A minority, including those who bought starter homes or some types of council property in the late 1980s, are unlikely to see an end to their problems even then. Others will manage to dig their way out - literally.
Two years ago, Markus and Maxine Lehnert were also stuck in the negative equity trap. Today, they have not only escaped but made themselves a healthy pounds 20,000 profit in the process.
In August 1994, Markus was offered a new position at a hotel in Kent. The commuting would have created too much of a strain, which meant the couple had to move from Luton to Kent. The problem was their home in Luton had been valued at pounds 10,000 less than their existing mortgage. The solution came with their decision to self-build.
"Having read a copy of Build It magazine a few years ago, I knew that there were great savings to be made," explains Markus. Every year around 25,000 couples opt to design and build their own home and through careful planning and budgeting, some self builders save around 20-30 per cent on the cost of buying a similar property. Markus and Maxine were no exception.
The couple began their search for land in mid September 1994 and finally found a suitable plot through General Accident Land and Property Services. There were two adjoining plots for sale which were on the market for pounds 50,000 each. However, since one plot was slightly smaller than the other, Markus managed to negotiate a 20 per cent discount.
"I had been on a self-build seminar back in 1993 so I had a fair grounding on how to budget for the build," he says.
The Lehnerts then approached Potton, a firm of self-build specialists, and with the help of the company's architect, modified the floor plans of their new home to suit their individual needs.
Markus copied the floor plans for their new home and distributed them with a covering letter to over 150 contractors in the area. Two or three years ago, barely a dozen lenders were prepared to consider mortgages for self-builders. Today, up to 25, including some of the biggest banks and building societies, have special schemes for self-builders, while a dozen others will consider applications on an individual basis.
All lenders will pay out the mortgage, charged at the same variable rate, in stages depending on progress achieved in building the home. About half the lenders will, however, not make loans to purchase the land itself, often a big expense.
Armed with the best quotes from contractors, the kit price for their cottage and the land costs, the Lehnerts took the plans to the Bradford & Bingley Building Society. The society offered a mortgage on 75 per cent of the value of the finished property, provided they were able to rent out their existing home in Luton and provide an income to cover their current mortgage. This would cover the total build costs, budgeted at pounds 90,000 and provide the couple with the means to build a house expected to sell for pounds 120,000. Thus, their pounds 10,000 negative equity was covered, leaving another pounds 20,000 profit should the Lehnerts ever decide to sell.
Once the finances were agreed and planning permission was granted, the couple started building in March 1995. Markus and Maxine managed the entire project, bringing in contracted labour for each stage. Neither had any previous DIY experience but with good research and planning they completed the build within four months.
"The key is with good suppliers and contractors who have the machinery to do the job so you don't have to waste money hiring equipment. You then need to make sure you have a good solicitor who can help with the fine print, and finally a good rapport with the building authorities since they have the final jurisdiction over what you can and can't build," advises Markus.
By project managing the build and developing a good relationship with their local builders' merchants, the Lehnerts saved themselves around pounds 30,000 on labour costs and several hundred pounds on materials.
Markus and Maxine moved into their new home in June 1995 with no power or services connected to the property. They carried out all the wiring in the property so that by October the house was habitable.
"Camping for four months was not ideal, and normally it wouldn't have been necessary except that we needed to save every penny possible," Marcus says. "At the time we were renting a property in Kent whilst overseeing the build and so as soon as we had a roof over our heads we moved out to save ourselves the additional expense.
"Before we started the build, I had no DIY experience at all but I found that as the work progressed, I did more and more myself. Wiring up the building was just common sense and in a way, easier for me to do since I knew where all the appliances were going to go."
For a year, the Lehnerts were totally committed to building their dream home but agree that the whole experience has been extremely satisfying, especially since their completed property has been valued at pounds 120,000 as expected. They have sold their three-bedroomed semi in Luton and are now proud owners of a Tudor style cottage with four bedrooms and three reception rooms in the heart of rural Kent.
To book a place on a Potton Self Build seminar, call 01767 260348. Self- build mortgage details are in MoneyFacts, a monthly specialist guide to the best rates.Reuse content