# Advice needed re negative equity mortgage with arrears



## stayorgo (14 Sep 2016)

Hi All,

Would really love some advice as we really seem to be up the creek without a paddle. I know very little about these matters and my husband is as bad. I will give all the details as I don't want to leave anything out that may be needed.

Bought house in 2006 when we were 24 and I was a college student and my husband was a plasterer. We all know how the building trade went so once I was finished college I began earning and took up the re-payments and have roughly managed €700- €800 per month (give or take) since then so arrears have built up. We have had more interest only periods than I can count. My husband is now back in full time work and the bank are not happy with our earnings now and say that the mortgage is unsustainable so our options are voluntary sale, voluntary surrender or trade down mortgage. We have been working with step change debt charity. My brother has offered to help us with our mortgage for a period and I have advised the bank of this. My contact in the arrears support unit has said she will take 6 months of full mortgage repayments (€1322 per month) and after 6 months she will consider capitalizing the arrears which would give us a new repayment figure of €1460. She has said that this is a verbal agreement and there will be nothing in writing until they have 6 months of repayments to look at. She also advised that we would still be getting letters in the interim as there is nothing in writing. Just today I have received a solicitors letter. These solicitors have issued us a letter that we have 7 days to vacate property and they are repossessing. I have spoken to step change and they say it is strange. I have left messages for my BOI contact to phone me. We have some options which I will outline:

Option 1 : continue living in the house and taking money from my brother monthly to top up the mortgage - even I know this would be thick!
Option 2: we could move in with my dad (I will inherit his house in the future and the house is big enough for all of us), rent out our property and top up the mortgage every month to pay the full re-payment. We would not have to pay my dad rent we would just pay all the household bills and run the house ect.
Option 3: Sell the house and cut our losses - try to make a deal on the debt left over.

Lender - Bank Of Ireland
Property bought in 2006 for €265,000
Now worth €210,00 (if very lucky)
Arrears €25000
Mortgage balance including arrears €266,000 (we have basically rented for 10 years! with nothing to show for it)

I know there are some people on here who are so much worse off so I'm not pleading the poor mouth, we have options which lots of people don't have. We made a very bad decision buying the house in 2006 and we have been a bit paralyzed, afraid to make any decision in case we mess up again. If you have any advice I would be so grateful as we really don't have a clue and my husband is too proud to seek advice from anyone.


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## PGF2016 (14 Sep 2016)

Sounds like you can't afford the house so option 1 should definitely be off the table. I don't see any good coming from your brother topping up your mortgage.


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## cremeegg (14 Sep 2016)

Never, ever tell the bank that a family member will help with a mortgage. The bank are owed money, if they can get part of that from your brother, they will take it and you get no benefit in return. If your brother is generous enough to help you, that is between you and your brother, do not tell the bank. If you already have mentioned this to the bank, say that it didn't work out or something to that effect.

If your mortgage really is unsustainable, then this,

"My contact in the arrears support unit has said she will take 6 months of full mortgage repayments (€1322 per month) and after 6 months she will consider capitalizing the arrears which would give us a new repayment figure of €1460. She has said that this is a verbal agreement and there will be nothing in writing until they have 6 months of repayments to look at."

makes no sense for you, it makes lots of sense for the bank.

You need to decide if you think the mortgage is sustainable, can you afford €1,460 a month into the future.

Let us know if this is possible, maybe you will get further suggestions then either way.


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## stayorgo (14 Sep 2016)

Hi all many thanks for the replies. Staying in the house the mortgage is not sustainable. I feel our only options are to move in with my dad and rent out the house or else sell the house. I'm just wondering would it be better for us financially to sell the house now and deal with the leftover debt or should we rent it out for a few years in the hope we might at some stage end up breaking even. As I said we are just terrified of messing up yet again and making a silly decision.


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## todo (15 Sep 2016)

stayorgo said:


> Hi all many thanks for the replies. Staying in the house the mortgage is not sustainable. I feel our only options are to move in with my dad and rent out the house or else sell the house. I'm just wondering would it be better for us financially to sell the house now and deal with the leftover debt or should we rent it out for a few years in the hope we might at some stage end up breaking even. As I said we are just terrified of messing up yet again and making a silly decision.



What interest rate do they have you on?
Did you ever have a tracker mortgage with boi?
How much rent can you earn from the property?

If the rent does not come close to the monthly cost of the mortgage, then I think you'd be better off to sell, particularly if they have you on a high variable rate.


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## Brendan Burgess (15 Sep 2016)

Would you like to stay in the house? Would you prefer to live with your dad?   That is the first question for you to ask yourselves. 

*Option 1 -  stay in the house. *

If you left the house, how much would it cost to rent an alternative house?  I am guessing around €1,300.

This is quite a common scenario. Your mortgage might be unsustainable, but the alternative is even more unsustainable. 

You have a mortgage of €266k.  I assume you are not on a cheap tracker, so you are currently paying 4.5% SVR. You can fix for one year at 3.55% and you should do so.  That means that the interest you will be charged will be €9,500 a year or €800 a month. 

So, while you are paying €800 per month, you are staying on top of things. Your loan balance is not increasing and the bank's risk is not increasing.  (Your arrears will be increasing, but this is actually not terribly important.) 

If you pay more, you are reducing the balance you owe the bank. Eventually, you would end up in positive equity. 

Don't take money from your brother for the moment.

The Bank will continue to hassle  you.  But be firm with them. Tell them you are doing the best you can and you will not agree to a voluntary surrender.   Let them take legal action.  If you pay at least the interest, then it's very unlikely that the court will give them an order for possession.  

It will take a few years to get to that situation, if it ever does, and the house price might go up in the meantime.  Of course, it could go down, but there isn't much that BoI could do about an unsecured debt. 

*Option 2  - offer a voluntary sale in exchange for a debt write off. 
*
I am just putting this in for completeness. BoI don't do debt write downs.  But you should offer it anyway. 

Put it in writing. Dear Bank. I will agree to a voluntary sale if you write off the shortfall.  Otherwise, we will not be able to rent a house and pay off the shortfall, so we are better off staying in the house. We will continue to pay you the interest in full so the balance of the mortgage won't rise. 

*Option 3 - Move in with your father and let out the house 
*
This would be financially the best solution. 
 As long as you get €800 rent, that will pay the interest in full. 
If you top it up yourselves, then you will be paying down capital. 
At some stage, you will have paid off the negative equity and can sell it or keep it at that stage.


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## Jim Stafford (15 Sep 2016)

I note that you have been working with the Step Change charity (which is actually funded directly by the banks.)

I am very surprised that Step Change have not advised you to go and see a PIP at this critical stage.  The reality is that a PIA could make the house mortgage affordable by one of the following (or a combination of all three)

a) reducing the mortgage to the market value of the house,
b) reducing the interest rate and/or
c) by extending the term.

Call Step Change and ask them about seeing a PIP. It should have been their first recommendation to you!


Jim Stafford


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## Brendan Burgess (15 Sep 2016)

stayorgo said:


> Property bought in 2006 for €265,000
> Now worth €210,00 (if very lucky)
> Arrears €25000
> Mortgage balance including arrears €266,000 (



Hi Jim

Is it worth the hassle of a PIA for a shortfall of €50k? 

I wouldn't have thought so. 

Brendan


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## Jim Stafford (16 Sep 2016)

Brendan Burgess said:


> Is it worth the hassle of a PIA for a shortfall of €50k?



Brendan, I assume you are being tongue in cheek! The real purpose of a PIA is to help people keep their family home, and restore them to solvency in 70 days.

If the bank re-possess the couple's home, they are unlikely to be able to buy another home for a long time.  Granted, in this case, they will not be homeless, as they will be able to move into her Dad's house.

What is more hassle:

Going through a PIA
Being personally served on your door step in front of your neighbours by a summons server. Being evicted from your home. The  bank obtaining judgment against you. Your credit record being blackened.The bank enforcing its judgment by sending the sheriff around to seize your cars.  Watching your cars being hitched up onto a recovery truck in front of your neighbours. The bank taking you to the district court and attaching your income for the next 10 years.  The bank forcing you to sell your Dad's house when you do finally inherit it, as you now have to pay off a judgment that has accumulated at 8% per annum with legal costs.

Jim Stafford


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## Brendan Burgess (16 Sep 2016)

Hi Jim

I wasn't being remotely tongue in cheek.  I thought of bankruptcy and a PIA but did not consider either viable or better than the alternatives.  I don't consider the posters to be insolvent as they can pay the interest in full on their mortgage while continuing to live there. They can pay the mortgage in full including capital, if they move in with her dad. 

I have been down in the Circuit Courts watching the repossession proceedings. The chances that someone paying the interest in full would be repossessed within two years are remote.  

You make a good point about other debts, which is why I usually don't answer these questions without the full details being given. 

Would BoI not veto this PIA?  OK, they could appeal it, but would they succeed? 

Brendan


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## Jim Stafford (16 Sep 2016)

Brendan

Thanks for your comments.

The couple are insolvent, as defined by the Personal Insolvency Act 2012, in that they are unable to pay their debts as they fall due.

Based on their level of mortgage arrears, it is clear that their mortgage was in arrears as at 1 January 2015.  Accordingly, they qualify for a "no veto PIA" i.e. if a bank voted no, it is likely that the court would over rule the bank.

Do the couple really want to fight the bank in the repossession courts, with legal costs ramping up on both sides?

What is odd is that the "independent" charity Step Change did not advise the couple to see a PIP straight away.


Jim Stafford


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## dereko1969 (16 Sep 2016)

Do you want to live in this house long-term?
What is your income? Difficult to advise on general affordability and options without those figures.
Is the solicitors letter threatening repossession within 7 days credible? Surely they would have had to get a court order to do this? Are you in MARP - is this not a breach of that? Have Step Changes advised how to treat the solicitors letter?


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## TLO (17 Sep 2016)

Stayorgo, a solicitors letter saying "vacate within 7 days" is bullying, and has no credibility.  Disgraceful behaviour, possibly warranting a complaint to the Law Society.  If a tenant was given 7 days to vacate a rental property all hell would break loose.  And this is a family owned home on which a payment has been made every month?  

As other dereko1969, Brendan Burgess, etc have asked, would you like to continue living in the home?  If you wish to stay, then you will stay.  Also, if you wish to continue living in your home then follow Jim Stafford's advice and get straight into a PIP.  Your PIP can put manners on BOI by serving them with a Protective Certificate and following up with with a "no veto PIA".  "Vacate within 7 days", unbelievable.  

You've done the right thing by asking for help both on this forum and with StepChange.  Now it's time to take it to the next level by engaging professionals who are skilled at organising permanent solutions for their clients.  Remember, government policy, backed by changes in the law, is to keep people in their homes.  You are doing nothing wrong by asking professionals to use the insolvency laws to keep you in your home, and return you and your husband to a solvent position.

Also, if you need a PIP recommendation, come back on here, I'm sure you will get good tips on who to talk to.


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## Brendan Burgess (18 Sep 2016)

I suspect the 7 day notice is a formal and required step in the legal process.  It's not bullying at all.


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## TLO (19 Sep 2016)

Depends on the wording of the solicitors letter received by Stayorgo.  "legal proceedings starting in 7 days" would be okay.  "7 days to vacate property" is unacceptable, completely unacceptable.  

Either way, Stayorgo and her husband should engage a PIP.  There are solutions other than those recited by BOI.


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## Gerry Canning (19 Sep 2016)

stayorgo,

From my reading you have got great advice from this post , so please act on it.

One other small suggestion.

Stop phoning or being phoned by your (contact) in BOI.Phone calls are recorded and can easily be taken out of context.
Keep everything in writing ,and should you be phoned , do not give your Date of Birth and firmly request any query in writing.
Take note of date/time/person etc.
I don,t wish to sound (hard) on BOI (contact) but please remember , its BOI (contacts) employer  who wish to throw your family out. 

(from the info you gave and the posters response I think you will be ok )

Good luck .


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