Case study Temporary default in order to purchase another property

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mark12

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Quote:
Originally Posted by Brendan Burgess
I suggest you start a new Case Study thread on your family member's situation, as I don't understand how he can buy another house if he can't afford his mortgage. But let's not take this Key Post off topic discussing it.

I didnt know this but what my cousin is doing is interesting, he is 12 months in arrears on his 250k mortgage only because he has an eye on a 40K 3bed property in Laois.
He is an honest hard working guy, he doesn't want to pull the plug on his old mortgage, he just wants to save enough cash to buy that 40K property first and then get back on track with the old mortgage, could this be worth it?
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Whatever about the moral wrongs of such a strategy, I find this to be an extraordinary metod of buying a property. He will be either pursued for the arrears and/or entered into the MARP process where he will need to falsify the documentation in order to stop the Bank proceeding against him.
I can't see this as being appropriate behaviour for the normal "honest hard-working guy".
 
I don't understand what he's trying to achieve here. He will lose everything in the end. If he has a property he bought for 40k and then owes arrears of say 300k on his current property, then the bank will just sell the first one and get a charge on the second property for the remainder outstanding. They may even try and force him to sell the second property as soon as it's enough to pay off the debt. The longer that takes the more interest he pays on arrears.
 
Obviously he will not put the second home in his name, but given that he is willing to pay the price in terms of arrears and a bad credit rating, i can't see why not, at the end of the day the taxpayer will not have to pay an extra cent in this case, he would not get a loan of 40K anywhere else would he?
 
elcato said:
I don't understand what he's trying to achieve here. He will lose everything in the end. If he has a property he bought for 40k and then owes arrears of say 300k on his current property, then the bank will just sell the first one and get a charge on the second property for the remainder outstanding. They may even try and force him to sell the second property as soon as it's enough to pay off the debt. The longer that takes the more interest he pays on arrears.
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Not if its in someones elses name..

i do not agree with what this "honest" man is doing.. I have a house i do not live in with my ex and am still paying for it(my half) and can not get another mortgage becasue of this.

question - if i did (magically) buy another house and stopped paying on orginal mortgage ( or pay what i could offer), would bansk come after me and new house??, I thought everyone is protected in there family home??
 
Banks come in for a lot of stick in terms of demands for financial statements etc, in coming to agreements re mortgage arrears. While thankfully the majority of people are honest and open in advising their financial circumstances, situations like the one identified above result in more stringent controls being input and resultant problems for those in genuine difficulties.
 
I like the idea, some calc's would be needed.
12 months into arrears isn't a rise from EUR250k to EUR300k as prev poster suggested. It may be from EUR5k - EUR25k but no where near the 50K increase in debt.

The strategy is sound to me and I would have had such high level of income I would hold the belt on current property in order to gain another property (even if not in my own name).

The idea to return to normal repayments (after 1yr - or so) is normal, perhaps bank would offer some sort of w/off on the accumulated interest (just suggestion).

Hope many many more ppl would do this...
 
Remember they put us in this scenario, don't be affraid to use your powers to make the step up.

''All loans all mortgages are just NUMBERS on the computers databases...'' Economy is human's creation and using imagination to navigate within it isn't anything immoral
 
How is it a good strategy? Is he defaulting on his first mortgage in order to save the money for a deposit, or the full house price? Who's name would the 40k house be put in? Would there be a mortgage on this house? At 40k, is the house habitable?
 
here are many examples of people being under the heavy stone of this economy... only few have the strenght to make their shoulders straight and keep their eyes open.
 
Has he paid nothing at all on his mortgage in 12 months?

Where is he putting the mortgage payments?

Is he proposing to abandon his current home and mortgage?

It sounds really foolish. The MARP helps people stay in their home. But it assumes that the borrower acts in good faith. If there is anything in the Personal Insolvency Bill for him, he won't be able to avail of that either.

And I echo the point made by 44 Brendan. There are honest people in genuine difficulties whom the lenders don't trust because the lenders know that there are fraudsters like your relative hiding income and choosing not to pay.

Brendan
 
His current home is worth 100K, he actually still owes close to 300K so he is in negative equity of about 200K, no payments at all in the last 12months.
Guess the bank won't move on to repossess anytime soon given the huge level of negative equity, 40K is the asking price for the other house, it's in need of some renovations but habitable, i gave him my blessing as long as he keeps his promisse of getting back on track soon so that i don't have to pay for this as well.
 
So your name is going to be on the deeds to the house? Surely that will leave you with a CAT obligation? NPPR payment, household charge etc....

Run quickly and don't look back!
 
Brendan Burgess said:
Has he paid nothing at all on his mortgage in 12 months?

Where is he putting the mortgage payments?

Is he proposing to abandon his current home and mortgage?

It sounds really foolish. The MARP helps people stay in their home
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And so does negative equity !! Jonny and Mary stop paying their €1200 a month mortgage for eight months and spend the €9600 on a car - they are €120k in negative equity. After the eight months they start repaying their mortgage as normal. Will the bank be running to the high court to repossess the house, MARP or no MARP?
 
Brendan, my cousin is not a fraudster, he works hard and i trust his word, he will pay all the arrears, interest and capital on the mortgage, he just needs to save the 40K first.
 
demoivre said:
And so does negative equity !! Jonny and Mary stop paying their €1200 a month mortgage for eight months and spend the €9600 on a car - they are €120k in negative equity. After the eight months they start repaying their mortgage as normal. Will the bank be running to the high court to repossess the house, MARP or no MARP?
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good to see more ppl are waking up
 
Brendan, my cousin is not a fraudster, he works hard and i trust his word,
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Buying a house and putting it in someone else's name to deceive ? I'm not arguing any moral side here btw, I just think it's not a good idea and will end up costing your cousin a lot more in the long run (i.e. both houses)
 
Maybe I'm missing something here but from my reading of it the OP's cousin is temporarily defaulting on his mortgage in order to free up cash to buy the 2nd house also in their own name, before reverting to paying the first mortgage again.

Nothing I've seen the OP say suggests that the individual in question is planning to walk away from his negative equity property, nor that he plans to register the property in anyone else's name - seriously like, have I missed a deleted / edited post or something? - it appears to me that people are being very quick to jump the gun here and condemn the guy for something he's not doing.

I see no moral issue with him doing what (I think) he's doing; he's agreed to repay a loan to the bank, and he still intends to repay it. He's effectively gambling that the bank don't take decisive action against him in the interim, and that he'll be able to negotiate around the arrears that build up while he's diverting his cash elsewhere. It's a pretty safe bet they'd much rather he gets back to giving them money every month than they bankrupt him and end up with not one, but two properties, with a combined negative equity of a couple of hundred grand. It's a high risk strategy alright, but I don't see a "moral" problem with it, whatever "moral" is these days.
 
mark12 said:
Obviously he will not put the second home in his name, but given that he is willing to pay the price in terms of arrears and a bad credit rating, i can't see why not, at the end of the day the taxpayer will not have to pay an extra cent in this case, he would not get a loan of 40K anywhere else would he?
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There you go Mandelbrot
 
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