Owe more than your home is worth?
The North East of England is being hit hardest by the negative equity situation caused by the housing price crash. There, approximately 10% of owners owe more than their house is worth. By contrast, in East Anglia and Scotland, the figure is closer to 1%. (the figure is approximately 4.8% in the UK as a whole). According to an Oct. 2008 article in the Telegraph, two million could get caught in the negative equity trap by 2010.
So what should you do if you are in this situation? Do you need to do anything at all? Here is what the Citizens Advice Bureau suggests:
1. If you are still able to make your payments, you should probably wait it out. According to a recent BBC story on the subject, if you can keep up with the payments until the market picks back up, you'll most likely come out fine.
2.The government recently launched the Homeowners Mortgage Support for borrowers suffering a temporary loss of income. This program can allow you to delay some mortgage payments for up to two years. You'll still owe the money, plus interest on it, but it is a much less catastrophic arrangement than losing your home. There are a number of qualifications, but two of them are:
- having savings of less than £16,000
- having less than £400,000 outstanding on your mortgage and any other loans secured against your home
3. Contact your local CAB before signing up for any mortgage "rescue" scheme. With some "sell and rent back" arrangements you could end up paying very high rent and even being evicted. Proceed carefully, in other words.
If you have any thoughts or suggestions on the issues regarding buying vs renting in the current climate, please leave your comments below.