# Mortgage arrears- I need help!



## saoirse091 (23 Nov 2012)

I bought my first and only property in 2008 on my own.
A two bedroom apartment in Galway for 220k, now worth roughly 100k.

I got a 95% mortgage for 40 years (I was 22 when I bought it)
I'm on a 5 year fixed rate over 5% (this ends Nov 2013).

I was in full time employment when I got the mortgage but I am now self employed with an income on average of only 15k per annum. This income includes me renting out my spare room.

Three months ago I agreed with Ulster Bank to have my repayments reduced by almost 40% for a period of one year.

I'm very worried about what I am going to do after that year as unless something drastically changes I will not be able to afford repayments.

I need some options on what to do


Would I be a candidate for a negative equity mortgage so I could trade down?
Is it true that the banks sometime write off a portion of your mortgage?
If I were to hand back the keys and walk away would I ever be able to get a mortgage or any loan again?
Any advice would be greatly appreciated.


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## oldnick (24 Nov 2012)

The bank lent ca. 200k  to a 22 year old ?  An amount based on nearly the full estimated value at a time when the market was starting to crash? In fact it was already going down from 2007.

Unbelievable. Why pay them a penny? Do you want to stay there that much? The bank can't do anything to you. Nasty letters. Threats of court action. Nothing else.  You earn 15k p.a. and are expected to pay those idiots 200k ?

Normally I'd lay much of the blame on the purchaser. And I get annoyed at mature people moaning about paying off a large mortgage. But in your case at 22 years with the bank throwing money at you I think the blame is 90% with the bank. There'd be nothing wrong in you throwing the keys back and walking away.

Yes, you may have trouble getting a loan in the future,but the penalty of paying such a large amount on your tiny income is too much  to make staying credit-worthy worthwhile.

 Now, if you really want to stay in the property then just pay interest only for a few years. Not a penny more. The bank will either accept or kick you out.I'm guessing they'd rather have you pay interest than take back your apartment.
They'll huff and they'll puff but  based similar incidents in the last few years I believe they'll accept the interest only.


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## peteb (24 Nov 2012)

Come on Nick.  Just because someone was 22 it doesnt put the responsibility at the foot of the back.  Old enough to vote, old enough to sign a contract, old enough to take responsibility for your own decisions.


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## wbbs (24 Nov 2012)

Oldnick, I had many interviews with young mortgage applicants, young enough to be my sons and daughters, I told most of them they were mad but they wouldn't listen!   You can't actively discriminate on age grounds if they meet the criteria however you might want to.

They sat there and told me property only goes up in price!  Often parents were with them egging them on, rent is dead money etc

You could nearly see them thinking this auld wan doesn't know what she's on about and I am sure a lot of them went elsewhere.   I even rang one young girl later after her and her mother had left to ask her if she wanted   me to tell the mother the mortgage was turned down, I felt the mother was pressuring the daughter to buy when the daughter was considering going travelling.   But she went ahead regardless.   

As to OP's problem, yes they can give back the keys or more correctly do a voluntary surrender of the property but the debt will still be there.   Hard to know what the new bill will do for clients like that if the banks veto the agreements.   An extended trip abroad might be the solution!


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## oldnick (24 Nov 2012)

I don't want to rehash the debt-forgiveness/who-is-to-blame debate which has been done to death on this and other forums.
Certainly we can't afford ,financially and morally, large scale debt forgiveness and I repeat what i said about laying much of the blame on the purchaser. 

But there are some cases where debt-forgiveness must apply especially where the bank has been overwhelmingly irresponsible.

I don't know the details of this case so I am surmising. I'd love OP to tell us  the income, how long it had been at this level and the date of purchase.

If OP was earning ,say, under €40.000 p.a.  and, more important,  did not have a track record of such earnings  (at  22!) then the bank made a stupid mistake. This was compounded by the fact that , since August 2007  property prices were consistently declining and the occassional whispering warnings of a property crash had turned into loud chorus.

( Prices reached their peak mid2007 and by early 2008 were down 3-4%. By mid 2008 down 10%. Daft price index).

So, it's not the age per se but the normal lending criteria that make me wonder whether the bank was absolutely bonkers - or if there are details in OP's post I've missed.

OP:  even interest-only will cost over 10k p.a.  CaN you afford this? Do you have a lodger to help?


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## Time (24 Nov 2012)

This is a perfect case to burn the banks for.


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## Importer (24 Nov 2012)

I think there is a few questions that you need to ask yourself

1) Is my income going to increase in the next few years ?
If yes it might be worth trying to continue the current arrangement with the bank. 

2) If you believe that your income is unlikely to increase, then it might be worth looking for a solution under the Personal Insolvency Bill which is going through the Seanad at the moment. The bill is due to be passed into law in the  next three or four months. Under the personal insolvency bill there may be a chance to have some of the debt written off and / or the interest rate reduced

Don't panic yet, There are lots of people in the same position as yourself.


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## Time (24 Nov 2012)

The personal insolvency bill won't help anyone. It is simply the banks having their cake and eating it too.

The only way out is bankruptcy in the UK. Then the bank can eat nothing that way.


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## oldnick (24 Nov 2012)

What ,really, does any poster think that Ulster Bank will do if the OP truthfully tells them that on 15k p.a. there is no way he can pay anything  and ,very sorry, but here are the keys  ?
OR
If the OP does see a possibility of earning more money -whether with a lodger and/or extra income - then does any poster believe that Ulster Bank will refuse an interest-only from OP for a few years ?

UB made a stupid wrong decision in providing the loan. They should be  happy to take the property which they ,with their knowledge and experience ,believed to be worth that loan.


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## Importer (24 Nov 2012)

Given his age, Bankruptcy would be far from ideal for the OP. To advise  him to do so is completely reckless. A stamp on his forehead for the rest of his days......

If the 200K mortgage is the OPs only debt, then the situation may not be as bad as it seems.

If the OP was able to land a new job paying say 25K, its quite conceivable
that, with the help of his lodger, he'll be able to pay a mortgage of 14K per year, based on 40 years payback.

Of course, Its not nice for him that he has substantial NE, but I'm afraid that's life (for now)

Not the worst case out there by any means.


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## Time (24 Nov 2012)

> Given his age, Bankruptcy would be far from ideal for the OP. To advise him to do so is completely reckless. A stamp on his forehead for the rest of his days......Given his age, Bankruptcy would be far from ideal for the OP. To advise him to do so is completely reckless. A stamp on his forehead for the rest of his days......


It is only for 1 year in the UK.


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## Importer (24 Nov 2012)

Yes,1 year before being discharged however the discharged bankrupt will face an uphill battle accessing credit for the rest of his life.

I dont think he wants that at 26 / 27 years of age.


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## Time (24 Nov 2012)

Got a source for this? Or is this some moral judgement?


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## SarahMc (24 Nov 2012)

Importer said:


> Yes,1 year before being discharged however the discharged bankrupt will face an uphill battle accessing credit for the rest of his life.
> 
> I dont think he wants that at 26 / 27 years of age.


 
Especially as a young entrepeuneur which is what OP is, access to credit is vital.

And less of the condescending attitude to people in their early 20s, far from a child legally and in reality. I bought my first house at 22, and it was a well thought out and well researched purchase.


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## Importer (24 Nov 2012)

I'm afraid this is absolute fact.

Once bankrupt your name appears on the bankruptcy register.
The register is maintained by the Insolvency Service of the UK which is required to do so by law. The register is easily accessed by anyone, including anyone who might be interested in doing business with you OR anyone who might be interested in extending you credit. It is checked as a matter of course. There is no hiding once you have declared yourself bankrupt. It is with you for ever, even after you have been discharged

What worries me is that there appears to be a growing wave of opinion in this country that bankruptcy is an easy solution for wiping the slate clean.

Bankruptcy is and always has been a vehicle of last resort for those who are so overwhelmed by debt that they are no longer able to continue.

Bankruptcy is not something that should be entered lightly. It has long term implications and is wont to haunt you for the rest of your days

No professional advisor will encourage a client to enter bankruptcy lightly
The debts would really need to be out of control and unmanageable.


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## WizardDr (26 Nov 2012)

First question:

Did you get a tracker mortgage at the start or did you go straight onto a five year fixed?
If you did what did the Letter of Offer show on the first page?

(And still no reply from original poster - why do we bovver?)


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## Kev (27 Nov 2012)

Some details regarding bankruptcy in UK.  His flat will be taken away and go towards his creditors ie the bank, therefore they will not lose out much. 

https://www.gov.uk/bankruptcy/overview


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## saoirse091 (6 Dec 2012)

Sorry for the delay in getting back to everyone, I do appreciate the comments.
I'll answer the questions now...

- I was on 25k per annum and had a very good track record of saving for the previous 2years before I got my mortgage.

- My mortgage was originally with First Active but got transferred to Ulster Bank when they closed.

-I got approval in Sept 2008 for 3 months to choose a property and towards the last month the banks did try to convince me not to buy afterall but I was blind like a lot of people who just wanted to get on the property ladder.

-I am not trying to use my age as a 'get out of jail free card', simply seeking some advice..

-I am paying a huge amount of interest now so I don't think going 'interest only' will solve my problems (but thanks for the suggestion).

-Also I had no choice in becoming self employed, i was the manager of 5 retail units that were closing down less than a year after i got my mortgage so i decided to take one over to try provide myself with an income.

-I am hoping to sell my business soon and just take up full time employment instead as i should have a slightly higher income with a lot less hassle.

- I already have a lodger (included in 15k income)

-I need to look into the personal insolvency bill, i don't know much about it (thanks for the suggestion).

- The mortgage is my only debt

-I absolutely hate the thought of declaring myself bankrupt, it just seems like something that stays with you for the rest of your life and in a few years time i would like to open a new enterprise but i believe this may hinder me doing so...

-I went straight on to a 5yr fixed rate, it was a condition for me being approved a mortgage

- I don't know much about a letter of offer, is probably stuck in a pile of papers somewhere, is it important?


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## wbbs (6 Dec 2012)

The relevance of the letter of offer is to see what rate will you revert to when your fixed term is up, it should say it somewhere on loan offer if you have your copy, if you're lucky you might revert to tracker.  Have a search to see if you have it!


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