ish!) or you cut the price to sell quickly) so the alternative might be to sell it quickly at 130k, pay 10k in sales costs, whatever penalty on the mortgage (3,6 or 10 months interest perhaps) and 3months x 2 rent which will probably leave her with a few grand and nowhere to live.
My friends, when they split, had a mortgage that was more than the house was worth. He wanted to keep the house, and she wanted to be bought out of her negative equity so he ended up giving her several grand to buy her half of the negative equity! Otherwise she was quite prepared to force him to sell and have them both be a few grand out (not a friendly divorce). He figured that since it would cost him the same either way, and one way he kept the house with an endowment that was a few years old, that that was by far the best suggestion ...
... in your S-I-L's case, she has (I suppose) the right to half the house (50k of the original price) and now, by paying the extra 25k she will have 100% of a 150k house, that sounds like a storming good idea. The banks should be ok (aside from her income) buying the house since she's effectively the owner of a 150k property where the maximum the mortgage should be is the 100k from before plus an additiona 25k (so still only 125k out of 150k so they are easily covered and it's less than 90%). If they put down a decent deposit when they bought the house (so that the mortgage plus 25k comes to less than 75% of 150k) she should get a really good rate from the bank/building society and if she plans to live there for a while she could go "interest only" on the mortgage with the idea that in 25 years she could sell this house to pay off the capital and use the increase in value to put down on the next place (or as salaries increase she could start another investment vehicle ISA/Tessa/whatever sort of thing plus premium bonds, lottery tickets etc. to build up a capital sum to pay off the mortgage capital amount, however IANAPIABIPOOTV!)
Her alternative is to walk away and have him pay her 25k (or whatever) but I don't think that's as good a deal.
I'm having a drink on your behalf right now. Okay so it's only lemonade (by which I mean Sprite) but it's the thought that counts!
I *will* get off my b'hind and come visit again one day, and appreciate staying in a house that's your very very own! And not just because with three bedrooms, I might not have to sleep on the lounge-room floor. ;-)
Well, I'm obviously not grown up enuff to be able to point out all the financial ramifications of being a home owner...but having spent some time sharing my living space with someone I had never met before, [and not really liking it...] YAY to you, it's all positive as far as I'm concerned. I shall raise a glass of the holy [and jolly cheap here] SC as soon as I get back to my little wooden apartment :)
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On the subject of house prices, one might think that their increasing is a boon to the homeowner. Well, it is, but not in the case of my sister-in-Law. They moved house about 2 years ago, buying at ?100,000. The house is now valued at about ?150,000. Quite a tidy profit. Trouble is, SiL and husband are getting divorced. SiL doesn't earn enough to take on the mortgage, but hubby needs the money. The solicitors have been at work, and the upshot is that she has to buy him out of the house by coming up with half the profit; i.e. ?25,000 =/
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As for negative equity, well, it sounds nasty but I think I should be safe, plus I plan on staying there a good while and it's cheaper in the long run than renting.
Agree 100%
The problem with negative equity the last time around came because house prices actually sank in many areas (by upto 30% in some areas) so the fact that you're ok now and ok next year doesn't mean you're safe from negative equity unless you can pay off more of the capital than the house price has dropped at the time you need to sell. If you don't need to sell then you can hold on and hope the prices recover (as they always have so far!) or that your salary will keep increasing (with inflation and promotion) reducing the amount of your salary required to pay the interest and leaving more to pay off capital or invest, and other sources of revenue (lottery wins, inheritances, stock options, marrying a millionaire, long term investments) show up and help to pay off the house.
Depending on the mortgage ...
My friends, when they split, had a mortgage that was more than the house was worth. He wanted to keep the house, and she wanted to be bought out of her negative equity so he ended up giving her several grand to buy her half of the negative equity! Otherwise she was quite prepared to force him to sell and have them both be a few grand out (not a friendly divorce). He figured that since it would cost him the same either way, and one way he kept the house with an endowment that was a few years old, that that was by far the best suggestion ...
... in your S-I-L's case, she has (I suppose) the right to half the house (50k of the original price) and now, by paying the extra 25k she will have 100% of a 150k house, that sounds like a storming good idea. The banks should be ok (aside from her income) buying the house since she's effectively the owner of a 150k property where the maximum the mortgage should be is the 100k from before plus an additiona 25k (so still only 125k out of 150k so they are easily covered and it's less than 90%). If they put down a decent deposit when they bought the house (so that the mortgage plus 25k comes to less than 75% of 150k) she should get a really good rate from the bank/building society and if she plans to live there for a while she could go "interest only" on the mortgage with the idea that in 25 years she could sell this house to pay off the capital and use the increase in value to put down on the next place (or as salaries increase she could start another investment vehicle ISA/Tessa/whatever sort of thing plus premium bonds, lottery tickets etc. to build up a capital sum to pay off the mortgage capital amount, however IANAPIABIPOOTV!)
Her alternative is to walk away and have him pay her 25k (or whatever) but I don't think that's as good a deal.
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I'm having a drink on your behalf right now. Okay so it's only lemonade
(by which I mean Sprite) but it's the thought that counts!
I *will* get off my b'hind and come visit again one day, and appreciate
staying in a house that's your very very own! And not just because with
three bedrooms, I might not have to sleep on the lounge-room floor. ;-)
Yayyy for youuu!
congrats dearie