# Trying to Sell house in Negative Equity with my sister



## EmilyB2015 (7 Apr 2015)

Hi All, I've never posted here before and am looking for some advice if possible.

I've a property with my sister that we bought in 2006 on a 100% mortgage 
Cost of Property - €295,000
Balance Due - €260,800
Took mortgage out over 35 years.

I moved out of the house 4 1/2 years ago and continued paying my half of the mortgage.  However circumstances have changed and i've since got married and live with my husband in his house.  She still lives in the house on her own.  We have explored renting the property while she still lives in it but hasn't worked out.  I've tried to broach the subject of splitting rent etc and she basically maintained that she has to maintain the house, upkeep etc. I understand this but the reality of the situation is that I cannot continue to afford to pay for half a house that will probably never reach the current balance due to be repaid.  

I'm trying to come to a reasonable solution where we can all agree without too much agro - she's very headstrong!! 

I was thinking that the fairest solution would be to rent out the entire house and split the rent 50/50 and she find somewhere else to live.

Put the house up for sale and take the financial hit as it stands 
Can the  bank allow us to sell the house and move negative equity to a loan - i feel that it might be better just to pay off the negative equity and move on from the property the amount I'm paying off the mortgage could be the same paying off a loan.

Would it be possible for my sister to take out a credit union loan and incorporate negative equity and buy and smaller property with this loan or will the bank allow her to transfer negative equity to another mortgage. 

I'm really at a loss as to what to do or what would be the most amicable solution as I don't want to cause a family argument as she has been out sick from work a few times for surgeries thankfully she's back to good health. 

We both have good jobs and on paper it looks that we can both afford the mortgage.  I really just want to move on from mortgage and move on with my life with my husband as we would like to start a family and feel the financial burden of my joint mortgage is putting a lot of strain on us. 

Any advice would be really appreciated.


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## Bronte (7 Apr 2015)

Clean breaks are best.

Is you sister willing to move out?

Not sure renting the house out is the ideal. 

Is your sister willing to take over the entire mortgage herself. 

If she's not then the house should be sold and NE tackled between you.  Probably easiest to wait until NE is lower.  How long in mortgage repayments before you are that far. 

Yes a bank can allow you to sell and repay the NE as either a long or short term loan.


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## epicaricacy (7 Apr 2015)

How much of a shortfall would be left after selling the house?


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## EmilyB2015 (7 Apr 2015)

Bronte said:


> Clean breaks are best.
> 
> Is you sister willing to move out?
> 
> ...



Hi Bronte, 

thanks for your reply,

I think my sister thinks that I will sit this out until the house reaches value of mortgage.. I've been watching the market and to be honest if we make 200- 210k for the house we will be lucky.

She is not in a financial position to take over the mortgage a lot on one salary.. I suggested last year that she take over 75% and I'd pay 25% and have a legal agreement drawn up to reflect same but she couldn't afford to and wasn't willing to entertain the idea. 

as far as I can see the shortfall will be 30k each.. I'm really not sure if she will agree to this but to be honest a clean break seems to be easiest solution if she is will to sell.  if not it's a different kettle of fish then..


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## Brendan Burgess (7 Apr 2015)

Hi Emily

Which lender?
What interest rate are you paying?
Did you have a written agreement with your "headstrong" sister before you entered into this commitment with her?
What is your sister's rough salary?


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## EmilyB2015 (7 Apr 2015)

epicaricacy said:


> How much of a shortfall would be left after selling the house?



Jointly appx 60k but it will leave her with a big loan and no option to buy again for a very long time or would bank allow her bring NE into a new mortgage? or how straight forward is this?


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## EmilyB2015 (7 Apr 2015)

Brendan Burgess said:


> Hi Emily
> 
> Which lender?
> What interest rate are you paying?
> ...



Hi Brendan 

EBS 

Variable Rate 4.63%

No written agreement we naively thought that it was a good idea to buy a house together and sell after a couple of years but  things got worse and worse with economy and we are literally working to pay banks as we have personal loans for cars etc.. 

Her salary is approx 40,000 public sector same as me with take home pay about 65% of that figure... She needs health insurance so she can't cut that we've both cut cloth to measure but I feel I'm just throwing good money after bad.  Would love to find an amicable solution. Really caught!


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## Brendan Burgess (7 Apr 2015)

1) Check that interest rate. Assuming you bought it as a home, the rate should be 4.33%.  You will find the rates here:[broken link removed]

2) You should not be paying half your sister's housing costs.  

3) Assuming the 4.63% rate is correct...
the repayments are around €1,400 a month
the interest on the mortgage is around €1,000 a month

4) Assume that you can rent out the whole house  to an unrelated tenant for €800 per month. 

5) The monthly shortfall would be 
Rent received €800 
Interest paid: €1,000
capital repayment: €400 
Net cash outflow: €600 
Your share: €300 

6) So if your sister wants to stay there, she should pay €1,100 per month and you should pay €300 per month.

7) She should rent out a room to help her pay the mortgage. 

8) No other option works for your sister 
She can't take over the mortgage as her income is too low.
She can't sell it as she would not be able to buy again and would be stuck with a €30k loan with nothing to show for it. 

9) You have to set out these figures and present the three options to her 
A) Sell and pay off the shortfall 
B) Rent out the entire house 
C) Reduce your repayment to €300 per month 

10) Assuming you do opt for C) you must sign an agreement as to what you are doing so that at some later stage, when you have paid down the negative equity and built up some positive equity, she does not claim that she owns more than 50% of the house.


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## Brendan Burgess (7 Apr 2015)

_I moved out of the house 4 1/2 years ago and continued paying my half of the mortgage._

You probably should point out that you have been overpaying by €400 per month, so she owes you €21,600 which could be reflected in a higher share of the ownership of the house for you.


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## epicaricacy (7 Apr 2015)

Hi Emily

A couple I know that are separating have a house that is approx. 120K in negative equity with EBS. Their salaries would be similar to you and your sister.
They approached the IMHO and the IMHO gave them Grant Thornton's contact details - as Grant Thornton work in tandem with the IMHO regarding PIAs. EBS pay the fees of both the IMHO and Grant Thornton.
After an intitial telephone conversation with Grant Thornton - Grant Thornton suggested that a PIA type 'full and final lump sum' of 25K (20% of shortfall figure) should be enough to ensure that they can walk away from the house.
The friend will get the lump sum from family and the couple will pay back the lump sum to the family.
The couple will either sell the house on behalf of EBS (recommended for both parties as it maximises the selling price) or engage in a voluntary surrender.
After the house has been sold and the shortfall amount crystallised, Grant Thornton will propose the lump sum to EBS.
Why not contact David Hall in the IMHO and explain your position? It's a free service and it could provide you with a much cheaper exit strategy. He might suggest that you contact Grant Thornton directly for a free preliminary chat regarding the possibility of a PIA.
I would suggest that you contact IMHO / Grant Thornton prior to discussing the option with your sister and then present your findings to her.


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## Brendan Burgess (7 Apr 2015)

Hi epi

There is nothing at all in Emily's post to suggest that she is insolvent. Quite the opposite in fact. 



EmilyB2015 said:


> We both have good jobs and on paper it looks that we can both afford the mortgage.



Insolvency is not a solution here. 

Brendan


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## epicaricacy (7 Apr 2015)

Hi Brendan

The couple that are using IMHO / Grant Thornton to resolve their situation are not insolvent either. Their projected shortfall will be twice the projected amount that Emily and her sister will owe.They are both employed, but are separating. EBS / AIB appear to be the most pragmatic institution to deal with. Why not use their pragmatism to secure a favourable deal.

Emily is correct. Her current situation is not sustainable. The other suggestions - including trying to convince her sister that Emily is owed 21K etc. are cumbersome, bound to cause ongoing conflict and involve a lot of unnecessary stress. Emily wants to get on with her life. It's not Emily's role to ensure that her sister remains living in a property that she can't afford.

Both women earn 40K gross per annum - and receive 65% of this in net wages. Hardly the type of income that one can afford to contribute to 2 mortgages and start a family.  

There is every chance that the bank would do some deal on a shortfall amount of 60k+. It could involve an informal, yet binding - solution / agreement on the shortfall amount that wouldn't involve any interface with the insolvency service.

What's the harm in contacting the IMHO / Grant Thornton, explaining the situation and sussing it out - as my friend did? It seems like the most appropriate solution to a seemingly intractable situation.


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## EmilyB2015 (8 Apr 2015)

Brendan Burgess said:


> 1) Check that interest rate. Assuming you bought it as a home, the rate should be 4.33%.  You will find the rates here:[broken link removed]
> 
> 2) You should not be paying half your sister's housing costs.
> 
> ...



Hi Brendan
Many thanks for setting out these options for me it's given me good guidance as to where to start and how to approach this situation. 
You are correct about Interest rate i originally quoted you incorrect amount. 
Thanks again


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## EmilyB2015 (8 Apr 2015)

epicaricacy said:


> Hi Brendan
> 
> The couple that are using IMHO / Grant Thornton to resolve their situation are not insolvent either. Their projected shortfall will be twice the projected amount that Emily and her sister will owe.They are both employed, but are separating. EBS / AIB appear to be the most pragmatic institution to deal with. Why not use their pragmatism to secure a favourable deal.
> 
> ...




Hi 

Thanks for your response I will explore this option.. We both don't want to enter the PIA option as it will destroy our credit rating and in turn make things difficult for my sister to borrow money again and me for that matter.. I can't imagine that the bank will write off 75% of shortfall without financial implications, or have I misunderstood?

Thanks,


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## Brendan Burgess (8 Apr 2015)

EmilyB2015 said:


> Hi
> 
> Thanks for your response I will explore this option.. We both don't want to enter the PIA option as it will destroy our credit rating and in turn make things difficult for my sister to borrow money again and me for that matter.. I can't imagine that the bank will write off 75% of shortfall without financial implications, or have I misunderstood?
> 
> Thanks,



No. You have not misunderstood at all.

The clue is in the name. The insolvency options are for those who are insolvent. You can both meet your debts as they fall due, so you should not be claiming insolvency. 

I suppose there is no harm in asking EBS if they would allow you to sell and settle the shortfall, but I think it's unlikely and it would show up on both your credit records for 5 years. 

Brendan


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## EmilyB2015 (8 Apr 2015)

Brendan Burgess said:


> No. You have not misunderstood at all.
> 
> The clue is in the name. The insolvency options are for those who are insolvent. You can both meet your debts as they fall due, so you should not be claiming insolvency.
> 
> ...



Thanks Brendan just want to be sure of every option available... It's  a last resort to go for insolvency as I don't want cause a lot of tension and hassle hoping that it will be pain free enough.

Thanks for all of your advice.


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## epicaricacy (8 Apr 2015)

EmilyB2015 said:


> Hi
> 
> Thanks for your response I will explore this option.. We both don't want to enter the PIA option as it will destroy our credit rating and in turn make things difficult for my sister to borrow money again and me for that matter.. I can't imagine that the bank will write off 75% of shortfall without financial implications, or have I misunderstood?
> 
> Thanks,



Hi Emily

Why not ask Grant Thornton - who are actual insolvency experts - whether an 'informal agreement' (not involving the insolvency service or the courts) would end up affecting your credit rating for 5 years? You may be very surprised and what have you to lose by making those initial enquiries?

My friend contacted the IMHO and explained the situation re. impending separation. He had already registered with the IMHO. He was given a contact detail of someone in GT and gave him a call. The couple are earning the same wages as you and your sister, so they are in no way insolvent!!!!! However, like your situation - maintaining the house while only one party continued to live there is not sustainable for them on their salary.

The beauty about the arrangment is that - if you go through the IMHO - you can receive all of the expert advice free of charge - prior to making any decision. It's a no brainer really. I would always seek specialist advice from 'specialists' as opposed to advice from people with on a website.

You're not going to  be penalised because you've made contact to explore your options!!!!


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## EmilyB2015 (8 Apr 2015)

Hi, 

I will give them a shout and make informal inquiries and see what options are available to us... There is such a varied amount of information i'm a bit bamboozled with it all.. As you say I've nothing to lose by making general contact with IMHO and see what options are available if any without effecting our credit history.. 

Maintaining the house in the current situation is not a runner at the minute it's constantly on my mind and I feel the stress of it all is going to catch up with me very soon.  I will explore every avenue to see what can create the best possible outcome.

Thanks for all your help, much appreciate.


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## Bronte (8 Apr 2015)

Don't let the stress get to you.  Write down each option so that you have them clear in our mind.  I think your sister should be part of these discussions and should accompany you to IMHO.  It's her problem too.


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## EmilyB2015 (8 Apr 2015)

Bronte said:


> Don't let the stress get to you.  Write down each option so that you have them clear in our mind.  I think your sister should be part of these discussions and should accompany you to IMHO.  It's her problem too.


I'm so sick of it at this stage that's why i have to do something about it.  Want to have information for her and let her digest it and show what options are available before we pursue it. I'm going to meet over next few days/week and go through everything have all the cards on the table.  She's not going to be happy but situation cannot continue as is.
Thanks for your advice


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## epicaricacy (8 Apr 2015)

Hi Emily

I understand the stress that continued uncertainty - and the feeling of being trapped by circumstance - can cause. It's very difficult to quantify, but it eats away at us. It becomes like a third, hostile and unwelcome party in a marriage.

The IMHO - who have an agreement with AIB / EBS and who work in tandem with Grant Thornton - will probably ask you to fill out a Standard Financial Statement, which can be quite daunting at first, but is actually manageable. The whole process, if you decide to go with the voluntary sale / informal lump sum payment scenario (if it doesn't adversely effect your credit history) will, of course, be difficult - but at least there will be an end in sight. To paraphrase Nietzsche '......If one has a why to live for then the how of living becomes more bearable' - in your case the certainty at the finish should more than compensate for the stress involved in the process. The current situation - whereby you're paying towards a mortgage for a house you don't reside in while attempting to start a family on your current salary is not sustainable.


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## EmilyB2015 (8 Apr 2015)

epicaricacy said:


> Hi Emily
> 
> I understand the stress that continued uncertainty - and the feeling of being trapped by circumstance - can cause. It's very difficult to quantify, but it eats away at us. It becomes like a third, hostile and unwelcome party in a marriage.
> 
> The IMHO - who have an agreement with AIB / EBS and who work in tandem with Grant Thornton - will probably ask you to fill out a Standard Financial Statement, which can be quite daunting at first, but is actually manageable. The whole process, if you decide to go with the voluntary sale / informal lump sum payment scenario (if it doesn't adversely effect your credit history) will, of course, be difficult - but at least there will be an end in sight. To paraphrase Nietzsche '......If one has a why to live for then the how of living becomes more bearable' - in your case the certainty at the finish should more than compensate for the stress involved in the process. The current situation - whereby you're paying towards a mortgage for a house you don't reside in while attempting to start a family on your current salary is not sustainable.


Thanks very much for all your advice and you are right I need to deal with this sooner rather than later. I'll come back and let you know the outcome of it all. HOpefully it will be very positive and this worry and stress will be behind us.


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