# Tipping point with second house - advice needed



## Mortimer (4 Aug 2013)

Hi,

We were lumbered with a second house when we moved in 08 and sale on our house fell through. Mortgage with KBC, they have repeatedly refused to countenenance us selling it and coming to some agreement over balance. Mortgage owed - 250k approx, current value of house - 115k approx.

We've been paying interest only for the past few years, which is about 215 euro pm above the rental income. However, due to my job loss and extra taxes/cost of living it is getting harder and harder to pay this extra figure every month. We cannot afford the second home tax and new property tax - we cleaned out our 4 year old's piggy bank to get milk last week. 

We have never missed a payment on our home residence's mortgage since we moved in 2008. We'd love to stay here but get rid of albatross that is our second property.

Does the Personal Insolvency Bill contain anything that could help us? Can you try and get rid of debt on second property without it affecting our home? Furthermore, my wife has an option of moving to UK with her employer for a year or two. Is this a card up our sleeve we can use with our lender, KBC, i.e. threaten the UK bankruptcy card if they do not strike a deal?

Any feedback would be gladly accepted. KBC recently offered to extend interest only for another 36 months, which is really no use when we can't afford to top up rentail income every month and my social welfare will be drastically reduced from December.


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## Brendan Burgess (4 Aug 2013)

Hi Mort

Please complete the following information to get a proper answer.

Standard Format for unsustainable mortgage Case Studies


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## Mortimer (4 Aug 2013)

*Personal and income details
Net *(i.e. after tax) Income self:                  €814 pm (€188 pw dole). Due to be drastically reduced in December. 
Income history: One-year contract complete in February 2013. Previously made redundant in August 2008 and October 2011. 
*Net *income partner/spouse:                   2540 euro after tax
Income history: 
number of children: 3
Amount of child benefit received : 390 euro pm
Amount of Mortgage Interest Supplement received
*Home loan
*Lender: BOSI
Amount outstanding: 288K APPROX.
Value of home: No idea. We really don't care. Would gladly stay here forever.
Interest rate:      specify whether tracker or SVR or fixed rate. Not sure of rate but it's much lower than Investment property rate. SVR.
Monthly repayment : 1015 euro (interest and capital. Never missed a payment since we moved in April 2008).
Amount in arrears : None

Summary of discussions and agreements with the bank: N/A

*Investment property -*
Lender:  KBC
Amount outstanding: 248 k approx
Value of home: 115k approx
Interest rate: Various rates on sections of loan.
Monthly repayment : 914 euro interest only
Amount in arrears : 9k approx
Monthly rent received : 700 euro pm 

*Other loans and creditors *
Overdraft - 40 euro pm to clear AIB overdraft and close account
Credit Card - recently paid off in full an AIB card loan.
Credit Union - None
Car loan  - None
Family - None

*Other savings and investments : None


How important is retaining the family home to you? 
*Which of the following best describes your situation?


I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


*Any other relevant information

What is your preferred realistic outcome? 
*I wish to get rid of second "home" without being lumbered with debt for the remainder of our lives. Wife has option to move us to UK in the short-term with work, but realistically we don't want to have to move.


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## TommyB (4 Aug 2013)

Why did you not sell the house in 2008?


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## Mortimer (4 Aug 2013)

Hi TommyB.

It was a case of the most abysmal timing possible. The sale fell through on the day we were to complete the purchase of our new house. I had to move for my career so we went ahead, with a view to selling our first house in proceeding months. Almost immediately the crash happened and value of first house plunged. KBC would not countenance  us selling it and paying them the difference in the medium term, despite my pleas that it was likely to devalue further. To compound matters I lost my job 4 months later anyway and was stuck in new house and new location. We've since settled here anyway. Basically, we were naive and became accidental landlords .


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## TommyB (4 Aug 2013)

> KBC would not countenance us selling it and paying them the difference in the medium term, despite my pleas that it was likely to devalue further



This might save you as that could be used as grounds to remove yourself from any remaining debt in the event of a sale.


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## Brendan Burgess (4 Aug 2013)

I presume that the investment property is in your joint names? If not, one of you could go for a PIA or  bankruptcy. 



 Net income |€3,350 
Minimum Reasonable Living Expenses| €2,268
Home loan repayments|€1,015 
Available for creditors|€67
You need to do this calculation formally and show the results to KBC. 

You are effectively insolvent, so you have a few options 

1) Ask BoS to put you on interest only and use the €400 extra per month to make up the shortfall with KBC - I expect BoS would refuse this. 
2) Pay just the net rent on the investment property - For the moment, this is the only option you have. Write to KBC telling them that your paying only the net rent until further notice.  Alternatively you will agree to a voluntary sale. If you are paying the full interest only, they have no incentive to address the problem. 
3) Go for a Personal Insolvency Arrangement 
4) Sell the investment and go for a Debt Settlement Arrangement 
5) Sell both properties and go to the UK and both of you go bankrupt. 
6) Try to do a voluntary deal with KBC 

If and when you get a job again, you will be able to meet the full interest on your investment property while maintaining the full repayments on your home.  This argues for a Personal Insolvency Arrangment or bankruptcy now. 

If you can get a fresh start without any debt (but also without home ownership), when you are both earning, you will be able to build up savings again. 

You don't tell us the value of your home or the interest rate , which are critical. If it's not in huge negative equity and you have a cheap tracker, then you should try to retain it. If it's in huge negative equity and it's a SVR loan, you should be happy to get rid of it.


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## Mortimer (4 Aug 2013)

Thanks for your reply, Brendan.

Yes, both properties are in joint names.

Out of interest, how did you arrive at this figure:
Minimum Reasonable Living Expenses €2,268

1) Ask BoS to put you on interest only and use the €400 extra per month  to make up the shortfall with KBC - I expect BoS would refuse this.  - Not an option, we'd like to do as our Home repayments have come first before anything. 
2) Pay just the net rent on the investment property - For the moment,  this is the only option you have. Write to KBC telling them that your  paying only the net rent until further notice.  Alternatively you will  agree to a voluntary sale. If you are paying the full interest only,  they have no incentive to address the problem.  - An option I've been considering.
3) Go for a Personal Insolvency Arrangement - what does this entail and can it effect our home?
4) Sell the investment and go for a Debt Settlement Arrangement - what is a Debt Settlement Agreement?
5) Sell both properties and go to the UK and both of you go bankrupt. - Not an option we'd like to take but it's one we have open to us. 
6) Try to do a voluntary deal with KBC - we've tried. They'll only listen if we have a firm offer on house but we're loathe to put it on market and lose tenants on the off-chance we get an offer within a short time scale.

I've honestly no idea how much home is worth as none similar have sold since we bought ours. The interest rate is pretty low with BOSI. We do not want to leave it as we love our home and area.


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## Brendan Burgess (4 Aug 2013)

Summary table of Reasonable Living Expense from the Insolvency Service

Check out the various guides to Personal Insolvency Arrangements on askaboutmoney and elsewhere. 

[broken link removed]


   [broken link removed]


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## Mortimer (4 Aug 2013)

Oh, and where did you get net income figure?

My figures are:
        My Dole   814.66       Wife's Wages   2540       Children's Allowance   290       Rental income
  700   TOTAL                          4344

However, I've been told to expect little or no jobseeker's from December on.


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## Mortimer (4 Aug 2013)

Thanks again, Brendan.

What option would you go for if you were in our position?


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