1 bed apartment - Neg Equity Sale

[southside100]

Personal and income details
Net (i.e. after tax): 2700
Income self: IT industry
Income history: Still employed
Net income partner/spouse: 2300
Income history: Still employed
number of children: 1
Amount of Mortgage Interest Supplement received: None
Home loan: 325,000
Lender: PTSB
Amount outstanding: 316,000
Value of home: 140,000
Interest rate: 4.6% SVR
Monthly repayment: 1,450
Amount in arrears: 10k

Summary of discussions and agreements with the bank:
I april 2011 we rented our 1 bed apartment out and we rented a house in the area. We struggled to keep on top of the mortgage repayments as we were only getting 800 rent for the apartment, so we had a shortfall of 600 which we couldn't afford on top of renting a house so ended up running into arrears. In June of 2012 we approached the bank about selling the property and buying a house for the same money so our finances would be more or less the same. He advised us that if we were to get a new mortgage our finaces would have to be in order. So we decided to move back to the apartment for 6 months, start paying our full mortage and got our finances back on track. We were told all all throughout this process that the bank will not stand in your way of selling your property, "we don't keep people trapped somewhere they don't want to be" and "once we're happy you're getting market value for it then you can sell".
We accepeted an offer of 140k, contracts are being drawn up (not signed yet). We submitted our application for the new mortgage last week and were turned down. We were disappointed but still thought lets sell the property, work out payment for the Neg Equity and get on with our lives. Now the bank are saying they will not release the title deeds as the shortfall of 176K is too big an amount to be left unsecured. So we have incurred expenses of almost 2k with solicitors etc. The vendor has also incurred solicitors cost, plus the fac they have bought new furniture for the place which is waiting to be delivered.
We feel like we have been lied to by the bank, giving false promises all along just to get us to meet our full monthly mortgage repayments every month. Now they won't even return my calls, all contact has stopped. They have just left us high and dry, with unwanted expenses that neither us or the vendor needed!

Other loans and creditors - delete those which don't apply to you
Credit Card: 5,000
Term Loan: 9,000
Term Loan: 4,000

Other savings and investments
None

How important is retaining the family home to you?
I don't care about keeping the family home. We have already outgrown the place. We only moved back with the idea of selling 6 months down the line. Our son is almost 4 and is still sleeping in the same bedroom as his parents. We simply don't have another 5-10 years to wait until the market comes back around, we need a bigger place now. I have contacted MABS and they said as long as you are meeting your monthly outgoings there's nothing we can do. They said if I had of stayed renting and kept going further and further into arrears then I would have a case. So we feel by trying to do the right thing and face our obligations we've been left in a worse situtation. We are honestly considering the UK bankruptcy route at this stage. We've put our lives on hold for the past year trying to deal with this and we are left in the same place we started. This is really starting to affect us at home, we're constantly stressed out, can't sleep wondering where we go next.

Any other relevant information
What is your preferred realistic outcome?
To sell, work out a deal for the Neg Equity and just get on with our lives.

 

[flattea2]

Given your incomes I think you should never have considered trying to sell this property, and you should not have moved back in for 6 months paying full mortgage – you’ve just proved to the bank you can service the debt.

As far as the bank are concerned you are able to meet your repayments, I don’t see any reason (from their perspective) that they would let you carry an unsecured loan for 176k. I'm surprised that someone in the bank seems to have given you the advice they did.

I think you should get out of the property and rent a place suitable for you family. How much would this be? You may just have to make up the shortfall on the rent on the 1-bed.

I don’t really see any other way. Maybe you could try only putting the rent from the 1-bed into the mortgage while you sort your other loans out. Once sorted, you’ll have more breathing room.

 

[southside100]

Hindsight is a wonderful thing. We trusted the bank manager who was advising us, we had no reason not to.

I'm hesitant to become a landlord again, but if its the only way forward for my family then its something I will have to consider.

 

[oldnick]

You were willing to pay the bank their debt.
You had found a way that was easier, quicker, cheaper and less stressful than continuing to both rent a house plus let your apt . The bank manager said this would be fine. And,acting on that, you went ahead with time,effort and costs involved

Now the bank has said you can't do this.
Besides misleading you the bank is condemning you to dwell in entirely unsuitable accommodation or forcing you to become landlords; a much dearer way of repaying the debt and a much harder experience than just renting a suitable home and paying off your debt. Crazy.

If I have correctly summarised what you said then my advice is
Stop paying the bank. Now. Start saving some cash. Start looking for opportunities in U.K. or elsewhere. And leave.

I know other posters will regard this as irresponsible advice.
I may have agreed until recently. I have always been one of those traditional debts-must-be-paid types. But the more I study how the banks behaved in the past and are still behaving - even to honest struggling young families like yours willing to pay their debts in a reasonable manner - then I'd say you MUST choose your family's well-being over that of the bank's.

 

[Kine]

I'd say you MUST choose your family's well-being over that of the bank's.

Ultimately this is what it boils down to - what is best for your family. People will morale hazard you until the day you die, but very few of those will be in your position having to make the decisions you need to make.

Work out the implications of all the varying levels of what you can do, from following what the bank wants to going bankrupt in the UK (if feasible) and see what is best for you.

Good luck.

 

[southside100]

I got advice from an ex PTSB staff member last night who used to process a lot of mortgages for them. He said at the end of the day they are their to make money, they don't care what your personal circumstances are, they just want to be repaid.

I didn't buy this home as an investment to make a few quid for myself. Myself and my wife bought it as a starter home, which was fine when it was just the two of us but since our child came along its just not suitable anymore. We can't wait for 5-10 years until we come out of Neg Equity to sell, my son needs his own space now.

Thanks for the advice. The way I see it we've got 2 options, rent it out, go further and further into arrears and go down the Personal Insolvency route in Ireland. Or go to the UK and go bankrupt in 18 months.

Shane Filan walked away from 23 million worth of debt in under 12 months, so 315k is just a drop in the ocean to them!

 

[flattea2]

I didn’t mean to come across as having wonderful hindsight, apologies if so. Of course you took the bank manager at his word, no reason not to.

We are in a similar position – bought an apartment a number of years ago – having kids then meant we had to rent a house. We are losing money every month on the apartment but have decided that uprooting our kids to go to a different country to declare bankruptcy is not in their interest and our jobs are reasonably good and secure.

I don’t think your situation is so bad that you need to go bankrupt. Try to balance everything out – you have 5k net a month coming in. You only need 12% of this to cover the shortfall if the apartment is rented. I bet if you could get these term loans and the credit card in order that the mortgage on the apartment would be a lot easier.

You are probably feeling disillusioned with the bank reneging on its promise, plus the hassle of possibly pulling out of the apartment sale with its associated costs. But to go bankrupt you’ll have to give up your jobs, uproot your child, less contact with family and friends, find new jobs in a new country, you may earn less there. Just things to ponder over.

 

[southside100]

I understand you were only trying to offer some advice and I appreciate that, so thank you. I was in a bad place this morning when I wrote this post. We plan to take a couple of months out to re-assess the situation. Moving abroad is a last resort so renting in Ireland and re-jigging our monthly outgoings is the more favourable option. I just hope this post can help other people in the same situation before they make the same mistakes as us.