Negative equity loan offers questioned
EBS and AIB have announced details of a negative equity trade-up mortgage for customers who want to move to a property of greater value but whose homes are worth less than they paid for them.
The announcement has been questioned by mortgage experts, however.
The Negative Equity Trade Up mortgages will allow customers to sell their existing home and transfer whatever debt is left from their previous mortgage onto a new loan for a new property of greater value.
The application process involves assessing a customer’s ability to repay the higher mortgage which will cover the negative equity on the previous mortgage as well as the mortgage on a new home.
For the portion of the overall loan used to buy the new property, standard residential new home loan-to-values (LTVs) will apply and up to 92 per cent LTV finance will be available.
Once the negative equity element is factored in, the maximum LTV will be 175 per cent of the total new loan. The maximum total mortgage loan, including the transferred negative equity debt, is being put at €700,000.
“The announcement of negative equity schemes such as this and the ads on the radio asking young people to apply for mortgages all sound great, but it’s difficult to not regard them as just spin,” said the chief executive of the Irish Brokers’ Association, Ciaran Phelan.
“Other banks have launched negative equity mortgage options, but very few people seem to have been able to jump through all the hoops to qualify for them,” he said.
Trevor Grant of Mortgage Negotiators echoed Mr Phelan’s concerns. “Very few customers will be able to demonstrate sufficient net disposable income to qualify for the mortgage,” he said. This was “like many of the new launched ‘innovative products’ ” that looked “good on paper”. It would be “unworkable in practice” and have “no real impact”, he added.