say in two years time if you come to redo your mortgage and your house is worth less than you originally borrowed or need to borrow. not sure if mine would be but if house prices fall quite steeply its possible.
i guess you would not get the money a 100% mortgage is out of the question nowadays (well a legit one anyway)
welcome to negative equity ! only option is to ride it out and hope in years to come ( as history suggets it usually does) house prices recover
what about telling the bank to... take a running jump? surely, for a contract to be valid, both parties have to put up something of value. you put your house up, they supposedly put up their own cash, but in reality they don't do they? our wonderful banking system allows them to create money they 'loan' out of thin air, so surely technically they haven't put anything up. i've heard of one case in america where the guy argued against forclosure and won. don't fancy risking it though!!
confuses me too when a bank loans out money, it doesn't have to actually have the funds itself. it only needs a certain percentage. the rest is simply conjured up out of thin air. it's called the fractional reserve system, and it sounds dodgy to me.
That's why it's so worrying. If the mortgage is bigger than the house value it is obvious you can't use the house as security for a new loan. It may even get to the point if you couldn't honour your mortgage, that they take the house away from you and sell it. You'd still owe the bank the differance between the mortgage and the amount the bank sold the house for. Bank loan and no house! Good luck all those who have mortgaged their houses up to the chimney pot.
RE: confuses me too right. I do have a basic understanding of how this works. As explained to me sometime ago. Do you want me to attempt an explanation at a risk of sounding foolish?
You didn't realise it was all a "house of cards" then? You borrow mortgage to buy your house, you never actually see that money - similarly banks borrow from other banks - actual money doesn't change hands. Have a look at your paper money - just look at the wording...."I promise to pay the bearer, on demand, the sum of....." It's not real, it's underpinned, you are supposed to be able to take that note to a bank and demand gold....but it doesn't quite work like that. I've been saying for the past few years that the housing market was unsustainable at the prices it was rising to.....thank goodness I didn't move house in the last couple of years. Would like to move but we'll sit it out for now with a low mortgage. Plus....I reckon it's all this "0% finance" coming back to bite people
if you are on a fixed rate I suggest you would revert to the lender's variable rate. If base rates keep falling and the lender passes on the rate reduction you could be ok.
