# Negative Equity, not living in house, how to approach bank



## Sadee13 (3 May 2013)

Hi, we have a mortgage for 200k 29 years left.

This house is in negative equity of apporx 80 - 90k.

We do not live in the house anymore and will not be moving back. (I know this is a blunt explanation, there are certain reason's why). We are currently living in a family member's house which we would love to buy. This would cost us approx €110k. House value approx €220k.

We are currently making all payments on the mortgage, €800per month however our TRS will end at the end of the year and this will put us in trouble.

We have no hope of getting a negative equity mortgage as i only earn 30k and my partner is unemployed, we have 1 child.

How can we put this story to the bank - we do not want to keep the house, we are paying dead money on this for years to come. If we rent the house it will only cover half of the mortgage.

Please can anyone help us with some advice, we are getting desperate at this stage.

Thanks, Sadee13.....


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## Brendan Burgess (3 May 2013)

Hi Sadee

It's best to provide the full information in the Case Study format, if you want a useful analysis.

http://www.askaboutmoney.com/showthread.php?t=170704

Brendan


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## Sadee13 (4 May 2013)

*Thanks Brendan.*

*Personal and income details*
Net (i.e. after tax) Income self: 2000 montly, claiming husbands tax credits.
Income history: Public Servant, permanent
Net income partner/spouse:Unemployed at present
Income history: 500 monthly S Welfare payment
number of children: 1
Amount of Mortgage Interest Supplement received: Approx 220 monthly
*Home loan*
Lender: EBS
Amount outstanding: 199K
Value of home: 110K-120K
Interest rate: 4.58? from June SVR
Monthly Payment: 814 inc TRS (7 year's clamining TRS soon)
Amount in arrears: 0

Summary of discussions and agreements with the bank: None

*Other loans and creditors - *delete those which don't apply to you
Overdraft: N/A
Credit Card: N/A
Credit Union: N/A
Car loan: Finished payments last year
Family 

*Other savings and investments - €7k*


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

I don't care about keeping the family home. 


*Any other relevant information*

*What is your preferred realistic outcome? *
*We are currently making full payments, as interest only is not a whole lot less, i am worried with interest rates rising and our TRS being reduced. The house we are in at the moment, i own a share in and can buy off family for 100k to 110k which would reduce our payments a lot.*


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## honest (4 May 2013)

Sadee13 said:


> *Personal and income details*
> Net (i.e. after tax) Income self: 2000 montly, claiming husbands tax credits.
> Income history: Public Servant, permanent
> Net income partner/spouse:Unemployed at present
> ...


 
So your net income is approx €24,000 per year.  With a child / three mouths to feed it will be difficult to pay off a 199k mortgage with that, in my humble opinion, especially if you are currently paying 4.58% interest rate.   You are paying over 9k interest alone, leaving *15k* a year to *live on* ( feed, clothe  + heat a family, possibly run a car if you need one to get to work,  etc )  *and *to pay off the *capital*.   Very tight going.  If interest rates rise ( they are at historic low levels now ) you are really in trouble.  Your mortgage is about 8 times your income.  Was it always that high a ratio?...I thought building societies usually only lent 3 or 4 times annual income?  When you took out your mortgage, interest rates were higher than they are now : did the bank stress test your repayments?


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## Sadee13 (4 May 2013)

Hi Honest, 

When we took out the mortgage in 2006 my husband was working full time (construction) so we had the 2 income's. We run 2 car's as we live in the country where there is no public transport, i need 1 for work & my husband needs his so that is crippling too.

Thanks for replying.


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## a-tax-payer (7 May 2013)

Hi Sadee

I dont understand why you are paying a mortgage on one house, but then not living there, then living somewhere else (are there costs living in the other house too?)
You then want to buy this other family house and get into more debt.
Some things jump out at me - 
You may struggle to get a loan in these times given the circumstances 
I believe that you then also wont get further TRS on that new property too.
If that family sells the house at half the market price this may result in a taxable gift?

Why doesnt that family member sell their house for market value (220k) , use the proceeds to help you out re negative equity and cut deal with bank and get rid of your house.
They can buy a new smaller home outright and maybe there is enough left for a small deposit for you to get a new (smaller) loan on a more reasonable sum.
You would then have an intact credit record, maybe a small deposit, have the freedom to move, or rent somewhere for a while rather than rushing out and buying another property.


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## Bronte (8 May 2013)

It appears you own a half share in the house you are living in. At least 100K's worth. So you have a much better solution. Sell that house, get your share, or your relation buy out your share. You sell your old home, and pay down the negative equity from the proceeds of the home you have inherited.

Then you go rent somewhere not so remote, closer to your job and you can reduce to one car and cut costs further.  Which you will need to do as one assumes your husband's social welfare payment will eventually end.  It would be better for him if you moved somewhere he has an easier possibility of work or retraining.


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## Sadee13 (8 May 2013)

Hi, thanks for replying. I have a 3rd share in this house. I understand that selling this house is the best soloution. However i have a strong emotional attachment as it's my family home. In a ideal world i would love if i could sell the house with the mortgage then re-mortgage my family home for say €100k and carry over half of the negative equity €40k, leaving us with a mortgage total of €140k and for the bank to help us out with the other half €40k. This is probably just wishful thinking......


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## Sadee13 (8 May 2013)

Just to add we are not paying any rent in my families home, just the usual bills. However we cant continue to do this.


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## Sadee13 (23 May 2013)

Spoke with the bank and they will not allow us to sell the house because of the negative equity as then it would be an unsecured loan. I advised that we will start running into difficulty in our mortgage come Dec as our TRS ends because our payment will be over 1k a month. They said we could possibly extend the term of our loan by 5years, this however wont change our situation as at the end of the day we wont be living in the house and want to get rid of it (again long story)....

I am at a loss as to what to do, can anyone advise please?


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## Mrs Vimes (23 May 2013)

Hi Sadee,

Sorry for your predicament. I'm afraid I don't have any advice to for you - bad news, actually.

A mortgage which qualified for TRS when they brought in the plan to phase it out will continue to qualify until 2017 when it will be ended, even if this is past the original 7 years.

In your case, you should not be getting TRS at all since the time you moved out of the house - it is only applicable to a person's mortgage while they live in the house.

You should have informed Revenue when you moved out of the house and told them to stop applying TRS from that point. You don't say when you moved out, but Revenue will want the TRS from that date paid back.

Sorry to add to your worries.

Sybil


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## Sadee13 (23 May 2013)

Hi Sybil,

I had presumed we would only loose it if we had rented the house out?? After 7 years claiming TRS would you still quailfy for the maximum amount until 2017?

Thanks


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## Bronte (24 May 2013)

Sadee13 said:


> Spoke with the bank and they will not allow us to sell the house because of the negative equity as then it would be an unsecured loan. I advised that we will start running into difficulty in our mortgage come Dec as our TRS ends because our payment will be over 1k a month. They said we could possibly extend the term of our loan by 5years, this however wont change our situation as at the end of the day we wont be living in the house and want to get rid of it (again long story)....
> 
> I am at a loss as to what to do, can anyone advise please?


 
You were given advice on this thread on what to do, but you don't want to do that, in addition to that your bank won't let you.  So really Sadee it's up to you?  You can decide to keep burying your head in the sand and dealing with the stress of it all and do nothing in the vague hope that some miracle will come along and wave all the problems away.  This is not going to happen.


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## Sadee13 (3 Jul 2013)

*Negative Equity - Bank won't allow me to sell*

We are in negative equity of approx 80k, banks will not allow us to sell house & we have no hope of a negative equity mortgage. Partner unemployed. I asked if they could come to some sort of an aggreement with the shortfall but told no.

I have thought about renting it out and us renting where we want to be but rent will not cover the mortgage, it would leave us with a shortfall of approx 350 per month which we could not afford.

Can we just hand back the keys? I understand we will be liable for the shortfall somehow & i know it is not that simple but just looking for advice.


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## Brendan Burgess (3 Jul 2013)

Hi Sadee

You own a third share in another house, so I can sort of see the bank's point of view.

You have a shortfall of €80k which you could discharge by selling your other home. 

You will be worse off if you just hand back the keys. They will sell it at fire-sale prices and you will just owe a bigger shortfall. 

I think your best option is to rent the house and make up the shortfall from your salary. As you are living rent-free, you should be able to well afford this.

In time, the value of the property may rise and clear the negative equity.

Brendan


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## Sadee13 (3 Jul 2013)

Thanks for replying Brendan. The only thing is we cannot continue to live in the house i owe a share in rent free. So say we rent out house we have mortgage on and pay shortfall of €350 and then pay rent on the property i have a share in of €650 that would be a total of €1000k per month and on a salary of €2000 with 1 child & another on the way this is not going to work. We can barely make the mortgage payment of €815 monthly as it is.

The other option of selling the house that we have a share in which has been pointed out to me obviously is the best option but i cant do this, as posted above.

Thanks
Sadee


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## SarahMc (3 Jul 2013)

You can sell the inherited property, you just don't want to as you have an emotional attachment which is a luxury really. Especially considering this house is remote enough to necessitate running 2 cars.
I'm puzzled that you were awarded Mortgage Interest Supplement for a house you are not living in?


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## Sadee13 (4 Jul 2013)

Hi Sarah,

The house we have mortgaged would be remote too, we would also need 2 cars there.

Do you mean Mortgage Interest Relief?? We were granted this when we took out our mortgage as we were 1st time buyers.


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## Importer (4 Jul 2013)

Hi Sadee

Here's what I would do in your shoes. It's a long journey

You have already asked the bank to agree to sell the house. They refused.
I imagine the main reason they refused is because you have successfully paid the mortgage so far. Their tune will change quickly if you stop paying the mortgage

You need to write to them one more time and explain that you can no longer pay the mortgage Then stop paying the mortgage and start to pay the "rent" to your relatives or start to save the "rent" yourself

The bank will have no other alternative then but to agree to sell the house.Once the house is sold the bank will seek to recover the negative equity portion from you. There is no extra money in your income to pay down the NE so at that stage I would apply for A DSA under the Insolvency Act.
The bank will need to decide whether it should accept the DSA proposal or not so it would be very helpful for you to accumulate some funds to offer the bank when the DSA is being negotiated. I would suggest to save the 800 euro per month for the next year or two if you can.

At the end of the process, you will hopefully be living in the house you want to live in (even though you might not own it) The house you don't want will be gone and the negative equity portion will hopefully also be gone. 

In my view, Any bank that fails to co-operate with a home owner, who wishes to sell their home (that is in negative equity) deserves to be treated with contempt. This is entrapment. When this happens you need to set aside all loyalty to that institution and do whats best for you and your family.

Best of luck with it


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## Sadee13 (4 Jul 2013)

Importer thanks for your reply. If we were to take this line of action and paid my relatives "rent" every month & if they took this into account that this payment will actually amount to the value of the house say in 20 years time (like a mortgage) that we would eventually own the house. Could this work or could the bank intervene.


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## Importer (4 Jul 2013)

If your relatives are in agreement to sell you the house with stage payments, I think it would be a very good option for you in the long run. 
In the short run, I would park the idea of buying the house until the issue of the 1st house has been resolved. If the bank becomes aware of your intention to buy the 2nd house, its likely that they would want to transfer your existing mortgage on to it. That would make things very complicated to resolve now

Under the new insolvency legislation, a person's home is protected in so far as it is reasonable to do so and for that reason I would say that there is very little that the bank can do in relation to the 2nd property if it is now your home.

Of course the fact that you own 1/3 of the 2nd property at a time that you are asking the bank to write off a large part of the negative equity on the 1st house is a hurdle to get over but I think its something that can be negotiated. That is why I earlier suggested accumulating a small lump sum that could be used for negotiating with the bank if that's possible.

I think you need to take this one step at a time. The 1st step is to get rid of a house that you're not living in, that you don't want and that you can't afford. When the bank tells you that they will extend the mortgage term blah blah blah. That is 
probably the best outcome for the bank. Its a terrible outcome for you. You want to sell the house. You dont want to live there and I dont think you want to be a landlord. The house must go. Be strong. Be firm. Do whats good for you


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## Sadee13 (4 Jul 2013)

Thank you so much for your replies. I will keep you updated, more than likely i will have many more questions.


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## Sadee13 (8 Jul 2013)

Importer, just wondering if i should seek legal advice on this as i haven't a clue where to start.

Sadee


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## so-crates (8 Jul 2013)

Sadee13, Importers advice amounts to strategic default. I would not be a supporter of such an approach from either a moral or a financial standpoint but if you do decide that your emotions are going to overrule logic then absolutely seek legal advice first.

I would urge you to reconsider your distaste for the property you purchased, sell your share in the inherited property and make new memories with your own child and husband in the property you own.


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## Dr.Debt (8 Jul 2013)

@So-crates
I think you have to understand one thing. The financial market that we are operating in is governed by the law and not by morals. In this particular case, it's the bank who is operating "strategically".Their strategy is to maximise their own position by refusing to cooperate with the OPs house sale. There is nothing moral about what the bank is doing and there is no requirement for the OP to act "morally" in return to the detriment of herself and her family who are in a difficult position.

It is the OPs right to sell her house if she wishes to do so. The bank is preventing this so it is perfectly legitimate for the OP to suspend all payments which will force the sale ultimately

This is not church, Its not a community "love In" Its hardcore business with winners and losers and this is true whether you like it or not. Within the framework the OP must square up to the bank and act in her own best interests within the framework of the law.

The bank lent money to the OP (and thousands of others) , they took a risk and the risk turned sour. The bank needs to "pay out" on the risk and if they had any concern about morals they would be cooperating with the OP not impeding her at every turn.

Don't ask the OP to fight this battle with one hand tied behind her back. Advising her to move back into a house that she doesn't want and strengthening cooperation with a bank that is not cooperating with her would be folly in the extreme


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## so-crates (10 Jul 2013)

@Dr. Debt, I understand the difference between morals and the law. Where I disagree with you is casting the bank's refusal as a negative thing and the OPs wishes as being a sound guide to her best interests. Essentially the OP is being unreasonable in putting a childhood attachment as an over-riding consideration. The "strategy" the bank is employing takes better cognisance of the long term and wider consequences of resolving the financial situation. The strategy recommended for the OP to default to try and get their own way irrespective of what they agreed, can afford or could accommodate. In other words without some strong and substantial justification that the property is unliveable it is a strategy which reeks of short-term considerations weighting the decisions.


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