Case study Would like to move, options?

[meepman]

Personal and income details
Income self: 2900
Income history: work for private company,been 15% compulsory redundancies since 2009, job fairly safe but not guaranteed
Income partner/spouse: on jobseekers allowance
Income history: freelance, very little
number of children 2
Amount of Mortgage Interest Supplement received: none
Home loan 330
Lender: ptsb
Amount outstanding: 290
Value of home: 170k??
Interest rate: tracker +2.25%
Monthly repayment 1500
Amount in arrears :none

Summary of discussions and agreements with the bank:
Been on interest only for 12 months and will not extend this, bank wants to park some of it from july and pay an amount(not decided) on remainder. Bank will also let us sell and purchase another house upto a certain price (about 170K)will lose tracker though. Also they will allow us to sell and take unsecured loan on outstanding amount.

Other loans and creditors:
Overdraft: overdraft limit is 3800, spending more than earning, so about 200 euros charge a year
Credit Card: none
Credit Union:none
Car loan:none
Family

Other savings and investments
8k, emergency funds


How important is retaining the family home to you? the house we live in is not important, would like to own a house but in a different area.

Which of the following best describes your situation?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


Any other relevant information:
live quite a distance from work, so car/fuel bills/tolls excessive. Just fuel and tolls is approx 600/month.

What is your preferred realistic outcome?
To sell property, come to an agreement with bank on unsecured loan and purchase another property closer to work, schools and friends.

 

[Brendan Burgess]

Hi meepman

You have €120k of negative equity. You are not going to be able to pay this off. And house prices would have to increase by 70% for it to evaporate

An interest rate of 3% is low. 3% of €290k is €9,000 a year in interest.

If you were to rent out your home, what rent would you get for it?

If the rent paid the interest, you could just leave it there and wait for years for house prices to recover.

I think you should put the following proposal to ptsb, and see how they react.

1) I will put the house on the market and pay the proceeds in full to you.
2) In consideration of my cooperation, and in consideration of the loss of the tracker, i will expect you to write off the shortfall.

3) If you do not agree to this, I will apply for a Personal Insolvency Arrangement and seek to have the shortfall written off that way.

4) When they refuse, make a further offer

• I will sell the house
• I will pay off the proceeds
• I will be left with a shortfall of €120k
• I will do my best to pay off €12k of this as quickly as possible.
• You agree, that when I have paid €12k, you will write off the balance

5) If you veto the PIA, I will hand back the keys to you and opt for bankruptcy either here or in the UK.

 

[Brendan Burgess]

If you do not want to play hardball with them...

Bank will also let us sell and purchase another house upto a certain price (about 170K)will lose tracker though. Also they will allow us to sell and take unsecured loan on outstanding amount.

Sell the house.
Don't buy another one. Rent instead.

This gets you to where you want to live.

You will then have €120k of unsecured debt and can apply for a Debt Settlement Arrangement which they will probably agree to.

Brendan

 

[meepman]

Thanks Brendan, the monthly rent the property would make is approx E750 max. But I don't want to rent it longterm.
I would like to move and rent initially but also be in a position to purchase again, so the hard ball options seem to be the best.
Would it be possible to purchase again, if we went down the road of selling and coming to a debt write-off or the 12K pay off deal you have suggested? How would my credit rating be affected?
As the 12K figure is 10% of the total neg equity, is that a percentage the banks are recognising as reasonable?