Moving on with negative equity

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Dublin Divorce

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Don’t know where to go for advice or what my first move is. I have a property in Dublin, about 160k in negative equity, jointly owned by myself and my now ex husband.
He wants to just hand the keys back (if only it were that simple!!) but i don’t want to destroy my credit rating and can’t do a PIP due to my job.
I have moved out and am renting the 3 bedrooms in the house for 1500 a month and I have moved in rent free with my partner and our 10 month old baby. I’m still having to pay 1400 a month into my old joint account for the mortgage/life insurance/house insurance/property tax etc for a house I am not living in and this is totally unsustainable for me.

I’d love to get rid of the house and deal with the negative equity, but even if they let me agree to only half it it would still be 20 odd years before I could clear that balance and I am already 42. I think my ex partner would agree to an arrangement for the other half although whether he would then default on that I don’t know! In an ideal world my new partner and I would like to self build so could potentially move some of the negative equity to a new house.

Any advice on who to speak to or what to do next?

Income details
Net monthly:
€3k salary from HSE employment plus €140 child benefit
€1500 coming in monthly from renting rooms.

Personal circumstances so we can calculate your reasonable living expenses:
Currently moved out of property and living with new partner and our baby to allow me to rent my house for income towards the mortgage.

Each pay half of crèche costs so personal cost of €260 a month.

Car required for work with €500 a month fuel costs to and from work 300km each day.

Home loan
Lender: KBC
Amount outstanding: €650k. €177 of which is warehoused. Agreement in place prior to ex husband leaving which I haven’t informed them about as initially he was still paying his half but then reduced to €500 a month after I rented some rooms.
Value of home: 500k
Interest rate: 4.25%
Monthly repayment: 2900
Amount in arrears:0

Credit Union / savings nil

Other loans and creditors:
Personal loan 4K €450 monthly payment. 8 months left.

Do you expect any lump sums.
No

How important is retaining the family home to you?

I don't care about keeping the family home. Property prices not increasing in the area and i’m afraid the market will crash and I will be even worse off.
 
OK, so you have a loan of €650k on which you are paying about €20,000 a year in interest.

You are getting rent of about €18,000

So you are not losing that much.

Your repayments are €36k a year, but €16k of that is a capital repayment, so the mortgage balance is reducing by €16k a year.

So, at this rate, if things don't change you will be out of negative equity in about 10 years.

I am not sure that there is that much you can do, if you are not prepared to go bankrupt.

Dublin Divorce said:
can’t do a PIP due to my job.
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Dublin Divorce said:
€3k salary from HSE employment
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What sort of jobs in the HSE are affected by someone being insolvent?

I don't think you need to worry too much about your credit rating as you won't be getting a mortgage anywhere else for a long time.

A PIA now would be the quickest way to getting credit again in the future.

It's quite likely that KBC would do a deal with you before it were necessary to do a PIA.

So you and your ex should definitely see a PIP.

Brendan
 
Are you and your ex contributing equally to the mortgage now?

Mortgage repayment: €2,900
Rent €1,500
Ex: €500
Your contribution: €900

All else being equal, you should both be contributing €700
 
Dublin Divorce said:
In an ideal world my new partner and I would like to self build so could potentially move some of the negative equity to a new house.
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This will only be possible if he can get a mortgage on his own. They will not give you a joint mortgage when you have such big borrowings already.

Brendan
 
I’m a pharmacist. Part of our annual registration is an annual declaration that we have never been bankrupt or insolvent.
Ex will only pay 500 so i’m left with the balance and additional costs-insurance, property tax etc.
House is in the outskirts of Dublin with no public transport links, hence the value not increasing to anywhere near what it wS and rental being poor.
From the replies i’m Understanding my only option is to keep expecting my new partner to completely support me and our child while I pay off the negative equity for 10 years-assuming there isn’t another property crash? And I have no hope of getting credit to be able to move on?
I know I borrowed the money and it’s my problem. I just hoped there was some option out there. :-(
 
Brendan Burgess said:
This will only be possible if he can get a mortgage on his own. They will not give you a joint mortgage when you have such big borrowings already.

Brendan
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Even if they agreed to let me sell the property and carry a share of the negative equity? Or would that not be possible as I am jointly and severally liable so it wouldn’t be split at all?
 
It is extremely unlikely that they would allow you to split the residual debt.

But you could ask them.

Brendan
 
Thanks Brendan. You’ve been very helpful and it’s good to know where I stand. As depressing as it is!
Do you think I should contact KBC myself to let them know the situation as PIA isn’t possible or should I go through MABS or some other organisation or solicitor? Or just so nothing for now and keep paying for fear it could get worse?
 
It seems that only undischarged bankrupts are banned from practising as a pharmacist.

So, you could apply for a PIA which does not affect your registration.

Or you could take a year's leave of absence to coincide with the bankruptcy period, after which you would be discharged.

Brendan
 
Yeah there still are, I know an estate where I lived was selling 3 bed semis for 400k at the absolute peak and are now at €325.

So still a small percentage in negative equity I would think.
 
A few obvious questions here.

  1. €500k valuation looks low for a €780k peak purchase. Has it been valued recently?
  2. How come you haven't paid off more principal in 12 years?
  3. Higher rent available than you're currently getting I would think
  4. Is the only work available to you as a pharmacist 150km away and paying €3k a month?
 
Observations.

300km is unsustainable. Physically, mentally and financially.
Mortgage 2900, rent 1500, OP 1400, ex 500= 3400.
Can you breakdown all property costs.
Income 3k, minus 500, 1400, 260, 450 = 2610.

You could give up your job. Go bankrupt. And go back to work when the bankruptcy is over. Personally for the sake of around 100 a week and a hell of a life commuting that’s my initial impression. You wouldn’t be costing your new partner more than now as I believe your household contribution is diddly squat. And he’d save on the 260, plus you’d be at home.

What would your ex do if you did that?
 
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NoRegretsCoyote said:
A few obvious questions here.

  1. €500k valuation looks low for a €780k peak purchase. Has it been valued recently?
  2. How come you haven't paid off more principal in 12 years?
  3. Higher rent available than you're currently getting I would think
  4. Is the only work available to you as a pharmacist 150km away and paying €3k a month?
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1. 2 identical houses for sale in the estate at €500k and neither has sold in the last 6 months so €500 is probably optimistic. It’s typical I own a house in about the only area of Dublin that hasn’t recovered. :-(
2. Ex worked in construction and was laid off at the crash so the bank agreed to 3 years interest only, then the current warehoused agreement.
3. Currently renting the rooms under the rent a room scheme as I was living there until things became unsustainable. Moved to partners house as a. We can’t afford my house between us even if he moved to mine and b. Childcare costs are far less. Yes I need to change the arrangement to renting the house formally and estate agent values that at 2400 /month but i’d be paying 40% tax on part of that so wouldn’t give me any real additional income and I was scared would invalidate the current warehoused arrangement on my mortgage-although at this stage I obviously need to start communication with the bank anyway. To date i’ve just been doing everything I possibly could to meet my financial obligations.
4. The current situation has only recently arisen due to my ex reducing his payment and me then moving to my partners to be able to rent more rooms to meet the mortgage payments. Changing job is exactly what I’ll do if I can’t come to some arrangement regarding the mortgage and if i don’t have to go bankrupt in which case i won’t be able to work as a pharmacist anyway.
 
Dublin Divorce said:
3. Currently renting the rooms under the rent a room scheme as I was living there until
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Dublin Divorce said:
Yes I need to change the arrangement to renting the house formally and estate agent values that at 2400 /month but i’d be paying 40% tax on part of that so wouldn’t give me any real additional income
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You're already in breach of the exemption for rent a room relief:
A. Your income is in excess of 14,000 per year, and
B. You're not occupying the house as your sole residence.

So, you're obviously already paying tax?

Under a formal letting arrangement, you'd be able to offset the mortgage interest as an expense, so maybe the tax isn't as bad as you think.
 
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