Case study Split mortgage offer - joint holder gone bankrupt abroad

TPRTLI

Registered User
Messages
3
I am putting my case out here to get some feedback, because I can't figure out what to do anymore.

I've ended up as the sole responsible party in a joint mortgage after my ex-partner moved abroad and declared himself bankrupt there. This was an expensive boom-time house, purchased with a 100% mortgage. My ex-partner was the significantly higher earner so financially I now have a tough situation with a mortgage that I cannot/will not be able to afford for the foreseeable future.

The bank has offered a split mortgage, which would relieve the financial pressure for now, but I'm struggling to accept it. The amounts are reasonable to start off with, but I'm struggling because of the T&C associated with this arrangement - the bank has a lot of power over my financial situation (reviews, SFS's etc), improved earnings will be assumed to go towards the debt, and if I don't significantly improve my earnings I will face the full warehoused half of the loan at the end of it all.

I've sought legal/financial advice on this as well, but it has proven not to be an easy task to find someone that doesn't just do the basic maths and say "you can afford it, just accept"...

Income details
Net monthly
PAYE €2050 p/m, single

Personal circumstances so we can calculate your reasonable living expenses
Latest SFS was submitted with expenses totalling ca €1300 p/m
Single, have a car, no dependents, high medical costs (€150 p/m), additional costs on travel (I am not from Ireland so I have counted visiting my family once a year as a sort of an entitlement rather than a luxury, please don't judge me on that).

Home loanLender:
Amount outstanding: €358k (incl€26.5k arrears)
Value of home: not valued, but estimate €220k - €240k based on similar properties in the estate
Interest rate: tracker 1.55
Monthly repayment: full repayment €1300, split offered €660
Amount in arrears : €26500

Summary of discussions and agreements with the banke.g.
in MARP since 2012 - seen it all - interest only, moratoriums etc.
After a period of making no payments I've now completed 6-month trial of payments to get a proposal from the bank - they've offered a split mortgage @ €660 p/m

No other loans, no significant savings

Do you expect any lump sums in the medium term future? Redundancy, inheritances, injuries awards.

No

How important is retaining the family home to you? Which of the following best describes your situation?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.

Any other relevant information
The split mortgage seems to be like a permanent state of insolvency and this is the main reason why I have not accepted it (yet) - any pay increases will disappear into this enormous debt and I will financially never really recover.
There is also the "unknown" of any actions due by the insolvency office that managed my ex-partner's bankruptcy. I have not been informed about any action or intentions they may have in relation to the property.

What is your preferred realistic outcome?

I will never be in a position to repay this entire home loan by myself. I would love to keep my home if I could achieve a write-down to reduce the amount overall (not just a split for the sake of being manageable temporarily), but this does not seem realistic so I am convincing myself that I should close the door on it... I have not yet figured out how exactly to do that either.
 
I was in a similar situation only both my partner (student) and I were both still in house. We were offered the 6 month trial with a view to split. I thought the terms were tough, but doable once my partner got out of college and back into a better job and we could afford the full mortgage payments again. however, I lost my job a week after the split offer so we never took it; we're now bankrupt. If I were in your situation I would look at this as slightly risky. Yes you would have the lump to repay at the end. But you could then sell the house at that stage, clear the balance and have a decent amount left over from the sale (there is a high likelihood of the market having gone up by the time you have cleared the first split). This, of course, depends on whether there is interest going onto the shelved amount, you need to clarify that as the amount could be onerous at the end of the term.
Should you get a windfall, raise etc. then, yes, the money will go into the mortgage, but it is going into an asset that you own that will most likely go up in value over the years.
It does, however, rule out ever having any disposable income of a decent level for the duration of the mortgage, as you say; you will essentially be in an insolvency arrangement for the duration of the mortgage term (how long is that? judging by the outstanding amount I'd guess at 30 years? that a LONG time to be paying over everything bar bare necessities)
In short I don't envy the decision, I'm glad I got pushed into taking the bankruptcy (not enough income for any other option) it will be 5 years in a payment order at worst, then back to normality. It may even be less should the term be reduced, which looks likely. I will vacate my house and return to rental market in a few months time, but I feel it's in the best interests.
The best of luck with your decision, but you need to talk with a PIP to look at other option under insolvency legislation.
 
Hi TPR

This is a very complicated, but interesting, case. I think you should start by studying this thread as it sets out how to approach the decision in a systematic manner:

How to analyse an offer of a split mortgage

We need a lot more information to give you a meaningful answer.

Which lender are you with? The terms vary with each lender.

What are the terms of the split mortgage? You owe €358k - There is usually an Active Part e.g., €258k and a warehoused part €100k on which they probably don't charge interest. Have they told you if they will charge interest on the split?

You seem to like the house. Is it suitable for your needs or is it too big? Your repayments will be €600? How much would it cost to rent similar accommodation or a smaller property suited to your needs?

Can you get a tenant?

Can you rent alternative premises, and rent out your home? How much rent would you get? I assume that you would get far more than €600 per month.

Your ex went bankrupt in another country. Do you know what has happened the ownership of the house? In Ireland, the Official Assignee in Bankruptcy owns half the house, even though you are paying the mortgage. Is the full house in your sole name now? Or can you get it into your sole name?
 
Thank you Stuboy and Brendan for replying!

I had a quick read of the suggested thread on split mortgage before posting, but it was a bit too late in the night to fully take it all in - will revisit after work today.

Stuboy - you are correct, the term is close to 30 years so living on "reasonable living standards" for that length would definitely send me over the edge.

I'm with TSB, the warehoused amount is @ 0%, the split is close to 50/50 - €185k Active and €173k warehoused.
Funnily enough it was a PIP who without much discussion said that I'm an easy case and suggested that I accept the offer - it was one of these free introductory consultations so when I heard that I didn't even bother raising my concerns.

The property exceeds my needs - it's a 3 bed semi. My house isn't even fully furnished, there's the bare minimum (kitchen, beds, built-in wardrobe in one) so if I was to rent mine out I assume I'd get in the range of €850 as partially furnished etc. At the same time I would end up paying significantly higher rent than if I was to take the split of €660 myself. That's regardless whether I stay in my own area or move elsewhere in reasonable distance for work, or whether I rent a smaller place or same type - rentals in my city/county are are very expensive, so there doesn't appear to be any gain either way. Moving into a shared property would be cheaper, but not be easy. Getting a tenant into my own place would require that I furnish the house with some basics to reasonable standard which I've no funds to do right now.

I've contacted the insolvency services that managed my ex's bankruptcy but there's been no reply as to their intentions or status in relation to ownership. My own bank hasn't been able or wanted to share any info either on how the ownership is/will be handled. It seems like they don't really care as long as I start making scheduled payments. There's nothing in writing, I've been advised over the phone that once I'm in the split mortgage agreement "I can take steps" to remove the joint party's name from the account. The offer has been sent under joint names but I don't exactly feel comfortable signing something without reasonable assurance that taking on the full responsibility will mean that I can achieve sole ownership.

I won't lie - it's been a long and exhausting journey up until now. As much as I'd love to make this work out for me I've considered bankruptcy in Ireland just to close this off as well as packing up and shipping myself out of the country whether it's before or after applying for bankruptcy. I just don't like giving up until I'm really sure that I have to - whether by common sense or circumstances. And I don't expect anyone else to take responsibility for the decision, I just really want to get to the point of making an educated one myself so I really appreciate your comments.
 
In my view a decision such as this should be based on immediate rather than postponed consequences. You currently bear full responsibility for the loan but cannot sell the property as you have only a shared ownership interest. The bank have offered you a medium term repayment option at 660 pm. This appears affordable based on your net income and also is likely to be at least as low if not lower than any comparable rental cost. At face value it would look like the current arrangement is a reasonably fair offer and will give you a reasonable amount of breathing space within which you can make further decisions. No need to worry now about what will happen in the future as the same options will be open to you then as they are now. Think about eating "eating this elephant" in small chunks rather than all at once. I.e. you are allowed to stay in the property for 660 pm. If this suits you accept the deal. You can abort it later if circumstances change.
The property ownership issue will be a longer term concern, but realistically this can be postponed for a couple of years. Why would you take the bankruptcy route at this time if you don't have to? Stay in the property. Pay the 660pm for the time being and then take further decisions based on the position in a couple of years time!
 
This is an extraordinary deal and you should grab it with both hands.

The mortgage as such is not your problem, it's the cost of accommodation in Ireland. It is costing you €660 rather than €850 you would have to pay elsewhere.

Because it's a cheap tracker, most of your repayments go to paying down the mortgage. After 10 years you will owe €132,000 on the main mortgage + €173k. After 15 years, you will owe €102,000 + €173k. Depending on how house prices go, you could be out of negative equity in a few years. And, from then on, you will still have a very cheap tracker.


30 years so living on "reasonable living standards" for that length would definitely send me over the edge.

But if you have to pay high rents, you will be living well below reasonable living standards. You will not find landlords as understanding as permanent tsb.

Getting a tenant into my own place would require that I furnish the house with some basics to reasonable standard which I've no funds to do right now.

If there is a shortage of accommodation in the area, you can do a deal with someone. Use the first three months' rent to pay for furniture.

Or get onto the Vincent de Paul. They will probably give you free furniture or sell it to you very cheaply or on credit.

In my view a decision such as this should be based on immediate rather than postponed consequences.

Very well put. You do not need to worry about what the Official Assignee in the other country is doing until you are closer to coming out of negative equity.

Brendan
 
Thank you both, I'm definitely seeing sides to this situation that I have not considered up to now - probably due to not being the smartest at this and the fear of getting it wrong and there is definitely an element of emotional distress like "why the f did this have to happen to me" dimming the clear view at times.
 
Thank you both, I'm definitely seeing sides to this situation that I have not considered up to now - probably due to not being the smartest at this and the fear of getting it wrong and there is definitely an element of emotional distress like "why the f did this have to happen to me" dimming the clear view at times.

From someone who pressed the nuclear button and successfully petitioned for bankruptcy - I recommend you listen to the advice of the 2 Brendans.
It's a great deal and play it by ear.
I'm paying almost €1000 rent for a very modest house in Cork. It seems as if PTSB are copping on a little at last. Grab it with both hands. PTSB may write off a proportion of the warehoused section of the mortgage in the future (as EBS are doing at the moment).
 
Last edited:
I have to say, with no interest on the warehoused portion of the debt that I would jump at the offer. the difference with my case is that my house needs A LOT of work, it was bought with the concept of putting more money into it to modernise it. Once the crash happened and jobs went there was never a chance of that happening. If the house meets your needs, you should consider staying in it! Don't go bankrupt unless it's absolutely necessary (I had other debt issues). You could be out of negative equity within 5-10 years and then be looking at selling (if you really wanted to) and being debt free with some money in the bank.
Your career could advance and the full mortgage amounts may become easily affordable.
You could meet someone and they could move in and help with repayments.
There are a lot of potential variables even in the short term.
When we move out we will be facing rent payments of 1500 on average, not far off my full mortgage. but for that I will get a house that is modern, with double glazed windows, no damp on the walls and insulated. It's a completely different scenario to yours.
Think coldly and clearly about this; that's what the banks do. try not to let your emotions get in the way, as hard as that can be.
Best of Luck.
 
Thank you both, I'm definitely seeing sides to this situation that I have not considered up to now - probably due to not being the smartest at this and the fear of getting it wrong and there is definitely an element of emotional distress like "why the f did this have to happen to me" dimming the clear view at times.
 
Back
Top