Case study Unemployed. Mortgage of €250k; husband a student

M

minnie26

Guest
age 27 & 29

Personal and income details
Income self: unemployed (Jobseekers 202.90
Income history: made redundant august 2012 no work since
Income partner/spouse: back to education allowance 202.90
Income history: student
number of children 1
Amount of Mortgage Interest Supplement received 0
Home loan 250000
Lender: ulsterbank
Amount outstanding: 243000
Value of home: 80000
Interest rate: 4.5% fixed rate
Monthly repayment reduced from 1200 to 150
Amount in arrears 1500

Summary of discussions and agreements with the bank in Marp since june 2012 .
Reduced repayments
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How important is retaining the family home to you?
[/B]Which of the following best describes your situation?

I don't care about keeping the family home.



Any other relevant information

What is your preferred realistic outcome?
For example: "I will never be in a position to repay the home loan.so will either have to voluntary surender it or wait for new insovency laws.
 
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Hi Minnie

What are your prospects for work and your spouse's prospects?

What will you be earning when you get work?

Brendan
 
Hi
My earnings would be between 350 -max 450 weekly
My spouse will be in college for 3 more years
 
Minnie, you know what to do.

You are unemployed.
You won't get a job because getting one will cost you more than you get at present.
Your husband's a student for years to come.
You have a child.

You owe nearly quarter-of-a-million Euros with equity of maybe 80.000 euros and every month the debt gets bigger and bigger.

You don't care about keeping the property which you are presently living in at a cost of only €150 per month.

Basically the bank is giving you almost free accommodation and the tax-payer is providing your income and husbands college education plus allowance.

The right thing would be to hand back the keys now and rent a place whether privately or through the council.
 
The best thing to do is nothing.

Stay in the MARP process and keep in touch with your bank for the six monthly reviews.

Your earnings will most likely improve over the next three to four years
so try to hang on for that.

Handing back the house voluntarily will not improve your situation. If you did this you would need to pay private rent and also come under pressure for the mortgage shortfall of 170K

You're in a tight situation and you need to do whats best for you and your family.
 
Hi minnie

It's interesting how two informed contributors can up with opposite conclusions. I think we still need more information to work out the best solution.

Amount of Mortgage Interest Supplement received 0
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Why are you not getting Mortgage Interest Supplement? If the house is suited to your needs, then I think you should be getting MIS.

Is the house and mortgage in joint names or in one person's name?

How did you get the mortgage in the first place? When did you get it? What was your salary and how much did you borrow?

Why is your spouse still studying at 27? Given your circumstances, can he afford to continue studying? Would he not be better off working and earning an income to support his family?
 
Hi in answer to your questions. We are not getting mortgage interest supplement as new rules state you have to be in marp for a year. We got a 100% mortgage in 2008 both of us were working at the time spouse was in the construction industry. Spouse has returned to college to retrain as there are no jobs in his profession.
 
Hi minnie

Assuming that your current home meets your needs, then you should see what can be done within reason to hold onto it.

You are currently paying €150 per month for your accommodation. If you hand back the keys, you will be assigned somewhere by the local authority which might not be as good. You will be required to pay around the same in rent anyway, so there is no immediate advantage in handing back the keys.

The long-term problem is that the amount you owe is increasing by around €9,000 a year. This is more a problem for the bank than it is for you, as you are unlikely to be able to repay it ever.

You should look at the mortgage to rent scheme. If you meet the qualification conditions, a housing association will buy your house from you for €80,000 and you will get to continue living in it.

You will then have an unsecured loan of €163,000.

As you are both on low incomes, you should then apply for a Debt Settlement Arrangement under the new Personal Insolvency Act. You won't be able to start this process until around May.

You will be left with a reasonable standard of living, but any surplus income will go towards repaying the loan over 6 years. After that, the balance will be written off.

An alternative approach would be to put a proposal to your lender now. I would suggest something along the following lines.

You will split your mortgage into

  • An active mortgage of €100,000 repayable over 30 years
  • a deferred mortgage of €143,000 with no interest on it.
The active part of the mortgage could be increased in three years when your partner has a job.



A variation of the above would be that you will stay as you are. You will pay €150 per month until your incomes improve. Within the year, the taxpayer will start paying you Mortgage Interest Supplement. This is the best outcome for the bank as they will get more in MIS than they can get on a repossessed house.



Brendan
 
Over the years I have very sorry for those caught in horrible NE and have often said the banks are more responsible than the property owners and should at least share the cost of the collapse.

However, I do believe that there should be a degree of sacrifice and effort on the owners' side. Otherwise the country will sink into economic chaos even more quickly.

Dr Debt's advice may be entirely right from the OP's point. Do nothing, stay where you are, don't hand the place back (i.e.keep letting the bank pay for your accommodation).

In other words, continue getting every state support for you and your husband -including education and live there at the bank's expence.

I'm not saying they must pay their debt. They can't. But neither should they continue to live ,almost free, in that property.
 
Hi nick

Let's tease this out.

The property is worth €80,000.
Therefore the bank's debt is worth €80,000 plus a notional bit extra.

If they hand back the property, it suits no one

  • the bank doesn't gain anything except the hassle and cost of a repossessed property
  • the parents and child are homeless with all the disruption that involves
  • We, as a society, have to find a home for them. It will cost us a lot more than the interest on €80,000
In this case, it makes sense to leave them in the home and come to some arrangement - whether that is "mortgage to rent", split mortgage or whatever.
 
"We as a society have to find a home for them"

Do we?
People who work and pay tax have to find a home for someone not working and whose husband has chosen to study ?
Do we know whether they can stay with their respective families or other relations?
Do we know whether the husband or OP cannot find work of any sort anywhere?

Of course society must help its most vulnerable . This help would include housing those who cannot support themselves through age, incapacity or dire poverty caused by an impossibility to find work.

As I don't know the full details of OP's circumstances it is wrong of me to direct any ire towards her and her family and I apologise for that.
But in giving details of OP's circumstances there is no mention of them seeking and finding any type of work.

And I do feel that should be addressed -not generally for this family ,but generally for society.

On a crude blunt level . How would any AMM poster feel if they were owned money by someone - maybe a tenant - who turned round and said ,sorry we're not working now.I've decided to study so I can't pay you. And the wife''s not working either. And we're staying in this property and not paying that either.

Seems not quite right somehow.
 
Hi Nick

Yes. I think we have signed up to some International Convention on Human Rights where we have an obligation to provide housing to those in need.

Initially, I agreed with you about her husband "choosing to study". But as he was in the construction industry, he has chosen to retrain and I think most people would support that and be happy funding it.

Brendan
 
Brendan Burgess said:
Yes. I think we have signed up to some International Convention on Human Rights where we have an obligation to provide housing to those in need.
Click to expand...

Yes but the Irish definition of housing and when it kicks in is very different to other countries!

Here in Switzerland, it only kicks in when you have exhausted all other assets and when it does come it is often in the form of one or two room in a disused army barracks or air raid shelter!
 
Generally there is surpise at the generousity of the Irish state in these situations - a generousity that the Germans et al find incomprehensible considering Ireland's position.

Switzerland can afford to be more gnerous -but takes the wise course of ensuring ,as Jim states, every other avenue is explored first, and even then provides minimum accommodation.
Ireland cannot afford such generousity - nor should encourage it if we ever want to get out of our mess.
 
I agree that we are generous in our social welfare provisions. But we do have an obligation to house them - be that in a hostel or a three bed house.

Brendan
 
This is the essence of the mess we are in. There is no balance. If you are at the top or bottom your fine, but if you are in the middle you have to carry the can and pay for everything, for those above and below. Eventually, the only people left in the counry will be SW recipients, civil servants, and the extreme wealthy who pay no tax.
 
Brendan Burgess said:
I agree that we are generous in our social welfare provisions. But we do have an obligation to house them - be that in a hostel or a three bed house.

Brendan
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But who came up with the notion of having to house families with a bedroom each & 1 for the dog?! "A roof over your head & food in your belly in times of need" is the tenant I believe applies or should!

A colleague of mine (Greek!) tried to buy 2bed affordable apartment (in block they were renting & loved) from council some time back - they refused family not on income levels but on basis that mum, dad & twin girls (who happily shared room) should have min 3bed house! Thats not what they wanted but thats what they ended up with - wheres the sense?

OP - quite honestly whilst you might think things look bleak & are no doubt fed up with being broke (I know I am having taken massive paycuts which barely cover debts I took on based on my previous "secure" pay) but is there any way of your husband fast tracking his retraining? 3/4yrs restudy seems a lot but so long as you engage with bank they would probably be happy for you to stay in property.

Yes its adding €€€€€ to "debt" but this could be addressed when you are or both are gainfully employed. You're not yet 30, plenty of time to catch up with arrears if you can come to arrangement with bank. Also plenty of time for house to come out of negative equity. We may never again reach dizzying heights but I don't think all is lost here, its perspective thats needed. Best of luck
 
IMO, a balance needs to be found. Nick has a good point. In certain cases the Irish government seems to encourage people to live in benefits rather than pushing them to find a job.
 
People seem to be forgetting there are nearly 1/2 a million people out of work and things don't seem to be getting any better it is hard to find work, most people do want to work and in the case here where the husband is trying to better himself and his family by going back to education we have some people moaning about it (sums up Ireland begrudgers) I am sure the husband would love to be doing what he does best but due to things out of his control that is not the case,and he has done the right thing, I am sure he paid enough taxes when he worked in the building trade so fair played to him ,

Galego said:
IMO, a balance needs to be found. Nick has a good point. In certain cases the Irish government seems to encourage people to live in benefits rather than pushing them to find a job.
Click to expand...
 
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