Negative Mortgage

However, if borrower in negative capital become ill or are dismissed, they face early redemption, as there is nothing to gain by letting interest be added to indebtedness. But there are two ways if you have more to pay on your mortgage than your home is worth: be stuck and waiting for an upswing before you start making a profits; or make a losing sale by taking out another home mortgage.

With £20,000 negative capital, Ken and Nicky Chapman were on an apartment in Beckenham, southern London. This system, preferred by most creditors, allows the borrower to take his negative capital with him when he moves. Rather than limiting yourself to a mortgage of up to 95 percent of the value of the new real estate, negative capital mortgage allows a mortgage of up to 125 percent.

Mortgagors may move into a more pricey real estate and take the deficit with them as part of their new mortgage. The Nationwide Building Society schema, for example, allows a borrowing party to carry a deficit of up to 25,000 lbs, as does Abbey National. The majority of creditors set an upper ceiling of 125 percent of the value of the new real estate on what you can lend.

The Woolwich, with its parent company, was one of the first creditors to implement this type of arrangement, allowing the parental home capital to be used as collateral for a replenishment of their son's or daughter's new mortgage. Reimbursement of the loans, however, is the sole responsability of the descendants.

The Bradford & Bingley Building Society runs such a program and says it is the preferable choice. q James Hipwell is Assistant Publisher of Your Mortgage Magazine.