Negative Equity Shortfall

[millertime]

We have a rental property which we have to supplement the mortgage by €500 per month. Every year we keep it, we're losing €6k plus the interest of circa €10,000.

The loan is with KBC.

If we sell it, we'll obviously be carrying a shortfall on the loan of circa €50K.

My questions are:

1. Would KBC consent to a sale?
2. How would they deal with the shortfall?? Would they look to secure it on something else?
3. Any other suggestions?

 

[ClubMan]

We have a rental property which we have to supplement the mortgage by €500 per month.

Is the mortgage interest only or capital + interest/annuity? If not interest only then could going for that help? No capital repayments and you can offset 75% of the interest against rental income.

Difficult for anybody to say what KBC might/will do to be honest.

 

[millertime]

its interest and capital at the moment.

However for every year we keep the house we lose

Supplement to mortgage - € 6,000
Interest Charged - €10,400 ( est 260k @ 4%)

If we were putting this towards the shortfall, we could live with that as the mortgage on our PPR is v manageable

 

[ClubMan]

I don't really understand your last post.

What about if you were on interest only - would that help?

 

[millertime]

Sorry about the misunderstanding, if we were on interest only we'd probably break even with the rent. The €600 pm supplement on the mortgage is really mostly capital.

Going interest only would improve our cashflow in the short term but the shortfall on an eventual sale would be greater

 

[ClubMan]

Going interest only would improve our cashflow in the short term but the shortfall on an eventual sale would be greater

If you don't believe that this is a sustainable investment long term then you might want to cut your losses - i.e. sell up and deal with the consequences in whatever way is possible.

Or you could go interest only which seems to make it sustainable from a cashflow perspective and consider your options or hold onto it in the hope/expectation that house prices will recover.

No easy answer.

 

[kildon]

they would consent if its in yours and their best interests

possible solution would be to pay off the negative equity/shortfall over the remaining term of the mortgage at the current interest rate

so say 20 years left, 4% interest, 50k shortfall after sale
then pay off the 50k shortfall at 4% over 20 years

if you have a tracker then your in a better position again and maybe they will pay
you for paying off the loan early

i'd ask them what options they offer and then consult with someone who's in the know and you trust