Case study advice needed re repossession, Negative Equity. Living abroad

H

Haskell

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I've come on here to ask for information if anyone can advise

I bought a house in Ireland 10 years ago. Myself and my wife paid the mortgage for the first 7 years. Then we had trouble with work and making ends meet. She is foreign and decided to up sticks and leave. I was the only signatory on the mortgage so when our relationship was under strain there was nothing stopping her. As a result I went through a difficult time and was unable to deal with the stress. I stopped paying the mortgage after a few months of paying what I could. I was self employed so had no redundancy etc.

Eventually I fled the country myself as I just couldnt cope with it all. I spent 3 years living far away and surviving on odd jobs. Finally I started to get my life back together. I'm now at a stage where I feel financially and mentally capable of dealing with the situation and while I still live abroad I still feel obliged to engage with my mortgage.

I contacted the mortgage company before christmas (KBC) and explained I would like to arrange to re start my payments if possible. There are obviously arrears etc. Right now the mortgage is 350K and the property is valued at 220. The house was empty for half the time as I needed to do repairs but has been rented now for 8 months. rent is 850 and mortgage is 1480

KBC told me they were issuing repossession proceedings and I think they mentioned a surrender order?

But they said while they would not put anything in writing they would hold off if full payments start in January. They said they would need to see full payments for 6 months before considering a new arrangement. I understand this but have since heard they are probably only trying to get a lump sum from me before repossessing anyway. This has me very worried obviously as while I want to reengage I am not making that much these days. If its inevitable the house is gone then I'd rather avoid throwing more away.

I was told about New Beginnings but also heard bad things about them. I am due to go back abroad in a couple of weeks and would like to finally sort this. I want to pay but can the bank be trusted to re capitalise the mortgage after the 6 months or am I wasting my time and money flogging a dead horse.

appreciate any advice I can get on here.

thanks
 
Just to clear one thing out of the way first. This has nothing to do with your wife? She is not on the mortgage? She is not on the house deeds? She may have helped you pay the mortgage, but that is irrelevant.

Haskell said:
Right now the mortgage is 350K and the property is valued at 220. The house was empty for half the time as I needed to do repairs but has been rented now for 8 months. rent is 850 and mortgage is 1480
Click to expand...

Why do you want to keep the house? It doesn't seem to make a lot of sense to me. That is the key question. The best outcome for you, if it were possible, is for you to voluntary sell the house and for KBC to write off the shortfall.

If they repossess the house, or even if you agree a voluntary sale or surrender, you will still be liable for the shortfall. If you are abroad, that will be pretty much irrelevant. If you can't pay it, it's pretty much irrelevant as well.

You should talk to the Irish Mortgage Holders Organisation, not New Beginnings. They have an arrangement with KBC and they will be best placed to advise you what sort of deal KBC might do.

Do you intend to return to Ireland at some stage? Do you have a cheap tracker? If the answer to both is "Yes", then you may be better off hanging onto the home as the interest cost will be less than the cost of renting. If you have a variable rate mortgage, KBC will really exploit you with the rate they charge on existing customers.

By the way, what has been happening the rent you have been receiving? Have you been paying that to KBC? You should be paying this at the very minimum, irrespective of what long term plan you opt for.
 
Thanks Brendan

I dont know if keeping the house is the right idea. Its just it is the only thing I have. I rent abroad. It was my family home. I understand this is nothing to do with my wife as she is not on the contract. Was just some info as to how I got into this mess

I have spoken to IMHO and they explained that KBC would not do anything re writedown or deal. It was all or nothing. It appears surrendering the house just leaves me with a large shortfall and KBC wont deal on it. They plan to chase it.

I will be moving back to Europe I think but not Ireland.

Regarding the rent I spoke on the phone with a KBC man almost a year ago. We ended up in a chat where I wanted to send them the rental while I sorted myself out. He refused to accept and said he could not accept that amount in lieu of the mortgage. I said its all I had and that if he wouldnt take it then I would use it to live on. He explained I had to hand over the mortgage amount. To which I said ok so we can move along at that amount. To which he said no, proceedings would still continue regarding respossession as 850 was not enough. In that context I didnt see the logic in handing over the rent as I was still not really earning enough to live on. I understand this was income and should have gone to KBC but when he explained it would not be acceptable as a monthly amount and they would persist with repossession without the full mortgage payment I just didnt understand the sense of handing it over. My bad I guess

I guess my question is does it sound like
A. keeping the house is the right move
B. will they in fact deal with a re structure in 6 months or just let me pay 6 months and then re possess anyway

And I know this is my own fault for not paying. I understand that. I've made some dumb decisions. Just trying to make the right one this time

thanks
 
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First let's look at it from a pure financial perspective

OK, so the property is worth €220k and the mortgage is €350k.
The interest on the mortgage at 4.25% would be €15,000 a year
You are getting rent of €10,200 but you have to deduct costs from that - say €2,200
So it's costing you €7,000 a year before paying any capital.

If you sell the property, you will be left with a mortgage shortfall of €130k.
Even if they allow you to pay interest at the mortgage rate of 4.25%, this will cost you €5,500 a year.

So there isn't much financial sense in agreeing to the sale of the property.

So, unless KBC does a deal with you on the shortfall as part of an agreement to sell, you should not sell or surrender the property.
House prices may fall, and you will owe them a bigger shortfall when they eventually get a repossession order after a few years in court. It doesn't matter that much if the mortgage shortfall rises. You can't pay it anyway.
However, house prices may also rise, and it's possible that if you string it out long enough, you could reduce the mortgage shortfall to a manageable level.

So I would suggest sending the following letter to KBC
(You are half addressing the repossession court when writing this letter. You will be producing it as evidence of engagement and your efforts to solve the problem.)
My life fell apart 3 years ago when my wife left and I lost my job. I was forced to emigrate to get a job.
I am getting it back together now and would like to sort out this problem.
I want to keep my family home as it's my family home and my plan would be to move back some day.
I contacted you in x/201y and offered to pay you the rent, but your Mr y refused it. So I have tried to stay on top, but have not received your cooperation.
The amount of the mortgage is exacerbated by the outrageous interest rates you are charging. You are charging over twice the average level in the rest of the Eurozone. You are charging almost twice what your parent bank would be charging me in Belgium.
I would propose that you would give me a split mortgage and warehouse the negative equity of €130k.
Although I am paying rent here I will do my very best to subsidize the mortgage payments from my income.

If this is not acceptable to you, then I will reluctantly agree to sell the home, subject to your agreeing a write off of the negative equity, or, alternatively agreeing a 5 year plan to pay off as much as possible.

As a gesture of goodwill, I will pay over the rent in full to you for the next three months while you are considering this proposal.

If we have been unable to agree a deal by the end of March, then I will need to use the rental income to build up a fund to pay for the legal costs of defending against your repossession.

I look forward to hearing from you.

[You should then put the rent into a separate account and not touch it. This would be used as part of any settlement you might come to.

You will probably be rejected, but such a letter will show the Registrar in the court that you have done your best to engage with them and they have not responded.

They might not even respond. If they don't, send a reminder every month. Keep up notes of every conversation. The date, time and the name of the person to whom you spoke.

You should get around another 2 years before they get an order for the repossession. If your finances improve by then or if house prices increase, you could well get to keep it.

Brendan
 
Brendan, thanks so much for taking the time. I will move on this and see what happens.
 
Good advice from BB which you should take! You appear to be trying to do the decent thing and KBC don't seem to be prepared to compromise to any degree. Tax liability is likely to be low and given portion of interest and expenses can also be offset against it. May be an issue ultimately if you move back home. However you need to show that you are attempting to co-operate with KBC in order to delay re-possession and the suggestion above is a good way of doing this.
 
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