THERE are tens of thousands of people in Northern Ireland whose homes are in negative equity. Some 63,000 households, which is 41% of home-owners. That’s a lot.
Negative equity is the term which describes the situation where the current market-value of your property is less than the loan mortgage you borrowed to buy it X years ago. Example? If, back in the supposedly halcyon days of the mid-2000s, you borrowed £180,000 to buy a home now valued at £110,000, you have £70,000 of negative equity.Provided you are able to remain in your home in other words, it continues to meet your physical requirements in that you have not outgrown it, nor, conversely, has it become too big for you, and you are able to meet your monthly mortgage commitments the fact that you are in negative equity is neither here nor there.
But for those who NEED TO UPGRADE owing to the arrival of children, negative equity creates a real problem. THEY NEED to sell in order to move to a BIGGER HOME, but find THEY CANNOT do so.
And the same is true for those wishing to DOWNSIZE due to their children having reached adulthood and moved out to set up homes of their own. Negative equity is their undoing, too. DIVORCE is another reason for having to sell, the reason being to release both parties from the joint-ownership agreement with regard to the home they shared in happier times.
And, of course, the DEATH OF A SPOUSE often leaves the surviving wife or husband wishing to move from a home which, as well as being too big and expensive to run and maintain, just has too many painful reminders of what they have lost.
In view of all of the above, the very real need for viable negative equity solutions is self-evident.
How do I get out of negative equity?’ is a frequently asked question these days. So too is What can I do about property debt?’ and Are there negative equity solutions?’
The answers to the last of those three questions is a resounding YES, there are negative equity solutions.’ Got that? This is not insurmountable!
Negative equity’ and debt’ are words which reek of pessimism and despair. In contrast, solutions’ and help’ are upbeat nouns wholly positive, in stark contrast to totally negative.
So where does one turn to find these answers?
Negative Equity Northern Ireland (NENI) have a hugely impressive track record that offers genuine positivity in the form of assistance which has extricated many individuals, couples and families from what had been seemingly impossible property debt.
How? By negotiating, on their behalf, with lenders to whom they owed money, be it in the form of negative equity, mortgage repayment difficulties, other debts and/or inability to clear the capital loan at the end of an interest-only mortgage term.
There are many in that interest-only mortgage category for whom pay-back time is looming on those loans which at one time appeared to have been such good deals.
Alas, they don’t have the money to repay the capital loan they took out, so they need help now rather than at some imaginary point further down the line’.
Reality is that situations do not just improve of their own accord as a result of ignoring them or hoping/wishing that they will somehow go away. There’s rather more to it than that. Fact.
So here’s the good news. Although they exist in order to make money, lenders banks and building societies DO LISTEN in cases of genuine hardship. And provided the case for forbearance is put to them by professionals whose research, knowledge, monetary and legal expertise and final-settlement negotiating skills they respect, the probability is that they will do business. Again, fact.
Now, here’s some more good news. Typically, NENI achieve 80% to 90% debt write-off for their customers. That’s people like you, who feared that they were beyond negative equity help.
Lenders know that NENI will have examined and assessed all of the relevant factors and details of those they represent en route to making a settlement proposal.
Ultimately it comes down to trust and respect borne of having conducted negotiations with NENI on many previous occasions.
Provided the reason(s) for debt can be shown to be legitimate rather than spurious, lenders WILL LISTEN to NENI’s negotiators. And where they see clear evidence of a genuine effort to co-operate, they are willing to examine and assess the situation in the hope of arriving at a resolution which suits both you and them.
How can that be?
Let’s put it like this; clearly selling a property on which there is negative equity creates a problem for the bank and the borrower alike. There is remaining debt; you owe them money. So what happens to that?
Well, you may be pleasantly surprised to learn that the vast majority of banks and building societies may be prepared to write off provide debt forgiveness’ is the technical term – some or most of that shortfall.
Now why on earth would they do that?
It boils down to two things money and time.
Any attempt to recover debt can take a lot of both, so banks and building societies do the sums in weighing up how much time and money they might end up spending when there is no guarantee that they will be able to recoup the outstanding amount.
Another consideration is the borrower’s ability to repay. The lender’s options are limited if due to negative equity you will still owe £70,000 following the sale of your property, but clearly are not able to repay this now or at any time in the near future.
In addition, there are legal time constraints on banks and building societies. They can only pursue debt for a limited period after which it is deemed, by law, to be unenforceable.
Also, banks have an incentive to agree to a negotiated settlement. That comes in the form of a reduced taxation bill where they successfully write off debt.
And finally, having been entrusted with ensuring that a mortgage was (a) affordable to the home buyer at the time of selling to them and (b) the version best suited to their needs and means, lenders may be wary of ending up on the wrong side of a court judgement in case they are found to have acted irresponsibly. Where that happens, banks are liable for compensation and/or a write off of the debt.
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