Realistic - will anything be done about negative equity

[ClubMan]

Being realistic do ye think anything will be done about negative equity?

I know we are not alone but we have 2 houses in negative equity (reluctant landlord on one). All we wanted was to do the best for ourselves and we are now stuck in a 2-bed house (v nice and love the location). We now have a baby and are completely stuck where we are.

I'm not looking to get away from the debt that we borrowed and are responsible for but I hate this feeling of being trapped and not being able to choose to have a second baby in the future because of decisions we made with the best of intentions for our future.

Hindsight is great and yes we should have thought about 2 bed etc... but at the time we were trying to live in a nice area within an easy commute of work and its all we could afford.

As alluded to earlier - I'm really curious to get some idea of what YOU realistically think should be done, why and by whom in your specific situation?

By the way - are you in an arrears or pre-arrears situation with either of the properties or managing to service the loans?

 

[DaisyD2]

Being realistic do ye think anything will be done about negative equity? NOTHING

I know we are not alone but we have 2 houses in negative equity (reluctant landlord on one). All we wanted was to do the best for ourselves and we are now stuck in a 2-bed house ( nice and love the location). We now have a baby and are completely stuck where we are.

I'm not looking to get away from the debt that we borrowed and are responsible for but I hate this feeling of being trapped and not being able to choose to have a second baby in the future because of decisions we made with the best of intentions for our future.

Hindsight is great and yes we should have thought about 2 bed etc... but at the time we were trying to live in a nice area within an easy
commute of work and its all we could afford - you achieved that goal! See above

Your problem isn't the negative equity and lack of choice, its your mindset that percieves this to be a problem.

You have two house (including your HOME!) - Good for you.
Your in a nice area and good location - Fabulous.
You have a baby - Congrats.
You have two bedrooms - whats the problem with kids sharing a room?

Honestly, we have lost the run of ourselves with the child/bedroom ratio of households. I shared a bedroom with my brother (5yrs younger) til I was 10. My
grandad came to live with us in our 3bed/1bath. It was great. Why are you putting off a 2nd child if thats what you want because of a bedroom? Its a wall?
The wall is in your mind.

Be thankful for a nice home, healthy baby, easy commute (being closer to home means you get back to your baby quicker at the end of a long day instead a a trek to some godforesaken "spatial hub" whilst your babys in a childminders).

Don't worry about the negative equity, its a state of mind, you don't "need" to sell - a smaller home just means you have to learn to watch where you put your feet (mine has toys everywhere and they're the dogs! , and declutter regularily, teach the kid/s to share and give to others.

 

[newirishman]

[..] Not only do two of the kids have to share a room but so do my wife and I![...]

It doesn't get much worse - really sorry to hear...


Joking aside - I am with Clubman here, as I would like to know what the OP thinks that should be done.
I am generally opposing any short-term debt forgiveness scheme where the general public picks up the tap. You never know what happens 10 years
down the line, we might have inflated all the debt away anyway.

I am quite sure that I am in negative equity. Would I like have less debt? Hell ya. Do I expect anybody else to pay off some of the debt for me? Absolutely not. There's no such thing like a free lunch.

 

[Pope John 11]

There's no such thing like a free lunch.

Hold that statement for now......Sean Quinn is looking for a free lunch, lets see what will happen in this scenario.

Big developers are getting free lunches, why for borrowing millions they cannot afford to pay back, but you are happy to pay this back, it could only happen in Ireland.

 

[LittlePiggy]

As somebody who is "trapped" in negative equity, I feel I can say that the "trap" is indeed a mental one that can sadden you about your options for the future.

We have no need to move or a desire to move, but should that need or desire arise you are powerles, and this can be demoralising.

What can be done about negative equity? Well if I were asking, I would simply like the ability to transfer that negative equity to a new property. Myself and my wife have good incomes (at the moment) and are actually over paying the mortgage to reduce capital. We have an excellent repayment record.

If we could move to a different property, pay all additional costs so that the bank provides nothing else to us, then I think that should be allowed. We are not increasing or reducing our debt, but we are moving.

We are probably in a luckier situation than many, and to deny us the need/desire to move is unfair in these circumstances.

 

[dereko1969]

As somebody who is "trapped" in negative equity, I feel I can say that the "trap" is indeed a mental one that can sadden you about your options for the future.

We have no need to move or a desire to move, but should that need or desire arise you are powerles, and this can be demoralising.

What can be done about negative equity? Well if I were asking, I would simply like the ability to transfer that negative equity to a new property. Myself and my wife have good incomes (at the moment) and are actually over paying the mortgage to reduce capital. We have an excellent repayment record.

If we could move to a different property, pay all additional costs so that the bank provides nothing else to us, then I think that should be allowed. We are not increasing or reducing our debt, but we are moving.

We are probably in a luckier situation than many, and to deny us the need/desire to move is unfair in these circumstances.

With regard to the first point in bold above, what's the point in worrying about something that doesn't affect you at the moment? You might as well worry about asteroids hitting your house.

With regard to the second, are you suggesting there are many people "out there" who wish to move to a house that costs the exact same as the current outstanding amount on their mortgage? I don't really understand this point - the bank would be giving you (presumably) more than 100% of a mortgage or am I reading this all wrong?

If you do wish to move at some stage in the future would you not be better off not over-paying so that you can have some sort of a deposit?

 

[moycullen14]

To answer your question, probably nothing for YOU. You see you are not of systemic importance to anyone. You'll carry on doing your best, paying as much as you can until something catastrophic happens (illness, redundancy, etc). If you want to do solve the problem, do it yourself. Your problem is one of debt management and in that situation, you have to prioritise the debts. Your PPR is the most important, the second house is not. Chances are it will be decades before it gets back out of NE and your income on it is going to decrease because of taxes, charges, PRSI, etc, etc. So just stop paying the mortgage. What can the bank do? Repossess it? Fine. They will of course be able to come after you for the balance but you stand up in court, tell the judge that you can't afford to pay them anything, get a payment plan that you can deal with and off you go.

Your credit rating will be in sh**e but, let's be honest, it is anyway. To be honest, it is the only way out of the problem for you. Otherwise, keep on paying. You could try threatening the bank with this, as they are well aware of the risks of default, and see who blinks first.

I am not advising you to take this course of action, I am merely saying it is open to you. Short of immigration & bankruptcy, I can't see too many other options.

 

[LittlePiggy]

With regard to the first point in bold above, what's the point in worrying about something that doesn't affect you at the moment? You might as well worry about asteroids hitting your house.

I worry about, and over-analyse, everything. There is no changing that I am afraid!

With regard to the second, are you suggesting there are many people "out there" who wish to move to a house that costs the exact same as the current outstanding amount on their mortgage? I don't really understand this point - the bank would be giving you (presumably) more than 100% of a mortgage or am I reading this all wrong?

I meant move to a house with the more or less same value as their current house. For example, if my house is worth 100k, I have a mortgage on it for 180k, and I want to move to another house worth 105k, this is not allowed. But if there was a mechanism to allow the outstanding 80k NE to be transferred to the new property, and I provide the 5k short, I have not increased my debt (I still owe the bank 180k) and the bank have not incurred new costs. I have, however, moved house to suit my needs.

Do bear in mind that I am unfamiliar with the detail of how these things work, so I am thinking very much from a simple man's point of view. I speak of a "mechanism" with little idea on how that would work.

And yes, I do believe people could quite possibly want to move to another house of the same or similar value. They may want to upsize to a cheaper area or move to an expensive area but are prepared to downsize.

If you do wish to move at some stage in the future would you not be better off not over-paying so that you can have some sort of a deposit?

I really was speaking theoretically... I haven't the intention to move currently. Your point on whether to overpay or squirrel money away is a good discussion for another day!

 

[bugler]

To answer your question, probably nothing for YOU. You see you are not of systemic importance to anyone. You'll carry on doing your best, paying as much as you can until something catastrophic happens (illness, redundancy, etc). If you want to do solve the problem, do it yourself. Your problem is one of debt management and in that situation, you have to prioritise the debts. Your PPR is the most important, the second house is not. Chances are it will be decades before it gets back out of NE and your income on it is going to decrease because of taxes, charges, PRSI, etc, etc. So just stop paying the mortgage. What can the bank do? Repossess it? Fine. They will of course be able to come after you for the balance but you stand up in court, tell the judge that you can't afford to pay them anything, get a payment plan that you can deal with and off you go.

Your credit rating will be in sh**e but, let's be honest, it is anyway. To be honest, it is the only way out of the problem for you. Otherwise, keep on paying. You could try threatening the bank with this, as they are well aware of the risks of default, and see who blinks first.

I am not advising you to take this course of action, I am merely saying it is open to you. Short of immigration & bankruptcy, I can't see too many other options.

Did you read the OP's post? Why do you say their credit rating is poor?

There is no indication from the original post(s) that the OP is under financial duress of any sort, or that they are struggling to repay. They simply don't like the 'feeling' of NE, and potentially would like a bigger house.

Are immigration, default, and bankruptcy now the responses to being in this scenario?

 

[mcaul]

There are a lot of people that have no understanding or feeling for those who got caught in the bubble. That's a sad state we have got ourselves into.

Thankfully I'm not in negative equity and have a dream house and don't care whether its worth 1c tomorrow or €1m as I won't be moving. But I have staff and friends who are in negative equity and have tried to put a positive spin on their situation.

Example. Staff A purchased in 2005 for €225,000 and house a few doors away is on market for €150,000.
Their mortgage balance is about 200k.

BUT - they have a 0.95% tracker and have now lived in the house for 6 years and morgage balance is 200k. they also have mortgage interest relief for another few years and their net mortage is about €730 after the most recent reduction.

Whoever buys the neighbour house (assuming 140k and after January) won't have mortgage interest relief and certainly won't have a tracker. Assuming a €140k mortgage, they will be paying €720 per month (based on 4.5% interest rate).

So the difference between buying then and buying now is €10 per month!

OK, so this calculation is not for everyone, but if you have a tracker and still have mortgage interest relief, you are not paying a huge amount over the monthly payments you would be paying now on current available interest rates.

As for debt forgiveness, I doubt if it will happen, but I do think some banks are already facilitating negative equity loans to some people - these are separated from the property and are paid off as a separate loan and allows for the homeowner to move house a lot easier. A more widespread availability of this type of loan with minimum interest (ecb rate) is probably one of the solutions to many people's problems where the actual payment is not an issue, but the negative equity is preventing a move.

 

[andycole]

I believe that anybody who has bought a home and is experiencing the pyrite problems with the quality of the construction of their house should be entitled to
either a new home similar in build to the one they are presently living in - or if a similar house in a similar location cannot be identified by the Government should then be entitled to be released from the mortgage contract's. No questions asked - because it is not acceptable that people are being left in houses that were not properly built by developers and builders. And I'll go further and say that the amount of mortgage payments that the people have paid should be totaled and then subtracted from the price of their replacement home or else refunded to them!

And if this pyrite problem is located within Apartment Blocks then it affect the complete block of Apartments and everybody living in them. So again as above - these people should be treated fairly as well - either placed in new homes in similar location - or if none can be found then refunded their mortgage payments paid to date!

 

[STEINER]

I don't think anything will be done about negative equity.

Out of curiosity I looked up nearby property for sale. One 3 bed which was brand new at 360k 5 years ago is on DAFT for 160k. I don't know how they can afford to take that much of a hit, assuming that the original buyers are the current sellers.

 

[Swyper]

One thing that really should be done about negative equity is the creation (forced on the banks if necessary) of negative equity mortgages. It is ridiculous in this jobs environment that it can be very hard to fill an experienced-position vacancy. Too many 30-somethings are so handcuffed by negative equity that they are unable to move within the country to take jobs. That is bad for the economy, and there is no loss to a bank which just changes the physical property that the loan is secured on. The banks would not even need new capital for that.

When we're making it easier to emigrate than move from Dublin to Cork, something is seriously wrong.

 

[cormirl]

I am in negative equity also

To not feel like I have no control over where I can live. To escape from feeling trapped. To no longer have a noose of negative equity around my neck. To be able to make decisions for the future for our family. Clubman, you obviously are not in negative equity because that is not a question you would have to ask if you were.

This noose you are talking about is exactly how i feel and i'm so dam angry.It kills me to pay any more for my house in Navan that has lost at least 160k since the time of purchase and I reckon will drop another 20-30k over the next few years.I'm seriously considering default and saving my mortgage repayments for another place in 10 years time that I can buy with cash...Fxxx the banks,they have received bailouts while we foot the bill and pay off debt of NEs that are unsuatainable.Life is too short.Everyone needs to default...My hse cost 280k today I would be luck to get 120K,more austerity and emigration means less demand,prices keep dropping...So I'm looking at it from the point of few that a third of the way through my mortgage term and my house is only worth a third of its original cost,what am i paying for!...the maths don't add up..

 

[tvman]

So I'm looking at it from the point of few that a third of the way through my mortgage term and my house is only worth a third of its original cost,what am i paying for!...the maths don't add up..

You're a third of the way through your mortgage term and presumably you owe exactly what you thought you'd owe at this stage, when you signed the mortgage contract on day one.

These maths add up - you're paying because you signed a contract.

If your house had increased in value would the bank be entitled to say "actually we're going to increase your mortgage amount to compensate"?

 

[Pope John 11]

I'm seriously considering default and saving my mortgage repayments for another place in 10 years time that I can buy with cash.

But could the banks take this new cash house off you if you fail to make payments on your present house?

 

[so-crates]

This noose you are talking about is exactly how i feel and i'm so dam angry.It kills me to pay any more for my house in Navan that has lost at least 160k since the time of purchase and I reckon will drop another 20-30k over the next few years.I'm seriously considering default and saving my mortgage repayments for another place in 10 years time that I can buy with cash...Fxxx the banks,they have received bailouts while we foot the bill and pay off debt of NEs that are unsuatainable.Life is too short.Everyone needs to default...My hse cost 280k today I would be luck to get 120K,more austerity and emigration means less demand,prices keep dropping...So I'm looking at it from the point of few that a third of the way through my mortgage term and my house is only worth a third of its original cost,what am i paying for!...the maths don't add up..

YoU are right, your sums do not add up.

120/280 = 3/7 not 1/3

93k as a current valuation would be a third of the price you deemed it was worth when you bought it.
You are repaying the capital you chose to borrow and the interest that accrues to it because you owe it, irrespective of the value of the house. Don't think that great plan of saving will work either, the debt will still be yours to clear, and that is what the savings would end up being used for. Give yourslf a break, you gambled on the property and in the short term, that hasn't panned out. It may not provide you with the current gain you hoped for but it may do so in the future. These are very long term investments yet so many people seem to expect them to perform brilliantly all the time. Plan instead to pay down your debt as fast as possible that way minimising your interest bill.