I bought a property in Dublin in 2006/2007 for 326k. The value of that property has now plummeted in value. Similar properties in the most recent phase of the same development have being selling for about 100k less. I have finished pulling out my hair and am now considering a few options.
Firstly, I’m single and don’t live in Ireland so don’t actually need a place here. I get paid well, about 70k (net) a year, so I can afford to keep it but what is the point?? I’m renting it out at the moment (illegally) and the rent is covering my mortgage repayments of 1200euro. However this is interest only and will increase to 1700euro in a year’s time so I will have to make up the shortfall of 500euro a month.
I borrowed 280k and reckon when the dust settles I will be about 50-100k in negative equity not to mention the loss of the 45k in saving I put into it. I would have to make up the shortfall in the repayment every month for an asset that is worth allot less than what I paid for it, for probably the next 10 years. I want to cut my losses and let the bank take the hit. To give the bank the keys and tell them I can no longer meet the repayments, say goodbye and leave the country.
In the US they call it jingle mail. Where a person posts the keys of their property back to the bank and they say they have gone bust. I bank with an offshore bank that has nothing to do with my Irish lender.
How do I do this here in Ireland?
How will this affect me in the future?
Will they write it off as a bad debt and leave it at that or will they chase me for the rest of my days?
Will they try to access my money in foreign banks?
How long will I be blacklisted for and will that only be in Ireland??
If you do this and ever plan to come back to Ireland, you will be pursued for the shortfall between the mortgage and the selling price of the property.
If you leave the country forever, there isn't much chance that the Irish lender will be able to chase you for the outstanding amount.
I don't mean to sound harsh, but why screw the rest of us that will attempt to do what's right within the societal structure that we live within? or did I miss some thing here.
Ultimately, if you and others 'opt' to drop the banks in the sh*t it will be the rest of us who will pay. We are already paying for what the sub prime in far off places have done.
my advice is think of it as an investment for the future which will come good again.
Til then, you are a responsible adult. Don't take that responsibility lightly.
I hope it works out for you.
You may even need to leave Europe...
Disclaimer: I'm not a financial advisor
In the states once the bank forecloses the former owner can escape with a with nothing more than a poor credit rating for a few years. This dates back to laws introduced after the great depression.
This is not the case in Ireland. You can be pursued through the courts for any shortfall. You can even go to jail for not paying the court imposed payments resulting!
So no you can't just post back the keys to the bank and get off scot free.
I agree with AnCatDubh except for hoping it works out for you. I hope the taxman screws you.
You don't, there is no provision in Ireland for this.
Irish bankruptcy laws are 19th century.
Who knows?, but you're going to have to keep looking over your shoulder.
They will probably sell it on to a debt collection agency for cents in the Euro, The agency will chase you for the debt and get to sell the property.
Some agencies can and do pursue you over multiple jurisdictions.
I'm not aware of any legislation that allows them to do this, though with widening powers in the future, they could freeze your assets. Just as well we voted no to Lisbon....but that's another debate.
Bankruptcy in Ireland
I know you're saying "what if I did this" and "woe is me, this is my situation "
But you're not the only one with this problem, and if you do"let the bank take the hit", it's not really the bank, they have customers who will have to bear higher interest rates and charges to make up for your fecklessness. You considered buying, listened to people saying "you can't lose on property, now's a great time to buy", ignored those who said "it's a bad idea to buy, property is overvalued" and made your decision. So you've made your bed, lie in it (in your overvalued apartment)
It's worth noting that banking practice means that banks will loan much more than they actually hold in deposit. So it doesn't need every morgage holder to default on their loans, just some of them. This is why so many banks are failing at the moment.
So you made a bad investment at a time when voices were starting to get really loud about which way the property market can move.
Oh my God, and the tragic thing is you're probably not alone in this.
1) You bought to make money. Unfortunately the value of investments can go down as well as up. Yours is on its way down. Tough. But if you can technically pay for it, you're not technically bankrupt.
2) you're renting it out illegally - bang goes any sympathy I might have had for your plight. Tax issues. This country does not need tax dodging absentee landlords any more now than it did 200 years ago.
1) you want to cut your losses. So far okay. Sell the property. Oh - you don't want to face the 100K shortfall between your outstanding debt and likely property liquidation income. You want the bank to take responsibility for your bad investment. What planet do you think people here are on? Do you think that's even remotely fair to other people in the country and the banks and god knows I don't do sympathy for the banks but I've enjoyed not having to pay bank charges for a while.
I don't care. Jingle mail does not exist in Ireland.
You can't do it.
Credit record in tatters and with likely consolidation in the banking sector probably on a European level if you're anywhere there, you're in trouble.
They will liquidate your assets up to and including your pension as far as I know and chase you for the balance.
Open to debate. Depends on the court system where you are and if they can find you which is increasingly easy.
I believe the legislation provides for 12 years but not expert there. Me personally I believe in paying my debts.
Sell the property and take the 145KE hit. That is the legal and moral answer.
It really is only a matter of time before debt collection agencies look beyond Ireland for their debts, so I suspect this will come back to bite you, unless you plan to leave the EU forever.
If everyone was like you, and simply ran away from their problems, the world would be completely ****ed. Be a responsible human and clean up your mess.
A lot of what has been stated so far has been inaccurate.
There is really very little practically that the bank can do if you just decide to hand in the keys one day and abscond from the jurisdiction. It is a civil matter, as you know you will be liable for any shortfall between sale price and outstanding mortgage/fees. The bank will probably obtain a judgement in this amount and seek to enforce it in other ways. e.g. if you have any other property in the jurisdiction they will register a judgement mortgage against it.
There are legal mechanisms for enforcing judgements obtained in one country in a different one. But in reality are rarely utilised against individuals, unless you are easily located and are a 'good mark' i.e. significant assets in another country, as banks are pragmatic and will not throw good money after bad if there is little prospect in recovering the debt. But are your foreign assets potentially at risk? The answer is yes.
Forced bankruptcy is not a runner from the banks perspective as it is very expensive and doesn't benefit them. Once a judgement is obtained against you the bank has 12 years to enforce it, before it becomes statute barred. If you intend returning to Ireland in this time (and the bank finds out) they can seek the normal debtor remedies e.g. installment, committal, etc. I'm not a banker, but I doubt whether this bank will ever deal with you again nor will any of its subsidiaries. Also credit in this jurisdiction will be a problem for a considerable period of time.
It's not actually as uncommon as you would think for someone just to 'do a runner' leaving the keys with the bank. That is one of the reasons why repossession levels in this country are lower than others. Although, it's always better to negotiate with the bank and seek their permission to sell the property yourself.
We are in a once in a lifetime global economic depression and 18% unemployment by 2010 cannot now be considered out of the question. This event will lead to a surge in people abandoning property they can no longer afford, banks are going to take a hammering from developers failing, they will need to raise cash and will sell the property for whatever they can get, the remaining debt will be sold to a debt collection agency that will pursue you.
dats_right is correct in what he says, but I believe the scale of the collapse is such that banks will soon have little choice in the matter, they need cash. Also since the property is not the original posters principle primary residence, there will be no leniency shown.
Sadly, there are many people in the same boat as the original poster, some that even have multiple properties on IO mortgages across Britain and Ireland, they are now waking up to the fact that leverage feels great until it bankrupts them.
So you stupidly bought at the very top of the market, after years of warning that prices were unsustainable, and now expect others to indirectly bail you out.
And we should have sympathy because...?
I'll probably get slapped over the head for suggesting the OP is trolling. Something about that post doesn't ring true. And if it isn't, I'm sure it's not that easy to welch on your debts. You might be able to get away with it now but down the line you won't be able to get a car loan or buy another house.