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4 | Guide for Buyers and Sellers
Mortgages
product. If you are happy with, say, your no guarantee. But by sitting tight, your prob-
endowment, and want to continue with an lem could disappear. In fact, negative equity
Subsequent buyers have the most mortgages to endowment mortgage you don't have to cash it only presents a real problem if you want to
choose from but this will still be limited, given in and start a new policy. You can just top it up move.
the current climate, depending on what deposit and carry on with the same policy. And that is where subsequent buyers have a
you can put down. But remember to check on If you do have a with-profits endowment problem if they do have negative equity. The
the length of the discount or fixed rate on offer. policy and want to change to a repayment loan, shortfall between what you may be able to
You may find that, in the long-run, a smaller there are alternatives to surrendering your poli- realise on your current property and what you
discount over a longer period would be better cy back to the life company that issued it. You owe on your mortgage could prove to be an
for you than a large discount over, say, just three can sell it to a market maker or at auction and, impossible difficulty to overcome when mov-
months. Also, make sure it is portable and you depending on the type of policy, could get a ing. If you haven't got the cash to make up the
can take it with you if you move. reasonable return. Contact the Association of difference, you could be stuck. There's no way
Of course, selecting a mortgage is not simply Policy Market Makers on 0845 011 9406 for to escape the situation - handing in your keys
a matter of seeking out the deepest discount, more information or a list of its members. to your lender will simply result in the building
the lowest fixed rate or the biggest cashback society or bank chasing you for the difference
available to you. Behind many a great mortgage
deal can lurk all sorts of demanding conditions Negative equity
between the selling price and the amount you
owe.
and terms that you need to be aware of before If your current mortgage is greater than the If you do need to move then talk to your lender
signing on the dotted line. These all tend to be value of your property, you're in a negative about your situation or go to see a mortgage
the same, whichever type of mortgage you equity situation. In simple terms it could mean adviser. Of course, these days you will need a
choose: portability, redemption fees, adminis- being stuck with a white elephant - a property larger deposit as well to be eligible for the
tration fees, and various insurances. You need to you bought at the height of the market a few mortgages currently on offer. If your property
be aware of them. years ago which is now worth less than what is in negative equity then you won’t be able to
If you already have an endowment, or anoth- you borrowed to pay for it. use equity in your current property to fund
er investment-linked mortgage, you don't have If that sounds like you, don't worry, you're not your next deposit and you will probably have
to continue with it if you don't want to. You alone. Experts are predicting that prices will to use any savings to pay the negative equity
could take out a repayment loan and keep the stabilise during 2009 and start to rise again in shortfall. What you must do is be realistic. If
endowment or investment going as a savings subsequent years – although of course this is you don't really need to move, then don't.
Homebuying The Complete Guide www.homebuying.co.uk
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