Re: long term consequences- bad credit rating, court proceedings of defaulting overse
I suspect this is not quite the case, for example I do not believe it will show on your credit profile here. Thus it will not impact your life as much, since defaulting on it wont effect your UK credit profile. Dont forget - foreign mortgages do not show on your credit profile in Ireland / UK thus how can a default show up?
This is the primary reason you should never get a mortgage locally for overseas purchase, even if the deal looks better.
Having said this - if this foreign bank takes it to the UK / Ireland courts then a CCJ will be listed against you. This automatically prevents you from getting credit. I guess the thing to do is to prevent it getting to that stage in any way you can. If you currently have clean credit profile then could you not get a loan to repay the foreign bank - one with more favourable terms?
Probably not is your answer - due to the credit crunch.
Under these siutations you have to prioritise credit repayments, normally the priority for finance repaying would always be
Mortgage -> Homeowner loans > Personal loans > credit cards > store cards > mail order
With foreign mortgages -
Mortgage -> Homeowner loans > Personal loans > credit cards > store cards > mail order > Foreign Mortgage (up until they threaten court action)
This is simply because the late payments or defaults DO NOT show on foreign mortgages - since they are not on your UK / Ireland credit profile. Defaulting on ANYTHING in the UK right now is totally detrimental to your credit profile since all lenders are far stricter since credit crunch.
The first question you need to ask is - what is your credit profile like at the moment?
www.creditexpert.co.uk /
www.experian.co.uk (not sure about the Ireland ones - probably the same) if your credit profile is already toast then I would say Prioritise the foreign mortgage.
Each case is different.
I think the thing to do is find out the policy of the bank you are talking about - see what arrangement you can make.