Can I force the bank to allow me to sell my home in negative equity?

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Brendan Burgess

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Example
I am unemployed and can't afford my mortgage
I have a mortgage of €350k
I have an offer on the house for €300k.

The legal position
The bank must give permission for the sale to go through and may refuse permission.
If the house is sold for €300k, then you will still owe the bank €50k and interest will continue to accrue until it is paid off.

Will the bank agree to the sale of the house?
This is at the discretion of the bank. It will make every effort to recover the deficit before agreeing to the sale. So if you can borrow from family or friends, it will ask you to do so.

If the deficit is not large and you are employed, the bank may convert the balance to a personal loan.

Will the bank do a deal with me and write off some of the deficit?
Probably. It's worth a try.

Can I just hand back the keys if the bank refuses permission to sell?
If you do that, the bank will sell the house probably for less than you can get, and you will owe more. The bank will also incur security and other costs for which you will be liable.

Are there any circumstances in which the bank must stop charging interest?
Not until the loan is paid off

What happens if I just hand back the keys and go to Australia for 12 years?
It is better to deal with your problems and try to resolve them with the bank.

If you do abandon the house, the bank has up to 6 years after the cause of the action to get a judgement against you.
The Judgement lasts for 12 years after which the bank is statute barred from enforcing it.

So you may have to stay out of the country for 18 years.

Of course, your credit record will be gone forever.
 
Re: What happens if I sell a house with negative equity?

Brendan

Thats a good Key Post.

Can I just make it clear why its simply not possible to sell the house without the Bank's permission? The Bank hold the Deeds as security for the loan. They will not release the Deeds to the customer - only to the solicitor. They are released on what is called Accountable Trust Receipt - this means that the solicitor undertakes not to release the Deeds until they are in funds to discharge the entire amount of the mortgage outstanding. In practice, most solicitors will ask for a recent mortgage statement when first instructed to act in a sale. Also, you would never complete a transaction as a vendor's solicitor without getting up to date redemption figures to be absolutely sure that you will have sufficient funds to discharge the mortgage.

Other than that, I would just say that it is important to stay in touch with the lender. If you are in difficulties, try and reach some form of compromise with them. Burying your head in the sand gets you nowhere.

mf
 
Re: What happens if I sell a house with negative equity?

Thanks MF1

this means that the solicitor undertakes not to release the Deeds until they are in funds to discharge the entire amount of the mortgage outstanding.
Click to expand...

Are you saying that the banks will never permission to sell the property for less than the mortgage amount? In one of the cases where I have been asked for advice recently, the bank is telling the mortgage holder to sell. The sales prices will be €50k short of the mortgage.

Brendan
 
Re: What happens if I sell a house with negative equity?

OK - rephrase - Solicitor would not close without sufficient funds to discharge the entire mortgage, unless Bank confirmed that it would release solicitor from undertaking and accept the lower amount in full/part settlement - depending on what agreement had been reached.

mf
 
Re: What happens if I sell a house with negative equity?

Good Key Post, Brendan

It should be made clear that much of the items addressed are governed by the contractual arrangements "agreed" between the parties rather than any overarching legislation on how banks should behave in relation to mortgages. I have put "agreed in inverted commas, since terms are normally offered by banks on a take it or forget the mortgage basis. But remember that the terms and conditions may differ from bank to bank especially in relation to arrears. Go and read your Ts and Cs in detail.

It is also worthwhile to refer to the "Code of Conduct on Mortgage Arrears" which is available from the Financial Regulator [broken link removed]

TC
 
Re: What happens if I sell a house with negative equity?


Hi Gulliver

I don't think that either the terms and conditions or the Code of Conduct has any relevance here?


The terms and conditions don't usually specify what might happen if there is negative equity - do they?

There is nothing of direct relevance in the code. The only remotely relevant bit is the following:

Where appropriate, the borrower must be made aware of other options such as
trading down, voluntary sale or alternative refinancing through another lender.
Click to expand...

Brendan
 
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