Selling - do I need to tell mortgage lender straight away?

Cadiz

I'm worn out trying to cling on to my increasingly negative equity ridden property and I want to sell up.

However, I'm in the process of 'restructuring' my mortgage with my mortgage lender and I don't want to rock the boat until all that is signed and sealed.

Should I be telling them I plan to put the place on the market? The bloody thing probably won't sell anyway, but am I obliged at this stage to advise them that I'm putting it on the market?

Treehouse72

I am not 100% sure, but I don't think you can sell a property in NE.


Ed: I mean to say, the bank won't allow you.

Cadiz

Really?! Can anyone else confirm this is the case?

I realise that I would still have mortgage obligations if it sells for less than my mortgage but didn't think I couldn't sell at all..

Treehouse72

I found this from Ronan Lyons, who is Daft's economist:

Negative equity – where the house is worth less than the loan outstanding to the bank – effectively traps people in their homes, as they can only move if they can clear their whole debt, i.e. they can only move with the permission of their bank.

http://www.ronanlyons.com/2009/06/03/up-to-60000-households-threatened-by-negative-equity-and-unemployment/

I think in some circumstances the bank allow people to convert the NE into some other form of (unsecured) debt, but I think those cases are rare and in general you can't sell for less than the remaining mortgage and just carry the debt (the difference) with you.

Again, you'll need much better advice than I can give, but that's my understanding.

Cadiz

Hi Treehouse,

There's remarkably little online about this in the Irish context but I fear you are right.

From your Ronan Lyons link:
Negative equity.....effectively traps people in their homes, as they can only move if they can clear their whole debt, i.e. they can only move with the permission of their bank.

The Irish mortgage brokers blog:
If you are in serious negative equity then you can’t move house (by selling up)...

http://66.102.9.132/searchq=cache:LNI4Bme_sHkJ:www.mortgagebrokers.ie/blog/index.php/category/fixed%2520rates/+%22negative+equity%22%2B%22selling+up%22&cd=7&hl=en&ct=clnk&gl=ie


Askaboutmoney.com (usually fairly reliable) posters suggest you can't do it unless you could make up any NE shortfall from the sale or in special circumstances.
http://66.102.9.132/searchq=cache:IWvopBPh6zcJ:www.askaboutmoney.com/showthread.php%3Fp%3D738256+%22negative+equity%22%2B%22selling%22&cd=1&hl=en&ct=clnk&gl=ie


National Mortgage Services Blog has this cheery missal:
» Falling house prices and negative equity: once the value of your house falls below the amount you owe on it, selling is no longer a viable option for getting out of debt trouble. The housing market is so sluggish that quick sales are all but impossible anyway, trapping even willing sellers.

http://66.102.9.132/searchq=cache:GDzuAHr0U6gJ:www.nms.ie/blog/+%22negative+equity%22%2B%22selling%22&cd=42&hl=en&ct=clnk&gl=ie

I'm going to talk to my bank - I'll report back in case it's useful for others.

stepbar

Unless you can make up the difference between the sale price and what you owe, the bank WILL NOT let you sell your house. The bank can't stop you from putting the place up for sale, but they won't release the deeds unless the full mortgage is settled.

Cadiz

Talked to my bank. They are not, in principle entirely opposed to it. "At the moment we are looking at debt reduction, that's a priority" quoth the man on the phone. "Depending on the sale price we would not necessarily oppose this."

However, this applies to my specific set of circumstances. I have another mortgage with them that the debt could be rolled into (sorry - I should have made this clear in my first post).

The biggest issue would be the possibility of selling at all - a few cursory enquiries suggest things are dead, even in my reasonably well-located area.

This is all going to get a lot worse before it gets better imo.

Treehouse72

By the sounds of things the other mortgage is on your PPR and the one you are looking to sell is an investment. If so, then in effect what the bank are suggesting is a form of equity release on the PPR as opposed to allowing you sell a property in NE per se. As you say, this possible solution would be unique to each customer. I am not qualified to say how coming to such an arrangement would fit in - for good or ill - to the bank's avowed aim of debt reduction.

I think it would be a good idea to work out how much the place is costing you per month (on top of any rent you might be getting for it) and extrapolate out for, say, 10 years and see how much you'll have spent in that time (I think we can assume capital appreciation in that timeframe is unlikely). If that number looks bigger than the hit you'd take dumping it now (assuming the bank allows you) then I think selling might be an idea. I suppose it's possible your NE is so big though that it dwarfs your losses over the medium term, in which case it's a tough situation.

Fwiw, I agree that things are getting worse and not better.

Cadiz

Thanks for the advice Treehouse. I may be living in one of those by the time all this plays out.