In danger of defaulting on mortgage...

CaptainSubprime

I have a 300 grand, 35 year mortgage for a 2-bed, second-hand apartment in Dublin which cost me 360, bought at the absolute peak of the high prices. There is a 3-bed in the same block reduced to 260, but has been for sale for about a year. There is also currently a 2 bed for sale for 360 which has been on the market since last Jan.

I recently had to take a whopping pay cut and there is a good chance that the company I work for could go under, or that I could lose my job. With the pay-cut, it has left me virtually penniless.

My lodger intends to leave in a couple of months. If I don't find a new tenant, then I wouldn't be able to meet the repayments. Even with a tenant, I am practically on the breadline due to this wage-cut.

I really don't know to do. Can anyone offer any advice on possible available options? Perhaps there is someone else on boards that has been in a similar boat? What is the worst case scenario here, and what are the ramifications of defaulting?

Capt. Subprime

andrewh5

You must talk to your lender asp. Explain the situation to them and see what they can do. Don't adopt an ostrich approach as they will not be too keen to help you if you do.

Ramifications?
You will not get credit for years afterwards.
You may well have your home repossessed.
If it is you will be pursued for the shortfall between what they get for your home on the open market and what you actually oew them plus their legal costs.

connundrum

Is it too late to take out extra insurance on the mortgage? i.e. unemployment cover.

If thats not an option, I would definitely head into your bank/lending institute and lay it out on the table for them. Tell them your current situation and fears for the future - they may be able to help by offering a payment break, or reduction in payments for a period.

Worst thing to do is not tell them anything IMO.

road_2_damascus

CaptainSubprime wrote: »

I have a 300 grand, 35 year mortgage for a 2-bed, second-hand apartment in Dublin which cost me 360, bought at the absolute peak of the high prices. There is a 3-bed in the same block reduced to 260, but has been for sale for about a year. There is also currently a 2 bed for sale for 360 which has been on the market since last Jan.

I recently had to take a whopping pay cut and there is a good chance that the company I work for could go under, or that I could lose my job. With the pay-cut, it has left me virtually penniless.

My lodger intends to leave in a couple of months. If I don't find a new tenant, then I wouldn't be able to meet the repayments. Even with a tenant, I am practically on the breadline due to this wage-cut.

I really don't know to do. Can anyone offer any advice on possible available options? Perhaps there is someone else on boards that has been in a similar boat? What is the worst case scenario here, and what are the ramifications of defaulting?

Capt. Subprime

see if you can organise an interest only payment on the mortgage for a few years. A friend of mine has just done this

quozl

Definitely. +1 for please, please talk to your lender.

They'll much prefer you come to them and try and arrange something rather than they have to come to you after you miss a number of payments.

The first makes you seem like someone who can be dealt with, the second makes you seem like more hassle than it's worth.

One important thing to remember is how much money and time it costs a bank to reposses. And even worse if they have to chase you for the difference they failed to recoup on the sale.

It's in their own interests to try and help you get through this tough patch.

Also, I'd suggest talking to mabs.ie in preference to randomers on a web forum. It's MABS' job to advise people in these sort of difficulties.

markpb

connundrum wrote: »

Is it too late to take out extra insurance on the mortgage? i.e. unemployment cover.

Most insurance companies will refuse to pay out if they believe you had reason to suspect you would be made redundant when you took out the policy.

ntlbell

Get in touch with the lenders now.

Get in touch with MABS.

You shouldn't have a problem finding another lodger if you offer some value.

Cut back on everything you can, I know you said your on the breadline but I'm sure if you look to your current spent you can find some holes.

Get a spending diary going for a month and see where you can cut back.

sky
telephone.
car insurance provider
home insurance provider
daily cofee's lunches
monthly shopping.

etc etc

Victor

If things really do become bad, you may be entitled to some assistance with your mortgage from the local Community Welfare Officer.

shamblertine

Could he declare bankruptcy, and if so what would be the effect of that? Would he lose the house?

Also didn't the government introduce some law where you can default for a year or something and you won't be kicked out of your home? or was there just talk of that?

Victor

shamblertine wrote: »

Could he declare bankruptcy,

In Ireland bankruptcy is something done to you, not by you.

and if so what would be the effect of that?

Appalling

Would he lose the house?

Yes.

Also didn't the government introduce some law where you can default for a year or something and you won't be kicked out of your home? or was there just talk of that?

There was talk, but I don't think anything has been firmed up.

dny123456

Definitely talk to the lender about possible switch to interest only. How much are your mortgage repayments currently? are you on a fixed rate? (i.e. there might be a penalty for switching to interest only)

How much could you get if you rented out the whole apartment? Look at daft and see what they are currently renting for. You may be able move into a cheaper house share for yourself for a while, and just pay the shortfall between your interest only mortgage and the rent you could get.

There are always options, don't despair. If you can keep your head, you will get through this.

blast05

What would happen to someone in this situation if they just dropped the keys into the bank and emigrated.....

gurramok

blast05 wrote: »

What would happen to someone in this situation if they just dropped the keys into the bank and emigrated.....

They would chase for the outstanding debt unless the person went to Mongolia!

TwoShedsJackson

blast05 wrote: »

What would happen to someone in this situation if they just dropped the keys into the bank and emigrated.....

You'll be pursued for the outstanding amount. You can leave the keys in to hand the property back to the bank in the US, but not here.

CaptainSubprime

It's a city centre apt, so renting should not be a problem. Have decided to stick with it; selling at this point in time would be foolish. Perhaps in 2 years time, we might be looking at a sounder property market. Undoubtedly prices will be lower, but I imagine it would be easier to do business in a calmer economic environment. Things can change quite quickly, but many of the commentators who predicted the crash have predicted that prices will bottom-out this year.

My rent should take care of my mortgage outgoings, so I may just move to a cheaper apartment and rent.

ntlbell

CaptainSubprime wrote: »

It's a city centre apt, so renting should not be a problem. Have decided to stick with it; selling at this point in time would be foolish. Perhaps in 2 years time, we might be looking at a sounder property market. Undoubtedly prices will be lower, but I imagine it would be easier to do business in a calmer economic environment. Things can change quite quickly, but many of the commentators who predicted the crash have predicted that prices will bottom-out this year.

My rent should take care of my mortgage outgoings, so I may just move to a cheaper apartment and rent.

there's not a hope in hell of the market bottoming out this year.

CaptainSubprime

ntlbell wrote: »

there's not a hope in hell of the market bottoming out this year.

Perhaps next year it will. Who of us has a crystal ball? There's obviously a fair amount of idle speculation due to the unprecedented nature of the crisis, but a particularly sharp adjustment could see people return to the market, and there's your bottoming out. Either way, significant negative equity means means I'll just have to roll with it, and reappraise the lie of the land in a few years.

ntlbell

CaptainSubprime wrote: »

Perhaps next year it will. Who of us has a crystal ball? There's obviously a fair amount of idle speculation due to the unprecedented nature of the crisis, but a particularly sharp adjustment could see people return to the market, and there's your bottoming out. Either way, significant negative equity means means I'll just have to roll with it, and reappraise the lie of the land in a few years.

No one has a crystal ball..

but we have information, that information TODAY indicates that we're miles away from any bottom...

El Stuntman

ntlbell wrote: »

No one has a crystal ball..

but we have information, that information TODAY indicates that we're miles away from any bottom...

jesus ntl, there you go 'talking us down' again

I hold you personally responsible for the price of my gaff not being 4 times it's equivalent in Berlin.

The_Conductor

Lol.....
If you manage to find a reasonable economist (aka one not aligned to or with a vested interest in, the property market) they tell very sobering stories......

Commercial property is beginning to nose-dive at an accelerating rate- dragged down by an inability to attract tenants (total inability- rent free periods etc aside). This in turn is affecting an additional drag on the residential sector- as there was an assumption that many of the commercial units were dual-purpose- they could be quickly converted to residential usage with minimal outlay.

The Irish economy is now expected to contract by over 12% this year, and tax revenues are at 2002 levels. The economy is expected to further contract in 2010 and 2011, with a 3 year window considered to be realistic for stabilisation (of the economy in general). Immigration has stagnated, a net emigration of over 27,000 occurred in 2008, and this trend is continuing in 2009. There is still an underlying demand for housing units, but its greatly reduced, and is now thought to be substantially comprised of two groups- 1. the first time buyers happy to buy anything at all- at the right price and 2. purchasers of apartments over the past few years who are desperate to get out of them and into more appropriate housing units. The investor element is circling the bandwagons at the moment- with the continuing falls in rent its difficult (but not impossible) to get a reasonable ROI.

I don't think the market is going to get a lot worse- its more the case that we are wallowing in depression and the depression is unlikely to lift for quite some time.

S.

ntlbell

El Stuntman wrote: »

jesus ntl, there you go 'talking us down' again

I hold you personally responsible for the price of my gaff not being 4 times it's equivalent in Berlin.

I'm losing a bloody fortune I could of been a millionaire! :pac:

The_Conductor

ntlbell wrote: »

I'm losing a bloody fortune I could of been a millionaire! :pac:

Its only paper (literally....)

ntlbell

smccarrick wrote: »

Its only paper (literally....)

But it turns into an X5 right? RIGHT?

The_Conductor

ntlbell wrote: »

But it turns into an X5 right? RIGHT?

Lol- I wish.....
Actually, I don't :pac:
We've gone way off topic here though.

Has anyone got any more insights to offer the OP?

S.

CaptainSubprime

smccarrick wrote: »

Lol.....

The Irish economy is now expected to contract by over 12% this year, and tax revenues are at 2002 levels. The economy is expected to further contract in 2010 and 2011, with a 3 year window considered to be realistic for stabilisation (of the economy in general). Immigration has stagnated, a net emigration of over 27,000 occurred in 2008, and this trend is continuing in 2009. There is still an underlying demand for housing units, but its greatly reduced, and is now thought to be substantially comprised of two groups- 1. the first time buyers happy to buy anything at all- at the right price and 2. purchasers of apartments over the past few years who are desperate to get out of them and into more appropriate housing units. The investor element is circling the bandwagons at the moment- with the continuing falls in rent its difficult (but not impossible) to get a reasonable ROI.

I don't think the market is going to get a lot worse- its more the case that we are wallowing in depression and the depression is unlikely to lift for quite some time.

12% is a staggering figure. An option for me would be to do a fire sale and flog it at a bargain basement price, which a fair few people in my boat may attempt to do this year.

Having done a lot of wallowing myself, I don't think that a fire-sale would the advisable course of action. The fact is that there will be a bottoming out, at some stage. It's not as if it will ever be worth zero. I've a 2 bed city centre apartment with parking in a half decent area. Presuming that Ireland doesn't do a Zimbabwe, then I think I should be able to shift it in a few years at a more manageable loss. The location is its saving grace. I don't know what I'd do if I was stuck with a place in the suburbs.

stovelid

connundrum wrote: »

Is it too late to take out extra insurance on the mortgage? i.e. unemployment cover.
.

I looked into getting this some time ago and was struck (in the one or two policies I considered, anyway) by the fact that they all had a suitably vague condition voiding the policy if you had 'reasonable grounds' to think you'd lose your job.

Like who doesn't at the moment? .

I'd be pretty surprised if even a proportion of these policies pay out - given the deluge of claims they must be getting.

Maybe somebody can correct me.

Theboinkmaster

CaptainSubprime wrote: »

12% is a staggering figure. An option for me would be to do a fire sale and flog it at a bargain basement price, which a fair few people in my boat may attempt to do this year.

Having done a lot of wallowing myself, I don't think that a fire-sale would the advisable course of action. The fact is that there will be a bottoming out, at some stage. It's not as if it will ever be worth zero. I've a 2 bed city centre apartment with parking in a half decent area. Presuming that Ireland doesn't do a Zimbabwe, then I think I should be able to shift it in a few years at a more manageable loss. The location is its saving grace. I don't know what I'd do if I was stuck with a place in the suburbs.

A more manageable loss? I may have read your posts incorrectly but it seems you believe the market is going to reach the bottom quite soon and that the value will increase in a few years?

I believe if at the top of the market your apartment was going for €360k and is now going for €260k that there is every chance it could bottom out at €150k in 3-5 years time. I really don't think you'll see a city centre 2 bed reach €200k again in our life time.

It really is all about multiples of salary. If average industrial wages by years end if €30k then a city centre 2 bed selling for €150k seems waaaaaaay overpriced.

I'm afraid I don't have any real advice for you other than to share my prediction of what value your apartment will eventually have. I'd say to sell now if you could (even selling for €230k now I believe this will be much higher than you could hope for in a few years time) but ultimately your mortgage of €300k is the problem.....not really sure what to advise you're kind of stuck....

krugerrand

Theboinkmaster wrote: »

I really don't think you'll see a city centre 2 bed reach €200k again in our life time.

Theboinkmaster, just wondering what length of time you mean by the phrase "our lifetime"? I apologise in advance for any intrusion, express or implied, into your personal affairs.

Theboinkmaster

krugerrand wrote: »

Theboinkmaster, just wondering what length of time you mean by the phrase "our lifetime"? I apologise in advance for any intrusion, express or implied, into your personal affairs.

Say 50 years