Question of Finance: Mortgages
Should we hand back the keys to our home?
Q My wife and I bought our home two years ago with a 100pc mortgage. However, our house is now worth only about three-quarters of the value of the mortgage.
We both have jobs and are just about managing.
Our intention was to raise our family here. However, because of all the talk in the media about negative equity, we are now wondering if we should hand back the keys.
A Negative equity only affects you if you are planning to sell your property in the short-term. Clearly, you are not.
The critical issue is affordability. Can you afford to meet the monthly repayments?
If, as your question suggests, you can -- just -- then while negative equity is not ideal, you really don't need to be too concerned. By the time you come to sell, the property market may well have recovered and you should have equity in the house.
Rather than make any rash decision, you should address any monetary issues as they arise and budget accordingly.
Identify areas where you could spend less or save more.
It is important that you work with people who are experts in personal finance. Whether it be your local credit union or another financial institution, your local manager can provide very useful tips as to help you manage your financial affairs, including reviewing fixed-rate options and ensuring you have the right insurance in place.
At this point, I think handing back your keys would be an extreme and unnecessary measure. Remember, you would still be responsible for any difference between your outstanding debt and the proceeds from selling your property.
Your primary concern should be on keeping a watchful eye over your finances and put that budget plan into action.
Kurt Kelly, manager, Blanchardstown and District Credit Union.