long term consequences- bad credit rating, court proceedings of defaulting overseas

O

older+wiser

Guest
I am one of the many Irish people who foolishly rushed into buying overseas property, in my case an apartment in Cyprus.

The Cypriot economy is heading the same way as ours and resale is pretty much impossible.

Because of the downturn here I think I will have problems keeping up repayments on the mortgage I took out with a Cypriot bank.

The apartment is nominally worth quite a bit more than the amount owed on the mortgage and the developer acted as guarantor on the mortgage ( a common practice in Cyprus).

Does anyone know what might happen if I have to default on the mortgage?

It would be bad enough losing the money I have already paid without any other long term consequences- bad credit rating, court proceedings etc. Thanks
 
Re: Consequences of defaulting overseas

Would it be possible for you to save yourself the headaches of going down this route and sell for the same amount that you owe the bank?
 
Re: Consequences of defaulting overseas

Whreabouts in Cyprus ?. Could you give details of the apartment & facilities ?.
 
Re: Consequences of defaulting overseas

Its never a good idea to default on something like a mortgage, apart from the moral issues around walking away from a debt.
The thing is though, if the property was worth (say) 150k to you a year or two ago, and you bought it for your own use and enjoyment, then the fact that the markets have collapsed is neither here nor there. Keep using and enjoying it, and wait until the upswing happens before you think of selling it. Surely you didn't invest in a property with a two or three year plan? Anyone who invests in property should have a minimum view of around seven years, ideally even more.
 
Re: Consequences of defaulting overseas

Its a two bed in a nice, good quality development near Larnaca. I bought it for the long term, not to try to resell for a quick buck. However, I work in the construction business (not a developer !) and my income is on a downward spiral and my wife will also have to take a pay cut in her job. That is why I might end up HAVING to default, not by choice.
 
Re: Consequences of defaulting overseas

older+wiser said:
Its a two bed in a nice, good quality development near Larnaca. I bought it for the long term, not to try to resell for a quick buck. However, I work in the construction business (not a developer !) and my income is on a downward spiral and my wife will also have to take a pay cut in her job. That is why I might end up HAVING to default, not by choice.
Click to expand...

Have you considered approaching the bank and developer and asking for a restructure. Plead extenuating circumstances and they may be willing to restructure it over a longer term with lower payments, considering its well over the value of the mortgage etc
 
Re: Consequences of defaulting overseas

GDE beat me to it. The developer won't want you to default, not in his interests. I was over in Cyprus last week & building work seems to be at a standstill everywhere. Lots of construction workers laid off, thousands of properties for sale, faded photos in estate agents windows. Not a time to try & sell, unless it's at a silly price.
 
Re: Long term consequences- bad credit rating

Hi Older and Wiser (OP)
I konw someone in same position , have you made any progress? What are your thoughts now.
Everybody Else
The Question is still unanswered, What are the consequences of a default on a foreign loan?? I suspect the answer is "there are none here in Ireland"
pjq
PS if you are not a priest or a rabbi , leave out the MORAL stuff, there are other forums for morals.
 
Re: long term consequences- bad credit rating, court proceedings of defaulting overse

These issues were explored a few weeks ago on this forum in relation to property in Riga. The only difference with Cyprus is that the developer has guaranteed the loan and that is only as good as the developer itself.

In short, the consequences are the same as if you defaulted on a mortgage here.
 
Re: long term consequences- bad credit rating, court proceedings of defaulting overse

I suspect this is not quite the case, for example I do not believe it will show on your credit profile here. Thus it will not impact your life as much, since defaulting on it wont effect your UK credit profile. Dont forget - foreign mortgages do not show on your credit profile in Ireland / UK thus how can a default show up?

This is the primary reason you should never get a mortgage locally for overseas purchase, even if the deal looks better.

Having said this - if this foreign bank takes it to the UK / Ireland courts then a CCJ will be listed against you. This automatically prevents you from getting credit. I guess the thing to do is to prevent it getting to that stage in any way you can. If you currently have clean credit profile then could you not get a loan to repay the foreign bank - one with more favourable terms?

Probably not is your answer - due to the credit crunch.

Under these siutations you have to prioritise credit repayments, normally the priority for finance repaying would always be

Mortgage -> Homeowner loans > Personal loans > credit cards > store cards > mail order

With foreign mortgages -

Mortgage -> Homeowner loans > Personal loans > credit cards > store cards > mail order > Foreign Mortgage (up until they threaten court action)

This is simply because the late payments or defaults DO NOT show on foreign mortgages - since they are not on your UK / Ireland credit profile. Defaulting on ANYTHING in the UK right now is totally detrimental to your credit profile since all lenders are far stricter since credit crunch.

The first question you need to ask is - what is your credit profile like at the moment? www.creditexpert.co.uk / www.experian.co.uk (not sure about the Ireland ones - probably the same) if your credit profile is already toast then I would say Prioritise the foreign mortgage.

Each case is different.

I think the thing to do is find out the policy of the bank you are talking about - see what arrangement you can make.
 
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