Another splitting up mortgage query

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Glen25

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I'm posting this for my other half. Any advice would be great as he is very stressed about it..
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My ex and I bought a house together at the height of the boom. Now, 8yrs later we have a house that we need to sort out. I've moved out and I'm now renting elsewhere and he is living with his new partner in the house. This isn’t an issue. Currently, they are paying the mortgage (€1000 pm, see below). (Originally, we both continued to live in the house after the break up, then rented it for a year where we both subsidised it and now he is living there with his new partner.)

When we broke up, we originally made a deal with the bank for interest only payments but this has increased over time to €1000 per month with 6 month reviews. All had been going well until this last review where the current repayment plan was denied and they have requested we pay the full mortgage. I understand that the long term sustainability of not paying the mortgage in full is not an ideal situation.

Currently, we're paying only €1,000 on a mortgage which should be €1,300 as we just can't afford it. The house is probably worth about €160k and the mortgage outstanding is around €320k. What with increased tax, petrol and no pay increases etc, we cannot make the full payments while trying to service our other short term debts with this. Looking to rent a room is out as the house is quite rural and there isn't a huge demand for this.

The bank have requested that we stop paying the short term (credit union/credit cards/car loans) debt and focus on the mortgage. However, going down the route of defaulting on paying short term debt is not an avenue either of us want to go down. We’d prefer to pay something to everyone and pay all debt off eventually.

We appealed this latest decision and weeks later it was denied again so now we're left with mortgage arrears as the old payment plan did not continue on.

A few questions..
1) If the €1,000 continues to be paid (without any formal agreement or approval by the bank) can the bank repossess even though it's only a €300 shortfall?

2) Would it be possible to get some sort of legal agreement drawn up that removes my interest in the property if my ex was somehow able to meet full repayments? I would be agreeable to this as at this stage we’d both like to have something concrete set out so we can both plan our futures.

3) Are banks doing any deals where we could sell the house and split the negative equity – how feasible would this (€60k loan each) even be? Would there be any write down? Would they need to see big arrears before they would even enter discussions?

4) Anybody got any suggestions as to what we could possibly do? Both parties are not in a position to buy the other out.

Thanks for any advice,
K.
 
Have a read of A guide to splitting up while in negative equity to outline some of the principles involved.

Who is the lender?
What is the interest rate e.g. SVR @4.5% or tracker at ECB + 0.75%?

As your ex is occupying the house, he should be paying the market rent for the property. Let's say that is €14,000 per year.

If he pays this directly to the lender, then your position in relationship to each other does not change. On top of that, you should pay an equal amount of capital off the mortgage each month. If he can't do that, then the other should not do so either. If one of you pays more capital than the other, it would be unfair.

If you had the money, you should give him roughly €80,000 or half the shortfall and come off the deed and the mortgage. However, you don't have the money and the bank probably won't allow it.

The bank may refuse to allow you to go interest-only, but in reality, if they get at least the interest, they won't take any further action, apart from hassling you with phone calls and letters.

1) The bank will not prioritise a house for repossession if they are getting the interest paid in full.

2) The bank will not allow you take your name off the mortgage. Anyway, it would be unfair to leave your ex with all the negative equity. If you could pay him, €80,000 it would be fair.

You and he can do a separate agreement whereby you agree to waive all interest in the house and he agrees to make the repayments. But you are still liable to the bank for any shortfall.

3) They might do such a deal, especially if it's a tracker mortgage. Not sure if this is the best plan though.


The bank have requested that we stop paying the short term (credit union/credit cards/car loans) debt and focus on the mortgage.
Click to expand...

You should clear the most expensive loans first especially the credit card and the credit union. If the bank is getting interest only, they may give out, but they will just have to accept it.
 
Have you talked to Mabs?

You mentioned that your are posting for your ex but it is as much a problem for you as he. There must be a reason the bank will not continue with interest only. For example are you living with someone who is a high earner etc.

Presumably you've filled out financial statements for the banks. But they are going to look at the bigger picture such as you ex's partners income.

Have you asked the bank to let the mortgage go into your ex's name?

It's very difficult to give advice based on what you posted. Could you do the money makeover thread if you want more concrete advice.
 
While you're working through this, I would advise you to continue paying the "interest- only" as before. The banks don't want your account to be in arrears any more than you and this is to protect their own vested interest. If your account is in arrears for more than a number of weeks then the bank is required to make an impairment provision in its accounts which ultimately affects its bottom line profitability. Bankers certainly dont want that in the current climate..

The banks are making a calculated guess that you would prefer to pay down your mortgage in priority to your short term debts however in your case and mainly due to your personal circumstances,This is not true.

If I was in your shoes, I would write to them again and confirm that you will continue to pay "interest only" for the time being as you are unable to afford anything more. Any bank that is still receiving interest on a mortgage will consider your case to be a lot better than many others. I would be surprised if they became overly concerned about your case. I wouldn't be surprised if they "gave in" and agree to your proposal. Its much better for them to have the account operating normal "as per agreement" rather than being "out of order" due to their own actions and persistence.
 
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