Tuesday 21 November 2017

How can we trade up with negative equity?

Sinead Ryan

Sinead Ryan

We've found out our third child is unexpectedly on the way.

Our small two-bedroom home is not suitable for five of us but we are in negative equity. What are the chances of us getting a mortgage to trade up?

I heard about special mortgages available for this but can't find any information.

Congratulations. Sounds like it's going to be a squash alright.

The mortgage you refer to is the vaunted Negative Equity (NE) mortgage which allows a borrower not in arrears, trade up, taking the NE portion of the existing loan with him rather than paying it off first. With about 300,000 mortgagees trapped in negative equity it seemed like a solution.

However, Trevor Grant, of the Association of Expert Mortgage Advisors says, "Unfortunately 175 NE mortgages have been approved and less than half of those approved appear to have been taken up. In reality, the NE carry can be quite large and the lending limits not generous. AIB, Bank of Ireland, Danske and PTSB offer negative-equity mortgages but it's hard to get approval.

"You have to qualify for any shortfall from the sale of the existing home on top of the new mortgage.

"So if your current home is worth €150,000 but you owe €250,000, and you buy a home for €300,000, you will need to be clearly able to demonstrate that you can afford a mortgage of €400,000 plus associated costs. Your application needs to be squeaky-clean to get it across the line so I'd suggest that you engage the services of an expert in this regard".

I am building an extension which will take up about half the garden, but not be any higher than the first floor roof level. A friend has suggested I need my neighbour's permission but we don't get on. Is planning permission sufficient?

Your neighbour's consent is not required for an extension but it's probably a good idea to mention it anyway so as to limit objections that might be lodged against a planning permission application. Susan Cosgrove of Cosgrove Gaynard Solicitors adds, "Your friend might be referring to the consent of a neighbour over the use of a boundary wall between the two properties.

"If you wish to use the boundary wall then consent may be required if it is a party wall i.e., not entirely on your property but sitting on the boundary and therefore jointly owned. Written agreement should be reached before works commence and kept with the title deeds for both properties.

"If agreement cannot be reached, S44 of the Land & Conveyancing Law Reform Act 2009 allows the building owner apply for a works order by application to the District Court.

"Depending on the size of the extension, you may not need planning permission. In a nutshell, if the extension is to the rear of the property, no more than 40sqm, does not exceed the height of the house or reduce the remaining garden to less than 25sqm, then it is likely to be exempt. You should employ an architect to provide an exemption certificate which will be required by any future purchaser on the sale of the property".

Irish Independent

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