According to Charlie Westin negative equity mortgages are on the way with some mortgage lenders already offering them to their existing customer.
Are Negative Equity Mortgages a Good Idea??
It is obviously not a good idea to have a mortgage for more than your property is worth, however many people in Ireland today (me included) are in negative equity through no fault of their own. If you are in a property you are happy with and you can afford the repayments then negative equity is not necessarily a total nightmare. The hope is that in time property prices will recover. How long this will take is anybodys guess but you would imagine that prices cant continue to fall indefinately.
As I see it there are two main groups of people who are suffering badly from negative equity. The first group of people are those who simply cannot afford to make their mortgage payments. With no option to sell the property they are stuck in an awfull situation. Most mortgage lenders are helping people with interest only repayments and in some cases agreeing to write off the negative equity if the property is sold for the current market value. If you are unable to make your mortgage payments you really need to approach your mortgage lender and see what your options are. If you cannot get anywhere with your mortgage lender then firms like DebtLine can offer help and advice.
The second group of people badly affected by negative equity are able to afford their repayments but need to move. This group of people most likely bought an appartment or a starter home just to get on the property ladder in the Celtic Tiger property rush. This is the group that can be helped with negative equity mortgages. A negative quity mortgage will help them move and get on with their lives. They will still be in a negative equity situation but it is much easier to handle if you are in a property you want to be in.
From a Banks point of view it is much better to have a negative equity customer in a home they are happy with. There is much less chance of repayment deliquency you would think.
In my opinion negative equity mortgages used correctly for people already in negative equity can be a workable solution for mortgage customers and mortgage lenders. Hopefully we will start to see more information on negative equity mortgages sooner rather than later.
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