Hi Calves
Let's look at your options
1) Pay Ulster Bank €1,500 per month for 5 years
2) You and your wife apply for a Personal Insolvency Arrangement
3) You and your wife sell the home and apply for a Debt Settlement Arrangement
4) You and your wife go bankrupt
Option 1 - Ulster Bank deal
You will be paying €18,000 a year, €12,000 of which will be capital.
At the end of 5 years, you will owe €540k
The house is worth €360k, so it would have to increase by 50% over 5 years to eliminate the negative equity.
You get the use of a €360k house for the next 5 years for a cost of €1500 per month.
if you go for one of the other options, you will pay far more than €1,500 to rent an equivalent house or you will get a far smaller house for your €1,500.
With an income of €90,000 you can easily afford €18,000 a year.
Option 2 - Personal Insolvency Arrangement Note that I have substantially rewritten this as the first version was very confusing. In fact, on reading it again, I am not sure what I was proposing myself.
A PIP would do the following calculation
1) You have an income of €7,500 per month
2) The RLE guidelines say that you can live on €2,500 per month before debt servicing.
3) That leaves you with €5,000 per month to pay towards your mortgage
4) But a €600,000 mortgage costs only €3,000 a month over 32 years -
your mortgage is fully sustainable and you won't qualify for a PIA.
3) sell the home and apply for a Debt Settlement Arrangement
You will have a mortgage shortfall of €240,000
Monthly income|€7,500
Monthly costs before rent|€2,500
Rent |€1,500
Available to pay towards shortfall|€3,500
Over 5 years|€210,000
So you get a write off of €30,000 plus your unsecured creditors
Bankruptcy
I don't think you can go bankrupt, as you are well able to pay your (reduced) payments as they become due. I think that the court would refuse you bankruptcy. In any event, you would have to attempt a DSA first.
Where will you be in 5 years' time if you take the UB deal
It will be something like the following
Mortgage: €540k
House value? Say €300k to €600k ( No one knows)
So you may still have big negative equity;
Or you may have positive equity.
But the most likely outcome is that you will still be in negative equity, but much reduced.
If they extend the deal, at some stage the value of the house will match the reduced mortgage - it might be 5 years, it might be 7 years, it might be 10 years.
The worst outcome for you would be that house prices fall and you would be in the same financial position as you are now.
You might ask Ulster Bank to agree to the following amendment. If you make the full repayments as per agreement for 5 years, that they will allow you to sell your house at the end of the 5 years and write off any shortfall.