Consequences Of Not Paying mortgage

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colin_hanley

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Hi, I'm currently living overseas in New Zealand where I am a resident. I was planning on moving home maybe in two years. I own a house in Ireland which I've been renting out for the last two years. My tenants look like they will be moving home (Eastern Europe) obviously because of the current climate. If they move home and I can't get new tenants, I'm toying with the idea of simply not paying the mortgage and seeing what happens. I'm doing this for the following reasons

1. House is currently in +100K negative equity so don't want to pump more cash into it.
2. My income will not cover me paying my mortgage at home and rent/living expenses etc. in NZ.
3. Not sure if I'll be heading home anytime soon (if ever) so don't really fear the bank manager knocking down my door.
4. I don't mind writing off my deposit.

I'm wondering what the consequences of simply not paying are ? Will I ever be able to get a mortgage/loan again in Ireland ?

Is it wothwhile talking to my bank (IIB) to explain my situation ? I've heard mention of freezing mortgages etc. but not sure if it is worth doing.

Obviously if I was in Ireland I would be more panicy about the situation but I suppose living over here means I have more of a physical & psychological buffer from the problem (i.e easier to stick head in sand).

Thanks,
Colin
 
It is wrong to walk away from your debts. Are you really asking us to advise you on doing something that is wrong?
 
No, not asking for advice on what to do. Just wondering if anyone knows whats the consequences of not paying a mortgage are. I believe my question may also be of interested for people living in their homes for which they can't pay their mortgage.
 
colin_hanley said:
No, not asking for advice on what to do. Just wondering if anyone knows whats the consequences of not paying a mortgage are. I believe my question may also be of interested for people living in their homes for which they can't pay their mortgage.
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the bank will foreclose on you, reposess your gaff and you will be liable for any shortfall - which they can take from your future earnings for many years hence.

not sure if any judgement registered against you in an Irish court will be able to be enforced against your NZ assets or income. Seeing as the entire Irish banking system is effectively nationalised, your bad debts would belong to all of us.

So, with that in mind, I hope you either do the decent thing and face up to your responsibilities (i.e. pay your debts) or else get hounded through the NZ courts by your bank. Why should we be responsible for the consequences of your actions?
 
Would you not change your mortgage to an "10 year interst only for investment property" type mortgage, and see how you go?

With interest rates so low, tis a great time to be interest only.
 
Colin,

Some answers to some of your questions below:

I'm wondering what the consequences of simply not paying are ? You'd be treated as any other 'bad debtor'. Your debts will run up, eventually you'll be taken to court (even if you don't show up) & judgement registered against you. Your credit history in Ireland will be affected for 5 years AFTER the mortgage is finally paid off. So, you could forget about getting a loan, mortgage or even a bank account in some cases.

Is it wothwhile talking to my bank (IIB) to explain my situation ? It can't hurt. You could ask about going interest-only? Or ask for a 6 month break - but that doesn't address your immediate situation.

'If they move home and I can't get new tenants'. Some suggestions:

1. Get new tenants & continue paying your mortgage
2. Drop the rent if you can't get new tenants easily & make up any shortfall yourself
3. Make some lifestyle changes over in NZ so that you have more money to put towards mortgage here
 
For 100k (it will be way more if by time they reposes the house as extra interest , court charges will be included) they will find a way to track you down.
 
Just want to add to what jhegarty said - the bank would likely take whatever they can get for your house so you would end up owing A LOT more than €100k.
 
Thanks for the advice guys. Sounds more serious than I originally thought. I guess I'll just wait and see what happens with the tenants. If they go, I'll get in touch with the bank and see if we can work something out.
 
colin_hanley said:
Thanks for the advice guys. Sounds more serious than I originally thought. I guess I'll just wait and see what happens with the tenants. If they go, I'll get in touch with the bank and see if we can work something out.
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Be up front on everything with the bank.

If they know you are out of country and having difficulty paying, then that should be flexible because the last thing they want is you defaulting.
 
If your tenants move, can't you advertise for new tenants, or even pay an agency to look after the property for you?

Have you any family / friends in Ireland who can do this for you?

I don't know a lot about the consequences of not paying your loan, but from my little knowledge, as soon as you figure you may have a problem paying the mortgage it's time to speak to the bank - and the sooner you go to them before payments asre missed, the assumption is that the more understanding they will be.....


www.mabs.ie might have info for you?
 
You could contact the bank and see if they will accept a surrender of the property to them. I'm not advocating it but if I was in your position I would simply want to get rid of the house. If the house is vacant and the mortgage defaults the bank can take back the house under the terms of the mortgage deed and sell as mortgagee in possession without a court order. They can still pursue you for any outstanding debt but the enforcement of foreign judgments is very time consuming and expensive and they may not choose to go this route. You will realistically never be able to obtain credit in Ireland again however.
 
To answer your query, I agree with moneyhoney and FKH's advice. Furthermore if you do contact the bank I would not let them know your current address nor what country you are in if possible. Once you have decided what you are going to do cease to have any contact with the bank until the time limit on bad debts/statute of limitations etc runs out. If you have no assets where you are the bank will probably not go to the expense of chasing you as it would be costly and time consuming and may lead to nothing from their point of view. They will eventually write it off as a bad debt. If you are returning to Ireland be aware that the bank will more than likely come after you. I suppose that banks may eventually start selling on this bad debt to debt collection agencies that would be knowledgable at chasing debtors in foreign jurisdictions but I haven't heard of it yet. Something to think about.
 
1. House is currently in +100K negative equity so don't want to pump more cash into it.
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Do you mean that your outstanding mortgage is €100k more than the market value of your house, if it could be sold? e.g. €300k mortgage, €200k market valuation.

Also, are you fully tax-compliant in relation to the two years rental income, in either jurisdiction?

But, you could take a leaf from the builders, such as the outspoken Mick Wallace, quote from last night's Primetime on RTE:

I'm not paying any interest on my loans and I doubt anyone else is
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Boom and bust at Anglo Irish Bank http://www.rte.ie/news/primetime/
 
Over the next few years there will be a huge increase in the use of debt collection agencies, these people will/can make your life in NZ hell, they can get court injunctions, freeze wages and seizes assets.

Plus at the moment you think your in neg equ of about 100K, by the time the bank does sell your house it maybe far far more. Also the bank will just be looking to get whatever they can for your house, no mater how much and as quickly as they can. You may have a debt of 200k plus.

You have a responsibility to sort this out, no one forced you to buy this house.
If it was me, i'd employ a letting agent and get the new tenants in asap. Ask for your mortgage to be made interest only, (maybe even fix it at a long term rate), as rates are low you might be able to get your repayments lower than the amount of rent you could get.
 
In America they have a policy where if you can't afford to pay your mortgage you simple pop the keys in an envelope and send them back to your bank. You are not liable for any shortfall on your ex-home when the bank sell it on. It's called the jingle policy.
 
UptheDeise said:
In America they have a policy where if you can't afford to pay your mortgage you simple pop the keys in an envelope and send them back to your bank. You are not liable for any shortfall on your ex-home when the bank sell it on. It's called the jingle policy.
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Great if you have a house in NE in the USA, but what use is that info to anyone on this thread? It does not work that way in Ireland.
 
Senna said:
Over the next few years there will be a huge increase in the use of debt collection agencies, these people will/can make your life in NZ hell, they can get court injunctions, freeze wages and seizes assets.
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What evidence do you have of Irish banks chasing people in New Zealand? They're going to have a difficult and costly time not to say anything of the bad publicity of chasing people in Ireland. Sometimes it doesn't make financial sense to chase people. Banks aren't stupid.
 
Bronte, The way I see it is the banks will look at each case, weigh up the costs vs the amount of money owed and the lightly hood of achieving a repayments They will go after the 'easy' cases. That does not mean that they wont farm out/sell etc the other cases to third parts, who will do the leg work. ie Gather up a list of all the people who they believe are in New Zealand and have a local PI/Depth collection company trace them, and put pressure on them to pay up. All this will happen long term.
 
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