Investment mortgage can't be paid - can home be taken from us?

M

maryb

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We bought a modest house 8 years ago. Then released equity in it and bought our now family home. We kept the original house as an investment property. Both properties are on tracker mortgages. Both are in massive negative equity (about 300k combined). Since the purchase we have had two children and now have childcare costs. Also the rental income has fallen dramatically, plus like everyone else we've had tax increases. We're both on salaries of c. 40k with no hope of increases (nothing dramatic anyway). Repaying home mortgage with capital at the moment and investment property is on interest only.
What happens if we can't continue repayments on our investment property? Don't think that the bank will keep us on interest only forever. Even though our home is in negative equity could they put a charge on it and eventually force us to sell, when it's paid off or back in positive equity? Would a court look favourably on the fact that we're trying to pay back the debt?
 
I'd say a lot of people in Ireland find themselves in this situation with cross securing of mortgages.

Would it not be in the banks interest to reposses the home with the most value i.e the one that is being paid down? In this case both houses are in negative equity but if there was equity in one house and not the other would the bank's view differ?

Look at your contract for the interest only mortgage. Does it say the interest only option is for the lifetime of the mortgage or does it say it is up for review?
 
It was on interest only for 3 years. Then switched to repayment. We struggled with that and applied and got interest only for 1 year. We sent a letter to the bank, asking if we could sell the property and deal with the negative equity, as realistically our ability to repay isn't looking good. One financial advisor said to just hand back the keys and that the bank wouldn't get much of a judgement against us but that they could put a charge on the family home.
 
If you don't pay your investment mortgage the bank will come after your home. As it's currently in negative equity they will probably wait until you've paid more of your mortgage off. Ultimately they could force you to sell. Probably what they will do is go for an instalment order against you instead of a judgement mortgage. A judge will only order what you can afford to repay but this doesn't make the debt go away. Talk to your lenders - in writing, engage with them.
 
If you don't pay your investment mortgage the bank will come after your home.

Not true. Unless the family home is used as collatoral for the investment mortgage, in addition to the investment property itself, then the bank can't touch your family home. They should have no lien/charge against your family home - unless you agreed to this. It would be unusual for the bank to require additional security as the investment property was usually considered sufficient collatoral for an investment mortgage.
 
RAMS said:
If you don't pay your investment mortgage the bank will come after your home.

Not true. Unless the family home is used as collatoral for the investment mortgage, in addition to the investment property itself, then the bank can't touch your family home. They should have no lien/charge against your family home - unless you agreed to this. It would be unusual for the bank to require additional security as the investment property was usually considered sufficient collatoral for an investment mortgage.
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Not necessarily. Though unlikely to 'get' the family home, the bank is still entitled to go after all assets. Mortgages in this Country are recourse mortgages i.e. the debt stays with you if the value of the security doesn't cover the mortgage.
 
Yes the debt stays with the person in this country but that is a different issue. The bank still can't go after assets it doesn't have a charge over, especially if those assets have charges/liens in favour of some other institution. If the bank didn't get sufficient collatoral to cover the loan, that's their problem. They can't come back at a later stage and say Oh, we made a mistake, so now we need to take your other asset(s) now.
 
RAMS said:
Yes the debt stays with the person in this country but that is a different issue. The bank still can't go after assets it doesn't have a charge over, especially if those assets have charges/liens in favour of some other institution. If the bank didn't get sufficient collatoral to cover the loan, that's their problem. They can't come back at a later stage and say Oh, we made a mistake, so now we need to take your other asset(s) now.
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Sorry, but you are wrong. They are recourse mortgages. In theory, a creditor can get a judgement against you and all your assets. Just because someone else has a lien on an asset doesn't stop them from putting a second lien on it and claiming what is left if anything after the first creditor has been paid. Often, it is just not worth their while doing this. Especially today. OP, this is all theoretical. No court will grant a judgement against your home as long as you are paying the mortgage. They probably would put a second lien on it though. Best advice is talk to your lender. It's in their interest as much as yours to be flexible within reason.
 
Sunny said:
In theory, a creditor can get a judgement against you and all your assets. Just because someone else has a lien on an asset doesn't stop them from putting a second lien on it and claiming what is left if anything after the first creditor has been paid.

No court will grant a judgement against your home as long as you are paying the mortgage. They probably would put a second lien on it though.
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Sorry I don't agree with the last bit. Say you have an investment property that you cannot afford to pay the mortgage on with Bank 1 and your home is worth 1 million with a mortgage remaining of 300K with Bank 2 which you can just about pay. When you default on the investment mortgage and investment property is sold at a loss of say 200K the balance owing will be sought by the lender on the home which has a value of 700K after mortgage. They can and will go after that house and force it's sale. They are not currently doing this because in Ireland in general 'eviction' cases are bad news for banks. Another reason for not doing it currently is the domino effect this will have. But when the two years of 'no touch' home loans is up I'd say anything is fair game. Particular where a home has a good value and is worthwhile to pursue. In the above scenario Bank 1 and 2 would get paid 300 + 200 plus costs of say 50K and home owner would get 150K.
 
Bronte said:
Sorry I don't agree with the last bit. Say you have an investment property that you cannot afford to pay the mortgage on with Bank 1 and your home is worth 1 million with a mortgage remaining of 300K with Bank 2 which you can just about pay. When you default on the investment mortgage and investment property is sold at a loss of say 200K the balance owing will be sought by the lender on the home which has a value of 700K after mortgage. They can and will go after that house and force it's sale. They are not currently doing this because in Ireland in general 'eviction' cases are bad news for banks. Another reason for not doing it currently is the domino effect this will have. But when the two years of 'no touch' home loans is up I'd say anything is fair game. Particular where a home has a good value and is worthwhile to pursue. In the above scenario Bank 1 and 2 would get paid 300 + 200 plus costs of say 50K and home owner would get 150K.
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You are possibly right and if there was that much positive equity in a house, then of course a judge would look at it and ask why wouldn't it be sold. However, in general the Courts are very reluctant to force the sale of the family home especially if the mortgage holder is not in arrears or is making attempts to pay. In the case of the OP it is very unlikely that she would be forced to sell the family home where she is meeting her obligations because of a problem with a investment mortgage. Especially considering the house is in negative equity.
 
Sunny said:
However, in general the Courts are very reluctant to force the sale of the family home especially if the mortgage holder is not in arrears or is making attempts to pay.
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While I would agree that there is a 'current' sympathy in the courts at the moment and a mood of judges that banks should be punished this is not the law. Sympathy and mood have no place in a law court. This is cold hard cash and no better people for that then bankers and lawyers.

On RTE radio last Monday was another tale of two women fighting to keep their homes. Very distressed ladies who did not know each other before having to face the cold face of the High Court. The judge did give them sympathy and time but it's completely pointless. All they are doing is racking up legal fees and will be left one of these days with nothing. Interestingly it was the women that faced the court. So stressful for marriage and families and no doubt the men couldn't face it. Very very sad indeed.

I think they didn't even have legal representation. It's a sorry state of affairs when we see the lawyers at the Moriarity tribunal racking up unbelievable fees but ordinary citizens can not afford court cases, only those who are poor or rich. Where's the justice in that. Those bright boys in the law library laughing with Seanie should think on that. Probably doesn't give them a moment's pause for breath.
 
It's nothing to do with sympathy. The case you mention is people in arrears and delaying the action is pointless because people end up digging a bigger hole for themselves. If the OP is meeting her mortgage obligations on the family home, a judge is very unlikely to force a sale unless there was an obvious reason like a huge amount of equity tied up in it.
 
And what happens Sunny in say 10 years when OP has paid back her home loan mortgage?
 
Bronte said:
And what happens Sunny in say 10 years when OP has paid back her home loan mortgage?
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Well then, it's a different story and I already agreed with you about that. However, talking about what might happen in 10 years doesn't help the OP and the worry she is going through now. All I am saying is that it is very unlikely that she will lose her family home and be put on the streets right now because of the problem with an investment mortgage so she shouldn't get herself all stressed about it.

Actually, sorry just read the OP's post again and I see where you coming from. She wants to know if the bank can put a charge against her house and enforce it if it goes into positive equity. And the answer is they can like you say.

The best advice remains talk to the lender and get proper legal advice if needs be.
 
Sorry, but you are wrong. They are recourse mortgages. In theory, a creditor can get a judgement against you and all your assets. Just because someone else has a lien on an asset doesn't stop them from putting a second lien on it and claiming what is left if anything after the first creditor has been paid.
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Sunny, i think you are missing my point. I am talking about security in respect of a performing loan. If a bank hasn't sufficient collatoral now because of a drop in property prices, they can't seek additional collatoral, in the absence of default. Banks have tried to do this. See other blogs on this issue.
 
RAMS said:
Sunny, i think you are missing my point. I am talking about security in respect of a performing loan. If a bank hasn't sufficient collatoral now because of a drop in property prices, they can't seek additional collatoral, in the absence of default. Banks have tried to do this. See other blogs on this issue.
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That wasn't your point. This was. You were talking about a defaulted loan and saying a bank couldn't come after a family home because it wasn't used as collateral.

RAMS said:
If you don't pay your investment mortgage the bank will come after your home.

Not true. Unless the family home is used as collatoral for the investment mortgage, in addition to the investment property itself, then the bank can't touch your family home. They should have no lien/charge against your family home - unless you agreed to this. It would be unusual for the bank to require additional security as the investment property was usually considered sufficient collatoral for an investment mortgage.
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The bank in theory can come after all assets if you don't pay your mortgage.
 
At the end of a mortgage doucment is says "WARNING: YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT". It doesn't say "WARNING: YOUR HOME and any other assets you may own IS AT RISK etc".
 
RAMS said:
At the end of a mortgage doucment is says "WARNING: YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT". It doesn't say "WARNING: YOUR HOME and any other assets you may own IS AT RISK etc".
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Once again, mortgages in Ireland are recourse mortgages. That means the borrowerer is liable for the full amount of the loan no matter what the value is of the security. If in the event of default, the security is not enough to meet the obligations under the loan agreement, the bank is entitled to seek payment by putting charges on your other assets.

I am not saying it is fair or right but thats the way it is.
 
It's a moot point in any case, as very few have assets worth a lot. Those that have trasnferred them into other's names, like the big bankers and developers did.
 
What happens if we can't continue repayments on our investment property?
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Sunny, this was posted by the original poster. They are not in default and both working. They are paying interest only on the investment property and continue to pay it. I was talking about this scenario - security for the loan and not default.

Not true. Unless the family home is used as collatoral for the investment mortgage, in addition to the investment property itself, then the bank can't touch your family home. They should have no lien/charge against your family home - unless you agreed to this. It would be unusual for the bank to require additional security as the investment property was usually considered sufficient collatoral for an investment mortgage.
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You were talking about a defaulted loan and saying a bank couldn't come after a family home because it wasn't used as collateral.
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You incorrectly assumed I was talking about default - I wasn't.
 
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