# Divorced, House in Neg Equity in Cork, Currently let - she wants to sell



## Sylvester3 (6 Feb 2013)

Hi all,

My ex-wife and I own a house with a mortgage of 240,000 and a value of around 160,000 if we are lucky. 

I returned to the UK so we could get divorced more quickly and so we would both have a good shot at rebuilding our lives. I returned to Uni and she found a job. She returned a couple of years before me. I have always been the sole earner, and the only one who actually paid the bills as she was a student in Ireland.

I managed to let out the house before I left, and kept the tracker, the bank not seeming to make an issue of it. There was a shortfall of around €200. However just before I left Ireland my ex wife who had never made any effort to pay told me she wouldn't share the extra cost with me and would prefer to go bankrupt. This was a change of tune as she had reassured me before I committed everything that she would of course share the costs.

I was fairly angry at this as I had paid for her education and the house for years and she was unprepared to help maintain the property. I called the bank (UB) to negotiate before I left for the UK but they were uninterested as long as I maintained payments. So I decided to play hardball and stopped all payments and awaited their response. When they eventually started the MARPS process I was upfront about everything.

I finally got them to agree to extend the term by 8 years, with the tracker, and the cost is only €70 more than the rental. I will need to arrange something else for the arrears, but seeing as I left the rental income untouched, I hope it won't be too much over.

At this point my ex, who is also involved (being joint on the mortgage) decided to ask the bank to allow us to sell. They agreed with the usual provision of paying for the remainder under terms.

I don't want to do this, but I don't know if I can continue to maintain the mortgage if she demands we sell. I know the bank are unlikely to allow me to take her off the mortgage and they see her as the mark as she has a job whilst they know I am at Uni doing a PG course. This is sort of ridiculous as I am the only one who has ever paid the mortgage!

Its a little complicated as she knows I plan to move to Aus to be with my new girlfriend, and has told me she thinks I will leave her with a mess to clean up financially. I'm pretty sure, on the other hand, that she will look at the joint €80k shortfall the bank will levee (at least) and call uncle before bankrupting under the UK system. I definitely have no desire to do that so I would be left with the entire sum in that situation. 

I was fairly well paid (€60k) and will be again (IT consultant type stuff) come the end of the summer and a move to Aus. My course is to get me into a dearly desired and quite lucrative specialism. I'm in my mid 30's. My ex has a middling UK income (Teacher) and student debts, parental debts she considers more important than our joint responsibility. I cleared all debts before I left Ireland (apart from house, natch) and have accumulated none so far. My ex and I parted with no alimony responsibilities to each other. 

So folks, how can I best describe the situation to my ex-wife so she  will agree to at least try to maintain the property for a few years and  not make a knee jerk decision to cut all ties and sink the ship?


----------



## Sylvester3 (7 Feb 2013)

Right well putting my thoughts in order and describing them here appears to have helped as I talked it over with my ex again and she has agreed to let me maintain the property as a rental as long as I don't expect her to contribute to it in any way. So yay for me.

Anyway it was good to see that the bank handled my situation properly without apparently trying to screw me over.


----------



## Dermot (7 Feb 2013)

So you are going through all this hassle of renting, paying all the associated costs involved in this and with a view to going to Australia eventually. When are you going to Aus and how do you proposed managing the letting.
I cannot see the logic of what you are doing while your ex maintains an interest in the house while not contributing anything to it now. 
If you get the mortgage reduced to a point where there is a decent amount of equity in it what do you think your ex will do if you dispose of the house or she tries once again to force a sale.
There are other options.


----------



## Sylvester3 (7 Feb 2013)

Well it is either an > €80k shortfall that she will refuse to pay anyway, or I manage things this way. I will manage it traditionally when I finally leave Europe - I will use an estate agent I know personally which will cost around €50 a month (when I last got a quote). I do believe the overall costs will be less than having to pay back the shortfall in whatever timescale the bank decides to ask for.

Most of the associated costs of letting are paid for at this moment, as the house is currently tenanted. The tenants seem like a good family, and the area is not coming down with empty properties at the moment, so I should always be good for new tenants if they do have to move on.

My ex and I have a 'gentleman's agreement' that she will not pursue her interest in the house in the future. I tend to believe her, but obviously if she decides otherwise then the law will be on her side. Not much I can do about that. However I don't want to cut off my nose to spite my face in this issue.

What other options do you think would suit this situation? The bank baldly gave us these:

1. The more favourable repayment options we now have
2. Sell it ourselves and pay the shortfall as a loan
3. Stop communicating and let the bank repossess and work out the shortfall

My ex preferred options 2 & 3 as it put the debt into a tangible form that she could then roll into a bankruptcy order under UK law. I don't have a wish to go bankrupt so it would mean me being on the hook for the entire amount. 

Anyway I see option 1 as being more sensible, but I am open to sensible suggestions. I am not going to try to disappear btw


----------



## Bronte (8 Feb 2013)

Sylvester your story and solution is absolutely crazy. 

Option 2 for you, sell and pay off the NE. How can you not see this? And how lucky you are that you can do this. 

It's quite clear there is still some emotional involvement (anger and believing in your gentleman's agreement despite all your experiences). Move on and get rid of.

Enjoy your new life in OZ with no strings attached.


----------



## Sylvester3 (8 Feb 2013)

I don't think I'm crazy, I'm normally quite clear minded about financial matters. Wouldn't it be more expensive in the long term to pay off the neg equity? What am I missing?


----------



## Bronte (8 Feb 2013)

Sylvester3 said:


> What am I missing?


 
Freedom from the big mess that it currently is, and the worse mess it looks like becoming. See the light Sylverster3. Sometimes it pays to pay more.

Others may have a different viewpoint as indeed you do.


----------



## Sylvester3 (8 Feb 2013)

Hi Bronte, I'm sorry if you feel I'm being combative or contrary, I certainly didn't mean to give that impression! I'm here to ask for advice, and to learn what the best thing to do in my situation. I understand it is best to view these things divorced of emotion, so while I would like to cut final ties to something my ex and I shared, I am trying to discount that reflex action.

So is it the view of all here that it makes the most sense in this case to sell the house and try to work out terms on a joint debt instead? 

I read in one of the other threads that it made sense to hold onto a house with a tracker mortgage and try to wait it out instead - in fact I think that was Brendan's key post thread, so that was why I was trying to go down that route in the first instance. I am happy to take counsel on the matter though.


----------



## NOAH (8 Feb 2013)

an interesting scenario.  

1.  How sure are you the house will fetch 160k?

2. What if the  tenants up and leave and you cant let it? Or ask for a price deduction.

3.  Why is the 80K NE not split 50/50?

4.  Go bankrupt in UK and then go to OZ.

Ireland is a dead duck for the next 10 years or more, that house price could fall even further.

here is an example from where I live,  one bedroom flat 120K sold for 45K.

Your situation is a financial mess.  You are paying out money you will never recover.

To use an analogy,  go to the sink in your kitchen, take out a 20 pound note and set fire to it and watch it disappear, thats what you are doing with your current plan. What happens if the tenants wreck your house and it does happen?  I could go on.

I know its not what you want to hear but its the truth.

Can you explain why you are left with the total amount of negative equity?

Are you thinking that there might be debt forgiveness by the banks by any chance?

Come back and say why your option is the better?

ps are you planning to stay away for good?


----------



## Sylvester3 (8 Feb 2013)

Hi Noah,
1. I'm not.

2. Its a family home in a nice area and I had it up to a great standard when I left, so I believe it won't be a problem to continue letting it. The family have never been a problem and moved to my home for more space.

3. As I understand it, the bank will hold us jointly liable for the debt, therefore if my ex refuses to pay (which she will) that means I have to.

4. Why would going bankrupt be an option if it doesn't need to be? I'm fairly sure it wouldn't be that easy for me to go bankrupt and then saunter off to Oz anyway. 

The house might fall further, but if I'm slowly paying off the capital then eventually I will have no debt, and at hopefully less cost than if I just throw in the towel and take the shortfall.

Its a 3 bed spacious house in easy commuting distance of Cork so it should retain more value in future than some of the less versatile properties people are lumbered with.

So the way I see it I could take on a 80 grand debt now or resolve to manage a property that might cost me a couple of grand a year in excess mortgage charges and any possible other charges that might come along. I have fairly good insurance recommended by someone on here that also covers non payment of rent and damage in case the worst happens.

As I'm abroad I don't think the bank will write off any remaining debt, nor do I expect them too. 

I will be unlikely to return to Europe as my girlfriend has a pretty amazing career in Aus and I intend to make my life with her there, but I don't want to leave under a cloud if I can possibly help it. 

Thanks for your advice everyone. I'm surprised the consensus is to go bankrupt or leave the debt behind though.


----------



## Dermot (9 Feb 2013)

You jointly have a mortgage of €240,000 on a house valued 160,000. You are going to Oz and she is in England.  You will be paying an agent approximately 10% for management fees, Household charge, House Insurance, PRTB charge, Repairs and renewals, Tax on profit at higher rate on the Letting, Accountant to file tax returns on a pretty complicated arrangement. You will have an awful lot of rent collected by the time you have the €80,000 taken off the mortgage.

Your wife is not prepared to pay anything towards the house but it sounds like it to me that if there was equity in the house she might be around at that time to collect.

I normally would be of the opinion that if you can afford to pay you should live up to that obligation even if you have to make a lot of sacrifices.

I am pretty much in agreement with Bronte and Noah but if you want to ease your mind you could write to your Bank and tell them where you are and where your Ex is and what the next phase of your plans are.  I make a reasonable offer of cash to them plus the house and in return they would write off the balance.  They do not have too many aces to play. In fact you hold all the Aces.  If your conscience bugs you later you can always send them a cheque in years to come if you come into a lot of money.

I would forget about any past attachment you have with the house and move on with your life.  You have 3 opinions on this matter and all have a common theme.  The very best of luck to you


----------



## Sylvester3 (10 Feb 2013)

So just to be sure, are you guys advising that the best thing I do is walk away from the house and debt and never look back? I'll quite happily do that if there are no legal ramifications from it.


----------



## cremeegg (12 Feb 2013)

If I understand correctly you have 26 years left on the mortgage and the rental income is €70 short of covering the mortgage payments capital and interest, per month.

This shortfall may increase due to increased costs to landlords, or it may fall due to an improving rental market. But either way if you have a salary of €60k this is small money.

At the end of the 26 years you will have the value of the property at that time, your ex may or may not demand 50%.

If this is the position, I cannot understand the suggestion that you go bankrupt or walk away. My advice would be keep renting and cover the shortfall.


----------



## Bronte (12 Feb 2013)

Sylvester3 said:


> So just to be sure, are you guys advising that the best thing I do is walk away from the house and debt and never look back? I'll quite happily do that if there are no legal ramifications from it.


 
I never suggested this, you should sell and both pay off the NE with the banks agreement and hopefuly at the same mortgage term and interest rate as currently applies.  They are more likely to agree as you are going abroad.


----------



## burmo (12 Feb 2013)

Sylvester3, I have to agree with the others. Just to check, are you paying all the appropriate taxes on the rent?


----------



## Sylvester3 (13 Feb 2013)

Hi all, thanks for your advice. I am going to try see how it goes with renting it out for a year or so and then go with the other option if it becomes clear that its not working out.

I have considered tax liabilities and will get more advice later on, but as I understand it most of the income will be non-taxable due to being eaten up by rental expenses (agency fees and insurance for example) and interest charges (75% allowed). The only thing that will be difficult for the first year will be the agency obligation to put 20% aside as I will be a non-state resident landlord. But should be able to manage that.

I haven't paid tax on it yet as I understand I have until 31 October to work that out. I am working on it right now though.

As I said I have an agreement with my ex that I hope she will abide by, but I would still rather she had a share of whatever the house is one day worth (In my dreams!) than live paying down an 80k+ debt that has no asset attached. The house is in a good rental area and the houses near by have never stayed "to let" for long, so I am fairly confident that it will stay tenanted for the next few years at least.

Anyway, thanks again for your help.

Syl


----------



## HMC (15 Feb 2013)

Syl, I am an overseas landlord. This issue with the 20%. I know that Revenue says this should be deducted by tenant but I chose not to do this, for 2 reasons. I want to maintain full control where tax is concerned and secondly I think it is an imposition on a tenant. Furthermore, as good and reliable as my tenant is, I do not want him involved in my financial affairs.

This year I made my first return for the rental property, and asked Revenue to do the sums. It was clear from the form that my tenant had not been asked to withhold 20% and Revenue didn't query this, or anything else.

So my advice would be not to trust anyone else where dealings with the tax man are concerned.


----------



## Importer (15 Feb 2013)

That gentleman's agreement with your ex............Get it in writing NOW.


----------

