Should we stay or should we go now?

We purchased our 2 bedroom apartment on Dublin (North city) in early 2008 for €300,000 (bought off plans in 2007). Took out mortgage of 95% (standard variable rate – currently at 4.65%) – our current outstanding amount on the mortgage is est. €276,000. Our apartment is now in negative equity (obviously!) and while it is a decent size we have outgrown it. We have one little girl and no garden, it is up five flights of stairs and generally, we feel it is time to move on – it was never meant to be our forever home and I now feel stifled at the very thought of living there in the long term. How I laugh now when I think of the time when we thought it was a good investment for a couple of years!!
Anyway, luckily both my husband and I are in fulltime permanent employment with a net pay between us of €62,250 per year. Due to an extended maternity leave etc. we do not have any savings but intend to remedy this. We have two personal loans which take up about €350 a month and obviously we have childcare costs and bills etc. We have never missed a mortgage or loan repayment and while at the moment we are playing catch-up and trying to get ourselves back on track, we would consider ourselves to be “ok” financially.
My questions are:
1. Should we try to sell and negotiate with our bank to take it at face value (I’m thinking the most it will achieve is €220,000 based on what else is in the area and the size etc)? How likely would that be to happen?
2. Should we sit tight and see if anything is going to happen with regard to trade-down mortgages (although I have a feeling that these may be only offered to people in arrears?) – we could easily find somewhere bigger to suit our needs for less money, that would in the long term be a better investment all round…but I also know that if this is going to happen, practically even house in the area will have a for sale sign on it.
3. Should we keep it and rent? I am dubious about this – it’s the uncertainty that stops me from seeing this as realistic. Also, can’t bear the thought of someone else living in my home! At least if I sold it, it wouldn’t be mine anymore.
What I would really like is to sell it and be rid of it. Starting again seems like the only option to me but there are many things to consider and I am overwhelmed with “what if’s”. The other thing that is making us stall is that my husband is 40 (I am 30) and we don’t know how long it will take us to save a decent deposit and whether we will ever get the mortgage we will need because of his age.
Very sorry for the long post and if you have gotten this far, thank you. All advice, very much appreciated.

"1. Should we try to sell and negotiate with our bank to take it at face value (I’m thinking the most it will achieve is €220,000 based on what else is in the area and the size etc)? How likely would that be to happen? "
Not likely - the banks wants the "€276,000" you owe them

"3. . Also, can’t bear the thought of someone else living in my home! At least if I sold it, it wouldn’t be mine anymore. "
In the situation you are in you might be better off leaving sentiment out of the equation

Your valuation would seem to be rather high. Where are you getting the figure from?

I was in a not dis-similar position, though with no kids so a little more flexibility.

I think your €220,000 is way too high. I bought a €310,000, 2 double bed, 80ish sq m apartment by the river in islandbridge in 2002 with a balcony and nice views, and recently had it unnoficially valued by an estate agent friend who reckoned it is worth about €220-€230k now. Mortgage balance now c. €250k. I wanted to move to look for better work, so was faced with a similar decision

If you sell, you will be on the hook for the negative equity. Making an arrangement with your bank given the size of the negative equity and the fact that you have a decent income wont be a runner. It is looking increasingly like homeowners will only get help if their income is pretty much zero, and they are going to be out on the street.

So the only option left if you really want to move is to rent. I moved to London and rent my Dublin apartment. Push the mortgage back out to 30 years to make the repayments as low as possible, and therefore minimise the shortfall between the rent you will receive and the mortgage payments you will pay. There will be a slight shortfall, but rent on another place, plus the shortfall, wont be any more than the mortgage you will be paying anyway. Its working out for me OK so far anyway

And you own an asset, the debt on which will be paying down. In 30 years you will have an unencumbered asset which you can sell for your pension or your kids, or live in it for free in your retirement. My view is that I will never sell. In 30 years I will have something, which is better than being stuck with a negative equity loan after selling the house, and having nothing to show for it at the end!

So that is my suggestion. Rent it out

I feel the most realistic option for you is to rent a larger house for now. Have you done a calculation of how much it would cost you to rent i.e. how much you could let your apt. for, how much tax you would pay on rental income etc.

You state that you think you would feel funny if someone else was to live in your home. I don't think you would actually feel that way if you moved out.
I moved out of my home about a year ago and felt the same before leaving, but got over that within a week of moving out. In reality, most of your sentiment for the apt. probably relate to the furniture, pictures and other personal possessions you have there. If you move, most of them can come with you - that will lessen the blow.

Like others have pointed out - I think your estimate of the current value of your house is a little on the high side, I think it will be much less than you estimate.
Good luck with whatever you decide.