Split up - what to do with house

Hi,

I was wondering if anyone can give me advice or if anyone has been in the same situation.

Myself and my husband have split up & have a house together that we bought 3 years ago (paid €320,000) so as you can guess we are in negative equity.

We're not sure whether to rent or to sell. If we rent the house it will not cover the mortgage so we will still be both paying rent for ourselves & paying some of the mortgage also as well as life insurance etc.

Should we sell the house & see if we can get a loan out for the shortfall? Is there any way that doing this would give either of us a bad credit rating? Does anyone know how long the bank gives you to pay it back?

I imagine it will take a long time to sell the house, there are houses on the market similar to ours for around €245,000 and they've been on the market for at least a year. I think we will need to rent it even if we do decide to sell it. Is a good idea to have tenants in the house if its for sale? What if they don't clean the house when there is someone coming to view it? Do we still have to declare that we are renting it to revenue even if its just for a while?

At the moment we can both pay mortgage but my husband does not have a secure job & a few times in the past year i've had to pay the mortgage on my own. I'm worried that this will happen again.

I'd appreciate any advice, i'm really worried at the moment. thanks in advance.

Maryjo,

Sorry to hear about the split. From your post it would appear that you are both keen on resolving the mortgage situation so that is at least one positive.

If you sold the property, you would both be required to pay the shortfall. Although getting a personal loan each for the split of the balance may be a solution, you will pay a much higher interest rate on the personal loan.

The bank may be agreeable to converting the balance to a term loan, again at a higher rate, but it would probably be in joint names and any missed payment from either of you would affect the credit rating of both of you.

Your post says that they mortgage payment is greater than rent receivable, could the loan be switched to an interest only loan, even for the short term, so that rental income may come closer to covering the loan payment?

In your circumstances I would sell the house, especially as you both are in agreement. It's best to have a clean break.

Getting a loan for the shortfall doesn't give you a bad credit rating.

Renting it makes it harder to sell. If you haven't rented before I don't advise it, it's a lot tricker than you might think.

Best of luck as it's not a nice situation to be in, but the best thing is that you are both working on it.

Thanks for the replies.

We are both in agreement now thankfully (after he threathed to leave the country & let me deal with it) but i'd still be worried that it may not last long.

I guess the best thing is to ring the bank & ask them what sort of loan they would give us & how much it would be (do we have to get the loan from them or could it be from another bank?)

I don't think we will be able to stay in the house while we are waiting to sell, its just too hard so i think we are going to have to rent it.

Do i need to inform revenue even if we're only renting for a short while? We will be making a loss from renting it so how can they tax us on a loss?

Thanks again

MaryJo said:

... I don't think we will be able to stay in the house while we are waiting to sell, its just too hard so i think we are going to have to rent it...

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Sorry to hear about the tough situation you are in.

IMHO renting is the worst possible use you could make of the house prior to sale, for the following reasons :

• You may alienate a percentage of potential owner-occupier buyers once they discover it is rented
• If you get offers from investors they will be much lower than you might expect
• Organising a sale around a sitting tenant can be fraught with difficultiy
• To keep everything legal and above board, you need to register with the PRTB and suffer the frustrations and disappointments I understand fron other posts are inherent in dealing with them
• Your lender may want to change the terms of your mortgage when they discover you are renting
• You will need to change your house insurance.

I believe it may be better to avoid renting if you can, but please remain open to what other posters have to suggest.

If you are both living in the house then for the sake of getting through this quickly and smoothly then try to continue, do not rent it, sell as quickly as you can (especially as your other half may leave the country).

Contact your bank immediately and make an appointment for you both if possible to discuss your options. Another bank is probably not going to be interested in giving you a loan, but of course shop around. It is though of more interest for your bank to help you as that helps them.

And yes you will have to declare rent to revenue even if you let it for a couple of months and even if you are at a loss. In relation to rental losses these are not always clearcut so don't assume that because the house costs you more than rent received that it is actually a loss. It can be a proft from a revenue point of view.