Hi All,
Hoping for some advice.
I bought a house in 2008 with a friend, and for obvious reasons (negative equity!) it's turning into a bit of a mess. Some background info;
Value of property - 120k
Mortgage - 240k over 35 years, variable rate with KBC, repayments 1250 per month approx
We lived in the house until about 6 months ago, we always envisaged we would live there for 4-5 years then either rent it out or sell up. We are both now renting separately with our respective girlfriends. The property is rented out at €850 per month (shortfall of €400). At the time of buying we earned similar salaries with similar prospects, and neither of us could afford a mortgage individually.
I now earn 50k PA + an 8k car allowance, I owe approx 30k on a personal loan & credit card, have 4k savings. I'm with my employer 9 yrs & prospects are good, my salary is likely to go up over the coming years, i intend to clear my debts over the next 3 yrs or so and build up some savings. I'm 33.
My friend earns 24k and is in temporary employment. Owes about 10k to the credit union and no savings. He's 34.
To cut a long story short - my friend is now refusing to contribute to the mortgage, saying he just can't afford it. We are now only paying the rental income off the mortgage, and it is in arrears. The bank have been reasonably understanding and we have been communicating with them, but the situation is obviously not sustainable. I don't want to contribute now to the mortgage, as half of anything I would pay would be reducing his negative equity also.
Any options I can come up with aren't attractive;
1) The bank agree to take his name off the mortgage and he signs the house over to me - I would be taking on his negative equity.
2) We agree with the bank to sell - we are jointly liable for the negative equity which he likely can't afford to pay, therefore I would end up paying more.
3) I pay an additional €400 per month to meet the repayments - he reaps half of the benefit.
4) We both continue to refuse to pay anything past the rental income - potentially end in repossession, and we will owe more than in option 2, due to legal costs & arrears etc.
Are there any options here I'm missing? Would the bank consider unusual solutions in these circumstances, such as parking his half of the mortgage?
Allowing us to sell up and split the negative equity 50:50? I doubt it, as likely I'm a safer bet to pursue for the joint negative equity.
I feel a bit like the harder I work to increase my income - it just exposes me more to the negative equity now tied up in the property. Obviously my gf and I are thinking of the future - eventually buying a family home etc., but I can't see an easy solution to this one. Just to note she would have no desire to buy into his negative portion of the property, understandably. I have been considering going with option 4, and rather than paying the bank, paying my contribution into a savings account which I could use if it got to that stage. I guess there are many pitfalls to this.
I should also mention that the property is in a Dublin commuter town, and I have no desire to move back into it. It was in a new development which didn't
turn out as idyllic as was promised, my gf hates the area, and we would be increasing our fuel costs drastically by moving back.
Any input much appreciated.
Hoping for some advice.
I bought a house in 2008 with a friend, and for obvious reasons (negative equity!) it's turning into a bit of a mess. Some background info;
Value of property - 120k
Mortgage - 240k over 35 years, variable rate with KBC, repayments 1250 per month approx
We lived in the house until about 6 months ago, we always envisaged we would live there for 4-5 years then either rent it out or sell up. We are both now renting separately with our respective girlfriends. The property is rented out at €850 per month (shortfall of €400). At the time of buying we earned similar salaries with similar prospects, and neither of us could afford a mortgage individually.
I now earn 50k PA + an 8k car allowance, I owe approx 30k on a personal loan & credit card, have 4k savings. I'm with my employer 9 yrs & prospects are good, my salary is likely to go up over the coming years, i intend to clear my debts over the next 3 yrs or so and build up some savings. I'm 33.
My friend earns 24k and is in temporary employment. Owes about 10k to the credit union and no savings. He's 34.
To cut a long story short - my friend is now refusing to contribute to the mortgage, saying he just can't afford it. We are now only paying the rental income off the mortgage, and it is in arrears. The bank have been reasonably understanding and we have been communicating with them, but the situation is obviously not sustainable. I don't want to contribute now to the mortgage, as half of anything I would pay would be reducing his negative equity also.
Any options I can come up with aren't attractive;
1) The bank agree to take his name off the mortgage and he signs the house over to me - I would be taking on his negative equity.
2) We agree with the bank to sell - we are jointly liable for the negative equity which he likely can't afford to pay, therefore I would end up paying more.
3) I pay an additional €400 per month to meet the repayments - he reaps half of the benefit.
4) We both continue to refuse to pay anything past the rental income - potentially end in repossession, and we will owe more than in option 2, due to legal costs & arrears etc.
Are there any options here I'm missing? Would the bank consider unusual solutions in these circumstances, such as parking his half of the mortgage?
Allowing us to sell up and split the negative equity 50:50? I doubt it, as likely I'm a safer bet to pursue for the joint negative equity.
I feel a bit like the harder I work to increase my income - it just exposes me more to the negative equity now tied up in the property. Obviously my gf and I are thinking of the future - eventually buying a family home etc., but I can't see an easy solution to this one. Just to note she would have no desire to buy into his negative portion of the property, understandably. I have been considering going with option 4, and rather than paying the bank, paying my contribution into a savings account which I could use if it got to that stage. I guess there are many pitfalls to this.
I should also mention that the property is in a Dublin commuter town, and I have no desire to move back into it. It was in a new development which didn't
turn out as idyllic as was promised, my gf hates the area, and we would be increasing our fuel costs drastically by moving back.
Any input much appreciated.