Partner moving in, no disposable income due to negative equity

[Elginelf]

I have just bought a house on my own, following a separation a few years ago. I now have a new partner and we are planning that once my house is ready we will move into it together. My partner is in a difficult situation financially and has no disposable income. Although I have no expectation of a substantial contribution towards running the house, it may become a problem in the short-term, because I have borrowed quite a bit to do up the house and in the longer term if interest rates continue to rise. And I know that my partner will want to contribute to our home. I was wondering if I outline his situation, readers might be able to offer suggestions on how to make the situation more manageable.
He currently owns the family home with his wife. They have one son. This house is worth about 230K and the mortgage left is about 75K. The monthly payments are around 500pm.
They also own a holiday home which they use very little and only rent to friends and families on occasion. The property is now only worth about 100K. The mortgage is about 235K and is on a tracker rate. The property has been on the market since March this year with very little interest. The mortgage is about €1300pm.
As a couple they also own a piece of land just outside the Dublin commuter belt which my partner inherited from his dad. It's the family homestead and he is very emotionally attached to it. It is right in the middle of a town and has potential as a site for a house. However, it's too far from our workplaces for us to consider this. He reckons that even in today's market that the site could fetch 50K.
My partner earns about 2800 per month. He currently pays both mortgages (totaling 1800) and all insurances on the houses. He also pays other household bills and ends up with approximately €200pm disposable income.
His wife works and earns about 45K.
We've talked and talked about this. He really wants to hold onto the site but wouldn't mind getting rid of the holiday home but is there any scope to do this? If he approached the bank about repossession/write-off, what would the likely outcome be? Could they force him to sell the site? Can they make any claim on the family home? His intention is to sign the family home over to his wife. The relationship is such that joint-ownership of a holiday home won't be workable in the future anyway. Even if he held onto the holiday home in his name, they payments on it and the maintenance he will be paying will mean his outgoings would still be the same as they are. And the bank wouldn't agree to his wife's name coming off the mortgage anyway.
Any suggestions as to what's possible here greatly appreciated......

 

[Brendan Burgess]

|Total|Family Home|holiday home|site|
Mortgage||75|235|0
Value||230|100|50
Net value|70|155|-135|50

Holiday home is on tracker

to be continued

 

[vandriver]

Whilst its admirable to live up to your responsibilities,I would have to wonder at leaving yourself so short of money that you barely have enough to feed yourself.As you mentioned the ex earning 45k,have you broached the subject of burden sharing between your partner and his ex?

 

[Elginelf]

Yes Vandriver, in the immediate term that's something that he will have to remedy and he knows that. Neither of us are really aware of how much it would reasonable to pay in these circumstances. We have talked about him possibly paying half the investment mortgage (650pm) and maintenance (between 300 and 400pm), leaving his ex to pay the mortgage on the family home and half the investment mortgage. Would this acceptable in the interim, until things are sorted out legally, assuming there is no way of reducing the total debt (other than selling the site)?

 

[SarahMc]

That sounds like a very fair interim measure. Is the ex agreeable?

Have they looked into mediation?

Can the holiday home be let on a long term basis?

 

[Brendan Burgess]

|Total|Family Home|holiday home|site|
Mortgage||75|235|0
Value||230|100|50
Net value|70|155|-135|50

Holiday home is on tracker

He really wants to hold onto the site but wouldn't mind getting rid of the holiday home but is there any scope to do this? If he approached the bank about repossession/write-off, what would the likely outcome be?

So he would like the taxpayer to take the loss on his holiday home so that he can keep an empty site and all the equity in his home?

I do have sympathy for your partner, but it does not extend to paying more taxes to write down parts of his debts while leaving the rest of his assets untouched.

He should put the following proposal to the lender:
We will sell the holiday home and the site.
This will give us €150k.
As we are paying these off a cheap tracker, you should recognize this by knocking a further €30k off the outstanding balance.
This will leave us with a shortfall of €55k.
You can add this to the home loan.

He will then be in the following position

Home|€230k
original mortgage|€75k
transferred mortgage|€55k
Net equity|€100k

Could they force him to sell the site?

If he is in arrears on his mortgage, they could get a judgement against him and register it on the site and force the sale of the site. They are unlikely to do so, however. They would be well within their rights not to allow any rescheduling of the mortgage while he owns a valuable site.

Can they make any claim on the family home?

Yes, he and the wife are jointly liable for the mortgage on the holiday home. If they don't pay it off, they can get a judgement for the unpaid debt and attach it to the family home.

His intention is to sign the family home over to his wife.

This guy can't afford to give away his assets while he has liabilities. This is real property developer stuff. Transfer the assets to the the wife so that when NAMA comes looking for repayment, tjey have no assets to pay them. The only problem with your scheme is that it won't work as his wife's name is on the mortgage, as you realise yourself: " And the bank wouldn't agree to his wife's name coming off the mortgage anyway."

 

[Elginelf]

Thanks for the replies. We've just talked about things again in the light of them and it looks like leaving things as they are and dividing the payments equally with his ex is the only way forward for the minute, unless the site is sold. I guess mediation is the road to agreeing this SarahMc. I don't think there's scope to rent out the house longer term - it's in a seaside town where there are numerous properties for sale and to let but definitely there would be scope to get more rental income from it in the holiday months, I would say.
Brendan, when I mentioned signing the home over to his wife, it wasn't to avoid the debt being paid. He would have been willing to leave her the small mortgage and continue to pay the larger one himself plus maintenance and leave himself with very little to live on and having to stay at his parent's house. Of course I know the banks won't agree to that. And as I mentioned in my OP, it's looking like him having nothing to contribute won't be viable in the long-term with regard to our own home.
I mentioned write-off because I knew there had to be some value in the tracker mortgage. It's interesting to hear 30K being estimated on that value, if the site were on the table.
It's good to see the options there in black and white......thanks again.

 

[Bronte]

Quite clearly the site should be sold. Also with the banks consent the holiday home. Bank will probably want the shortfall to be added to home loan. The holiday home debt is also the wife's so she should not object to this. Plus she's

What you and he need to do is do all the figures for each option. Also need the rental figures, I presume it's not even close to the mortgage amount.

I hope he's paying his NPPR and household charge, if not these will be nasty when selling. From the way you worded it (letting to family and friends) I guess no income is being declared. The sooner it's got rid of the better.

In relation to yourself, it is very surprising that you have just purchased and are stretched financially already, to the point that an interest rate rise worries you. Did the bank not stress test you?

Also you need to protect yourself in relation to this new house. If he contributes to the mortgage then he is de facto gaining ownership. Have you thought all this thru?