Negative Equity Solution For UK Homeowners
Negative Equity occurs when the value of a house is less than the outstanding balance on the mortgage and it is estimated that nearly 2 million home owners in the UK are now in negative equity. As the financial crisis deepens and the credit crunch begins to bite, there is evidence that the banks are aggressively repossessing borrowers who fall behind with their payments.
Of course, negative equity may be only a temporary situation while the property market it so depressed. When prices recover, so will thousands of homeowners' equity position. The real problem is the recent wave or mortgage offers with short term, introductory rates followed by high follow-on rates. Gone are the days of a 25 year mortgage at a reasonable rate. The banks actively encourage remortgaging every few years to boost their fees.
Another problem in these austere times is job insecurity. If a homeowner loses their job and are also in negative equity they really have nowhere to turn. They can't sell without taking a large loss that they have no hope of repaying. Houses aren't selling outside the capital anyway. So the poor, squeezed homeowner sits in the negative equity house until the bank eventually repossesses it.
House Buying companies have a solution to this sorry tale. The can in effect 'baby sit' the mortgage and make the repayments while the owner moves on. The seller gives them an option to buy the house in the future at a price agreed today. Typically, the price agreed will be the current market price but could even be more than that. It depends on how long into the future the purchase will be made. While the purchase option is in force, they'll look after the house and often improve it. They will be legally obliged to maintain and insure it so the seller has peace of mind that he can move on and forget the responsibilities of the house.
These Negative Equity Solutions can stop the bank from repossessing the house thus protecting the seller's credit score and avoiding the stigma attached to repossession. The key benefits of a Negative Equity Solution are:
The UK is just catching up with the Negative Equity Solutions that have been around for 30 years or more in the US and Australia. This is particularly timely now that our banks have to repay the giant bailout and are now charging astronomical arrangement fees. These techniques can totally bypass the banks and use existing mortgages. This is akin to the banks trading debt and it has just come into the realm of the regular citizen.
Of course, negative equity may be only a temporary situation while the property market it so depressed. When prices recover, so will thousands of homeowners' equity position. The real problem is the recent wave or mortgage offers with short term, introductory rates followed by high follow-on rates. Gone are the days of a 25 year mortgage at a reasonable rate. The banks actively encourage remortgaging every few years to boost their fees.
Another problem in these austere times is job insecurity. If a homeowner loses their job and are also in negative equity they really have nowhere to turn. They can't sell without taking a large loss that they have no hope of repaying. Houses aren't selling outside the capital anyway. So the poor, squeezed homeowner sits in the negative equity house until the bank eventually repossesses it.
House Buying companies have a solution to this sorry tale. The can in effect 'baby sit' the mortgage and make the repayments while the owner moves on. The seller gives them an option to buy the house in the future at a price agreed today. Typically, the price agreed will be the current market price but could even be more than that. It depends on how long into the future the purchase will be made. While the purchase option is in force, they'll look after the house and often improve it. They will be legally obliged to maintain and insure it so the seller has peace of mind that he can move on and forget the responsibilities of the house.
These Negative Equity Solutions can stop the bank from repossessing the house thus protecting the seller's credit score and avoiding the stigma attached to repossession. The key benefits of a Negative Equity Solution are:
- Achieve the best price for your house
- Zero costs. There are no costs to the seller. All valuation and legal fees are paid
- No estate agent fees
- Very fast transaction. The transaction can go through in as few as four weeks
- House is fully maintained and insured
- Prevent or avoid repossession
- Peace of mind knowing the bank is off your back
The UK is just catching up with the Negative Equity Solutions that have been around for 30 years or more in the US and Australia. This is particularly timely now that our banks have to repay the giant bailout and are now charging astronomical arrangement fees. These techniques can totally bypass the banks and use existing mortgages. This is akin to the banks trading debt and it has just come into the realm of the regular citizen.
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