Two mortgages - possible default on one

[Thrifty1]

I am looking for some advice and information please.

My husband owns an apartment which he bought before we met which has a standard variable mortgage on it with UB. €161,000 over 35 years.

After we got married he put it on the market as we wanted to buy a house as we were starting a family.
The was at the peak of the boom (2006) and we were told there would be no problem selling the apt quickly and we were given a joint mortgage on the house - €302,000 over 25 years.

Fastforward 4 years, the apt is still not sold and we have been paying 2 mortgages for this period. We have been very unsuccessful renting it out, last year for eg the total cost of the apt incl mortgage,insurance and management fees came to €12,000 and the total rent received was €3,500. The balance is coming out of our income and savings.

In the last 2 months the bank have increased the interest rate adding another €100 a month to repayments and the ECB increase and future expected increases will obviously add more. Its currently at €820 a month.

I was made redundant 3 years ago, I have had some part time work since but nothing regular. I am currently receiving maternity benefit, due to end in Sept after that we are back down to only my husbands wage.
Even if I did get work with 3 children to pay childcare costs for I would be left with very little.

Our total outgoings are €3715 pm and income will be €3163 in Sept - its currently €4033 with my maternity benefit.
We have no other loans.

(The mortgage on the house is a tracker with PTSB and last month it was €1348, this will go up by about €90 next month with the ECB increase.)

I want to know what will happen if we default on the mortgage on the apt.
My understanding is that they get a court order to sell it(is it necessary if we dont oppose it?). The sell it at aution and we are liable for the balance remaining including costs and interest.

Do they then send out a sheriff to our family house to seize assets?

Would the bank apply to the court for an installment order? What income is considered his and what mine for this purpose - eg is the child benefit included - technically its a payment to me not him.

Can they register a judgement on our family home? Not that I can see that would be worthwhile as its in negative equity to the tune of about €100k.
Can they take my assets, like my car? Our savings are in my bank account, can they access this?
How long can they chase him for payment? How long will his credit rating be affected for? We already have a home, a car and some savings so realistically wouldnt need a loan for a long time.


We are reluctant to go to the bank as we are worried if they find out its not our PPR they will move us to a higher interest rate - a landlord one.

We do still have some savings but my husbands job is not secure at all and im worried about continuing to plough this into paying the mortgage on the apt when we may need to cover the mortgage on the house which in my eyes is more important that we keep paying.

I reckon that an optimistic estimate is that we could sell the apt in 3 years for probably €80,000 (2 bed in small town), leaving a shortfall of about €65k and we would have paid about €36k in mortgage payments = total cost €100k

It makes me sick to my stomach thinking of all the money we are ploughing into the place with no prospect of getting out of it.

I really dont know what is the best option.
Has anyone any advice please.

 

[niceoneted]

Have you approached the bank about going interest only on either or both of the properties?
That is where I would start as it will free up some cash and give you some time to think about what you will do.

 

[Brendan Burgess]

Read this thread first to help you to assess the extent of the loss on your investment. You are making capital repayments, so you are gradually reducing the loan on the apartment.

Read the mortgage agreement for the apartment. Ulster Bank may be entitled to increase the interest rate, but they may not.

It seems that the best bet is to sell the apartment if you can.

UB will probably agree and will give your husband a 30 year loan for the shortfall at the existing mortgage rate.

You mention that you have savings. UB will want these savings to reduce the balance on the loan and that is only fair. You should use them as a negotiating card to get permission to sell the apartment.

If they go to court and repossess the property and get a judgement against your husband, they could register it on the family home. As it's in negative equity, it will have no practical effect.

I think it's unlikely that the sheriff will come after the family home. They will be reluctant to seize family possessions which may belong to you, as the debt is your husband's. They can't touch your car or your money, but they could repossess the husband's car and money.

As Ted says, you should seek to go interest only on your ptsb loan.

Brendan

 

[Thrifty1]

Thanks very much for your replies.

First off some good news, we have just signed up new tenants that are moving in this week. They seem nice and hopefully will stay longer than a couple of months.

Because the mortgage on the apt is over 35 years most the of repayment is going towards interest at the moment.
Over the past 7 years we have paid about €55k in repayments and only €10k has come off the prinicpal.
Moving to interest only wouldnt really make a different in the repayments.

He had the apt on the market for 3 years and we only had 2 viewings!!
The apt next door to us is also on the market the same length and is currently on at €110k (€40k less than the outstanding amount on the mortgage) and he cannot sell it.

I think we will leave things as they are at the moment while we have tenants and perhaps look at at putting it back on the market for €90k/100k and see can we sell it at that price.
I would rather a loan of €50k to be rid of the hassle of the apt.

Thanks again.