Is it better to walk away from your house

N

NL1001

Guest
I was wondering if someone has an answer about why not to give the keys back. My situation is that Im from UK, but family commitments bought in commuter belt (new build, no stamp). House has since falled by about 80,000 and still are for sale (ie still dropping). The repayments are pretty crippling and I have no standard of living (3 hr commute each day). I have been offerred a good job back in UK. Due to houses location, there is little rentable value (massive over supply in area) and I have about 50,000 negative equity

Now if I didnt repay the mortgage and walked away, in about a year Id be able to buy a house in the UK no worries with a big deposit and small mortgage. I currently pay over 2,000 a month of which 1500 is interest, so i reckon it would take approx 5 years to get back to zero equity (and that excludes inflationary factors) by which time I would have saved over 100,000 euros. Seems a no brainer in financial standpoint (i blame the bank for giving a single person a 6x multiplier)

My question is really, what are the implications of walking away if i dont intend to work in Ireland again. What if I did come back to work in ireland, would the bank come after me. I know in the UK the bank can come after you for 12 years. Is there a similar rule in ireland?
I have tried but cant find anything about the reality or implications of reposession apart from its hard to get another mortgage.

Can anyone give advice. Should I try to keep up the repayments for years to get back to net zero on the house, or move back to England
 
Re: Is it better to walk away form your house

Well, assuming the bank salesman didn't actually force you to sign at gunpoint (in which case the contract is null and void anyway), you have to accept responsibility for your debt.

That aside, I see no reason why should condemn yourself to a three hour commute indefinitely when you can move back to the UK and enjoy a much better quality of life.

Here's what I'd do if I were in your position. I'd arrange a meeting with the bank manager and tell them I was consider reneging on my mortgage agreement. Sending them a quick jingle mail and flitting to another country (under no circumstances disclose what country).

Ask them if they'd consider agreeing to a "short sale". In a short sale you sell the house at whatever price the market will bear and they take the hit on the difference between that and the outstanding balance on your mortgage.

If they are smart they will realise this is a better deal than having you do a runner and having to begin legal proceedings against you in order to repossess the house. During which time house prices will continue to fall and the house will lie vacant.

If negotiations are not going well you could perhaps sweeten the deal by agreeing to pay a portion of the outstanding balance on your mortgage after the sale from savings.

This is only my personal opinion and I have no idea if there are further legal issues that I am unaware that would make this a bad idea.
 
In Ireland the bank is legally entitled to pursue you for the negative equity if you hand back your keys. This should be quite easy for the bank to pursue anywhere in the EEA.

And rightly so IMO.
If you were forced into this transaction against your will, were of unsound mind, etc, you have plenty of comeback under contract law. Otherwise we make our decisions and stand up to their consequences like the big boys and girls we are.
 
John J said:
In Ireland the bank is legally entitled to pursue you for the negative equity if you hand back your keys. This should be quite easy for the bank to pursue anywhere in the EEA.
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But he is surely entitled to negotiate with the bank an agreement to have them waive the negative equity from the sale?

The alternative for the bank is lengthy and costly legal fees to repossess the asset. At which point it will have depreciated considerably from its present value (as the market continues to fall and the house is vacant). Once sold the bank faces the costs and difficulty of locating the OP and then launching a legal battle for recovery of monies owed.

I don't know about you, but if I was the bank manager I'd consider taking the fifty grand hit on the chin.
 
NL1001 said:
in about a year Id be able to buy a house in the UK no worries with a big deposit and small mortgage.
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NL1001 said:
i reckon it would take approx 5 years to get back to zero equity (and that excludes inflationary factors) by which time I would have saved over 100,000 euros.
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If you can save 100k in 5 years (or 80k if you added interest on already) and if paying a big deposit in a year is no problem to you then how come you can't afford the mortgage? At least I'm sure the bank will see it that way.

Can you live the rest of your life with this hanging over you? You're fortunate to have a good job offer, you're not broke thankfully. Do all you can to get out of this legally and ethically now I'd say, don't let it drag on for years and wear you down. Perhaps ask if you can pay interest only for a year while you're trying to sell it. Even though there's a glut of rentals available, you could still let it out for 20%, 30% or even 40% below the cheapest rental in your area. Some money coming in from rent is better than none.
 
Thats a hefty mortgage. If you bought a house and pay that much and still live 3hrs commute then you must have bought a monster gaf in the sticks.
What county is the house in? Maybe your term is too short- Did you get one of those sub-prime type specialist mortgages? Best thing to do is to contact the Bank and explain the circumstances. Keep in contact with them, maybe they could agreed to stretch your term out a few years and bring your repayments down in the medium term, that way they can carry the "loss" without having to write it off now- you know there will be an upswing at some point. Every month going by is another month of potential buyers building up who still want to own there own house and sooner or later the demand will match supply. Alternatively you could sell privately for a serious knockdown and reduce the debt you owe and the interest payments that you would have to service on the larger capital sum. Seek advice from MABS.
Otherwise you're just being lazy handing back the keys-damaging your credit rating i the process. UK housing market is in no great shapes either.
 
to answer a few responses

1. Of course I feel partly to blame. I have never been in debt in my life. I am currently putting every penny in to try to reducey negative equity. But to play devils advocate - I am not an organistaion that deals with loans debts and risks. The bank just wanted my money. With extornate stamp duty you were forced to buy in the commuter belt. The government just milked it while they could. All this mess was pretty avoidable. - (end devils advocate)
But because its not in my nature to do the jingle mail, that why I have asked.

2. Deb.If i didnt pay 2,000 *12 months * 5 years= 120,000 , well inxs of 100,000. This is how I could save this money. I have a family home in the UK I could live in rent free. But in the same time I would have reduced my mortgage by only 30,000 (still 20K neg equity). Do you think house prices will be 10% up on what they are today in 5 years. Its anyones guess. But it means I pay 120,000 euros to end up net zero. (actually still in debt when inflation is included). You are right about the big deposit. after a year i reckon i could save approx 35K without paying a mortgage or rent and a better job. moving into an nice apartment in UK of 200K leaves only 1000/month mortgage - currently i pay 2.5K/ month which is every penny i have spare.

3. Roro - No the duplex was 390 out near Naas. Means 30 year mortgage of 355 now over 2K per month + mgt fees. Managed to nail the curve right at the tip. basically 1.5 hours each way from door to work. Has got a bit better with red cow, but still not pleasent. But cant extend as im 35 and 30 years is longest mortgage I can get. And an extra 5 years deosnt reduce payments by much. But in about 1 year will be a good time to buy in UK. 30% lower than 18 months ago.

4. The rentral market is real bad out there, last year 2 places in the surrounding, now 13 as all the investors look to get some money back. Realistically I could get 600 net per month (taking fees out) undecutting the market by 20%. Actally that reduces to 400 when you then take off the govt subsidy as I wont live there so dont get the rebate. So I'll still be paying 1600 and now I dont live in the house. Which honestly doesnt really make that much financial sense.

5. JohnJ - again playing devils advocate. I made a decision, but so did they. They gave a securitised loan, basically trying to make as much money as possible. They had no problems taking my money gambling on the fact i could repay a 6x multiplier they were only too happy to give. If they lose then they have to live with their decisions and stand up to their consequences like the big boys and girls they are.
Contracts are 2 ways. They lend me money saying if i cant repay they take the house based on their informed valuation. (this appiles if there is positive or negative equity on the house). A few months ago they upped my mortgage repayments because of the credit crunch. So without an increase in base rate they take more of my money because they want more money. Very simple. Someone makes a bad deal in US, I pay 30 quid extra a month. When do they live with their consequences. Never it seems. We do. (Apologies for the mini rant)

I appreciate that I have a good job, but my quality of life is pretty non existent (working 7-7 every day.) and I am lucky in that respect. But it does feel like a noose. I cant get work away or abroad and further my career as I cant afford to pay for the house here (see earlier point re renting). I appreciate I made a mistake buying a house, but then the advice of the bank was very much pesuading me to buy saying if i didnt buy now I wouldnt be able to afford it in future. It seems kinda rich considering my pension fund has dropped and I dont expect them to stump up the loss. They sold me the mortgage based on an asset they valued (and charged me for the privilege) as a security and yet Im meant to pay the difference.

I think the next step is to see the bank manager like room305 suggests
But it seems that the main issue is the bank trying to chase me for the money and credit rating. But reading between lines, lots of foreigners moving home, 1 in 8 homes in dublin unoccupied, rents reducing, houses not being completed as developers just abondain builds, think its a while away before the supply/demand curve moves and prices go up. stamp duty still makes it impossible for others to upgrade. at what point do you cut your losses

Any other advice real appreciated. i still dont know the exact legal position i would be in if i 'jingle mail'. what powers do they have. how hard is it to reclaim the money. how long does it last? What about jurisdiction. does anyone have experience?
 
NL1001 said:
My question is really, what are the implications of walking away if i dont intend to work in Ireland again. What if I did come back to work in ireland, would the bank come after me.
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If you are seriously considering this course of action then you might want to talk to a solicitor first.
 
Why not give back the keys, i have a friend in a similar situation the bank gave him a loan for a house that was 93miles from work, daily commute was a bummer doing 12hr shifts in Dublin. One morning driving home he fell a sleep at the wheel of the car which the same bank owned by terms of a loan. car was a write-off €20k down the drain and the insurance wouldn't pay out due to a tyre-thread being below legal limit.
lucky to be alive several weeks out of work behind on his payments no money for another car and forced to rent near his place of work he has defaulted on both loans and the banks are after him. he tried to get the bank to take the house back they wouldn't except a short sale, and any moneys owing on the car loan he could keep repayments going as his circumstances had changed.
now he has just left his job a few weeks ago and moved to england. and far as he is concerned this mess is left here and it has nothing to do with him any more. As far as i know from what he said to me that they cant do anything to him in the UK. if the chase hi in the UK he will declare himself bankrupt.
UK have bankruptcy laws there and for £300 pounds he can declare himself bankrupt which he can't do here.
 
Surely it can't be that easy to just walk away from a mortgage with no consequences, I'd imagine it would affect your credit rating in the UK.
 
i have a friend in a similar situation the bank gave him a loan for a house that was 93miles from work, daily commute was a bummer doing 12hr shifts in Dublin. One morning driving home he fell a sleep at the wheel of the car which the same bank owned by terms of a loan. car was a write-off €20k down the drain and the insurance wouldn't pay out due to a tyre-thread being below legal limit.

So the evil bank sold him a house 93 miles from work? My goodness! That must have been a shock for him when he moved in. And the bank made him fall asleep at the wheel? Unbelievable. The bank should have had someone in the car to make sure he was driving irresponsibly like that. He could have killed a child or something, and it would be the BANK'S fault. And then they gave him a car with low tire tread depth? Shocking - I mean, it's not like you are responsible for maintaining your own car - the bank should send someone around every week to check it out for you...

Serioulsy, people like your friend are the same as the sub-prime clowns who have caused the credit crunch in the US. People like that and possibly the OP should NEVER be allowed to borrow ever again, they clearly are not capable of dealing with credit and try to deny responsibility for their own choices.
 
I don't agree with the sentiments expressed that people do not have personal responsibility for their actions. No one forced anyone to take large mortgages on a house miles from work. Having said that I agree that banks were reckless in their lending. If what Nollaig 90 says is true and that by returning to the UK you will not be chased by the Irish bank, and it will only affect your Irish credit rating than I'd say you've nothing to lose except that a person who does this once will be the type to always blame someone else. But then again we all make mistakes from which we need to move on and I know Irish people who posted the keys to their bank and left England after the last crash and moved to Ireland to rebuild their lives.
 
I am curious here. what if NE had not arrived here - op would be paying the now crippling mortgage and be commuting to his job?

You were not forced to be a homeowner. It was just easy for you.
 
At the end of the day if you feel you just can't keep up with the repayments and you give the keys back to the bank.If you have no money what are they coming after you for ?.If you have no money then what can they really do to you.Of course in the future if you where to have assets then they could come after you for those,So if you have nothing then what can you give them.
I also know that if one had a home mortgage and also a investment house that if you defaulted on the investment house the bank cannot go after your family home.This is my case if things ever got that bad.This is something that our solicitor explained to me at the time.
 
dodo said:
I also know that if one had a home mortgage and also a investment house that if you defaulted on the investment house the bank cannot go after your family home.This is my case if things ever got that bad.This is something that our solicitor explained to me at the time.
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only if you have a non-recourse mortgage on the investment property

otherwise they can take everything you've got
 
Rather than handing back the keys, why don't you rent it for less than the market rate in the area? Then move back to England and supplement the mortgage until you get out of negative equity.
 
What is a non recourse mortgage and why on earth would a bank allow such a thing?
 
here you go

I doubt there's any here, they are very common in America, especially California

I also doubt that dodo has one on his investment property and that his solicitor is, well, wrong. If you default on one mortgage, the bank would be well within its rights to go after your other assets (PPR, pension fund, savings, investments, future earnings etc) in order to recover your debt.

This fantasy security blanket that some people have (like OP) of ' shure, if the worst comes to the worst, I'll just give the keys back to the bank and they can't touch me' is not correct. Sorry to be the bearer of bad news.
 
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