negative equity and circumstances changed - advice please.

M

morpheus

Registered User
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Hi all,

Myself and partner bought the house in Nov 2006 for 325K with a 100% mortgage.

Its now worth about 300K, 3 bed terraced house, back garden.

Our circumstances unfortunately changed and we broke up, now we find ourselves with a house which will cost us cash to sell.

Should we rent the house? Should we sell the house, these are the questions we are mulling over.

Partner wants to stay in the house and rent 2 rooms (can you rent a box room?!!!) I think we should just finish furnishing the spare rooms and rent the whole place out. On the really bad days we consider selling it and cutting our losses.

Things are amicable between us and we can easily discuss these issues but I thought I would throw it out there and see what you thought?

regards
 
morpheus said:
Should we rent the house?
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Any use?

Sell home or keep as an investment?
Interest only mortgage for investment property
Property Investment FAQ
can you rent a box room?!!!
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Yes. Obviously the rent a room scheme only applies to owner occupiers where the rented room(s) bring in €10K p.a. or less in rental income.
I think we should just finish furnishing the spare rooms and rent the whole place out.
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Why? Have you crunched the numbers to compare the renting versus selling (presumably at a loss) scenarios?

Is your ex still living in the property? Where are you living?
 
One party should try and buy the other out, even if it means making a loss. Its best be shut of the whole thing IMO.
 
im living back with folks temporarily. she wants to stay there i think out of convenience for work but its not that she isnt open to discussion on the issue. was considering buying her out (well its in negative equity) but doubt bank will allow me to retain ownership on my own, i earn circa 40k pa and reckon i can afford the monthly payments but dont think that is enough.
 
Its a no brainer. Cut your losses, take a relatively small hit and get out asap. Do you really want to be a landlord with or without your ex?
 
It's not necessarily a no brainer if one or other or both of the people involved (even if split up as a couple) are happy to remain living there for the forseeable future and can afford to service the mortgage in which case the negative equity issue is not necessarily relevant to their day to day circumstances.
 
I don't see how either one of you can buy the other out. If you need €320,000 to clear the existing mortagage and the property is valued at €300,000 no bank will lend you the money. The only option would be if either of you had substantial savings.

Also unless you have enough money to repay any shortfall in the mortgage if you sold it this isn't really an option either.

I'm guessing that if you rented the entire house it would more or less cover the mortgage which is why you want to do that. Remember though that if you rent the house as investors there may be some clawback of stamp duty if you paid none when you bought the house.

Only if you have reserves of cash is selling or buying out an option so you may have no real choice but to rent it out.
 
we cant live there together and she is not in a position to buy me out. im willing to let her walk away considering there is negative equity of about 30k but was unsure as to whether i can take over the mortgage in that way.

yes you are correct in your assumption that we figure the renting may pay a large chunk of the mortgage until we are in a better position financially or until we sell on the house. we just dont know what the stamp duty implications are, we are currently recieving TRS too. we bought the house as first time buyers, but it was second hand so we paid the then FTB 3% stamp duty of about 9000 euro.
 
You bought in November 2006 so if you rent the property out (other than under the owner occupier rent a room scheme) before November 2008 then you are liable for a clawback of SD - i.e. whatever an investor would have paid less whatever you actually paid. If the property becomes a rental/investment property then you obviously cannot continue to claim owner occupier mortgage interest relief. The links that I posted above summarise many of the issues pertinent to converting a PPR to an investment. As I said you really need to crunch the numbers to assess the viability of the different option scenarios.
 
I would also say that the bank will probably not release your partner from the mortgage deed so she will still be jointly liable for the mortgage. To put the house and current mortgage in your sole name you will I believe need the bank's consent.
 
I think the investor rate of SD was 4.5% at that time. Though check with revenue.
So if you rent out before Nov 2008 you'll be liable to a 1.5% SD clawback
 
Seems to me that a €40k salary wouldn't comfortably sustain a €325k mortgage. I don't think turning it into an investment property is a solution either as it's a large gamble to take on a single type of asset. I'd say if you can get out with a €30-40k loss between the two of you then do it! take the pain for a couple of years of paying off the balance and get on with your separate lives.
 
Would it be feasible for one of the existing joint buyers to bring in one or more other joint buyers to buy the other party out and remain living in the property? Just another possible option to look at...
 
Perhaps, you should leave it altogether; let the bank take it back!

Thta's what's going to happen soon on a much larger scale anyway
 
Mick31 said:
Perhaps, you should leave it altogether; let the bank take it back!

Thta's what's going to happen soon on a much larger scale anyway
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Ho hum, you are still liable for any short-fall on the bank sale versus the mortgage, the banks selling fees, their legal fees to take repossession etc. These will be a lot larger than taking a loss on the house and getting a personal loan to cover them. Plus you will be declared bankrupt and be unable to get standard credit for 12 years.
 
Hi I had a friend in this situation and they decided to live together as there would have been a shortfall if they sold. For a year everything was fine but as soon as he met someone else it fell apart, he was bringing his new girlfriend home and it was not a comfortable situation. Add on to this that you could have to hold on to this house for an unknown number of years I would sell up now. This is what a solicitor advised and he bought her out and she started with a clean slate.
 
It amazes me that people think that can still get a house valued and presume that they will sell it for that.The fact is you will be lucky to sell it at all.I would ask where you got the value of 300k as if you bought in 2006 at 325k it has fallen less then 10%? Are there many other houses in the area selling quickly? If it takes six months too sell you can knock another six% at least off the value. All things to consider but hope it works out.
 
horatio1 said:
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I would ask where you got the value of 300k as if you bought in 2006 at 325k it has fallen less then 10%?
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Not wanting to stray off topic but it is possible that the house gained value from 2006 up to €360k or €370k in early/mid 2007 and has now dropped to €300k. That's a 16%/17% drop over the last 12 months. My point being, a 10% drop from 2006 levels does not seem unbelievable.

My advice would be to ride out the storm for the next few months until you are no longer faced with the possibility of SD claw-back and then consider your options. 4 months will come and go so fast that it won't be worth the €4.5k to sort things out now. If you're living back at the family home then presumably you can live rent free for those months and continue chipping away at the mortgage in the meantime.
 
yoganmahew said:
Ho hum, you are still liable for any short-fall on the bank sale versus the mortgage, the banks selling fees, their legal fees to take repossession etc. These will be a lot larger than taking a loss on the house and getting a personal loan to cover them. Plus you will be declared bankrupt and be unable to get standard credit for 12 years.
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The bank would charge you what??? They can put you on the black list and that's as far as it goes.
 
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