Worst Case Of Negative Equity Ever?

[Duncer]

http://www.bbc.co.uk/...hern-ireland-19647551

[Bazile]

Who would have thought that this product was bad for you ?

http://www.bbc.co.uk/...ld-us-canada-19657878

[Bazile]

what happened here - sorry

[ludwig]

If they're paying mortgages on houses that don't exist, they should just stop paying and let the non-existent houses be repossessed.

[hc4361]

If they stopped paying the would be taken to court and forced to pay one way or another; they wouldn't be able to get another mortgage; their assets could be seized.

[Flyhalf]

It's a very unfortunate situation, but what they are stuck with is the unpaid balance of a loan. The property was held as collateral for that loan, and the lender not unnaturally wants the whole loan repaid; further interest will also accrue for the length of time until full repayment is made.
I can only sympathise for them in their predicament.
It is emotive because the loans involved were for purchase of the borrower's home.
What would be your reaction if someone borrowed money to buy, say, a holiday home, and put up company shares as security? The holiday home is lost in a landslide and insurance doesn't cover it. When the lender finds the shares are only worth 75% of the value when the loan was taken out, how do you expect them to behave?

[ludwig]

The compensation system is wrong. It needs to pay either the amount outstanding on the loan OR the current market value - whichever is greater.

It's not really much of a compensation otherwise.

[Flyhalf]

ludwig, I agree compensation terms could be better, but taking loans into account is entirely impractical. Market value could be aligned to what the property would fetch if the proposed development did not exist, but as others not affected by compulsory purchase find themselves in negative equity, there'ate fair chance at least some of those involved will be similarly placed.

[Ellipsis]

I was in negative equity on my first property. In the end I had to sell at a huge loss as we wanted to start a family. It was painful.

However, because the market had been depressed, I could buy a new place at a much lower price than I would have been able to had I not been in negative equity. Once I'd bought the new place, the "loss" on my previous place was carried forwards and I was actually better off than I would have been had the market risen rapidly during the time I was in my first home.

I understand it's painful for them, and probably unfair that they were forced to move on somebody else's timescale and not their own.

But if they have bought another property, it's slightly misleading to suggest that they're in negative equity on their previous property, because they've benefited from being able to buy the new property at a lower price.