Mortgage difficulty

turniphead

Hi there,

I'll try keep this short because I'm desperate for help and advice.

Myself and my brother bought a 410,000 house in Kildare in 2006 as first time buyers. We were mid 20s at the time with civil service jobs and we got a 100% mortgage from EBS. Hindsight is a great thing but obviously this was a huge mistake.

We've never complained and got on with it and have always paid our mortgage each month which has been a great struggle over the years. The mortgage at the moment is just short of 2,000 per month.

Recently we reached a point where we couldn't continue like this. So many sacrifices are made each month to pay the mortgage. There has to be more to life. We decided to approach EBS to see if they would adjust our monthly repayments. They sent us a form to fill out and we've just returned it.

I'm fully aware there are so many people/families in worse situations. I genuinely feel guilty even asking for help. This house is just a burden to us. Unlike others we'd have no problem losing the house. It would be the greatest weight off our shoulders if we could return the keys and move on with our lives. Obviously that can't happen.

Basically I'm asking is this our life sentence or do we have options? Thank you for any help and advice.

NIMAN

This is a difficult one.

It might have been a big mistake but you weren't to know that at the time, and many will say you both entered into this contract of your own free will, but I think you accept that ok.

I assume you both still working? If so, and you can afford to pay the mortgage, then there is the likelihood that EBS will not entertain a change in payments as your circumstances haven't changed. It would be different if you had lost your jobs and simply could not pay it back.

As you mention, many are struggling to pay their mortgages. Not sure if you are struggling to pay yours or just fed up with having such a large burden round your neck as such a young age, but either way some good advice back in 06 would have stood you in good stead, but I guess you got caught up in the hype like the rest of the country.

Best thing to do is arrange to chat to your lender, and see what they have to say. Stress to them that you are struggling to pay and see what options, if any, they suggest.

Or you could take the option of stopping paying it, but I wouldn't advise that without talking to a legal person first, as the default could haunt the two of you for a long time.

Hope it all works out for you.


Edit: sorry re-read your post and see you have already started contact with your lender.

dharma200

This might be of interest to you.. perhaps other banks will follow ...http://www.irishtimes.com/business/personal-finance/debt-free-in-three-months-with-new-bankruptcy-option-1.1820244

draiochtanois

This post has been deleted.

NIMAN

dharma200 wrote: »

This might be of interest to you.. perhaps other banks will follow ...http://www.irishtimes.com/business/personal-finance/debt-free-in-three-months-with-new-bankruptcy-option-1.1820244

But this is why I advised to seek legal advice, because I am sure to declare yourself bankrupt is a very serious step, and one which might not be the best option if you can still afford your mortgage.

What about renting out the full house OP? Is it in a location where it could be attractive to a family? Say you even got 1000 rent per month, it would half the outlay from you and your brother every month and maybe bring a bit of relief?

turniphead

Cheers NIMAN,

Really appreciate you taking the time to reply. I suppose that says it all really.

We're both still employed alright and hopefully will be for a long time which means we can just about cover the 2,000 each month. It leaves no room for anything else though.

So unless EBS slightly adjust our payments down we'll be struggling by for the next few decades. Awful thought but our own doing.

NIMAN

Its not much to look forward to if you can just about cover your mortgage every month, you are both still young and need to have some other things in your life too.

It was obviously bad advice/decision on the part of your lender to let you have such a crippling mortgage in the first place. Did anyone ever say to you " I think this mortgage might be too much for your income". I am guessing not, as they rarely asked people these questions and we just happy to shift another mortgage.

turniphead

draiochtanois wrote: »

Do you have a spare bedroom or bedrooms to rent out to make it easier?

Yes, we have a spare bedroom which we rent from August to May. It's a huge help. We haven't declared it to revenue though because we can't afford to pay tax on it.

turniphead

NIMAN wrote: »

Its not much to look forward to if you can just about cover your mortgage every month, you are both still young and need to have some other things in your life too.

It was obviously bad advice/decision on the part of your lender to let you have such a crippling mortgage in the first place. Did anyone ever say to you " I think this mortgage might be too much for your income". I am guessing not, as they rarely asked people these questions and we just happy to shift another mortgage.

No, like so many others we were never asked. I think they just saw two decent lads with career jobs and a pension at the end.

At the time it seemed the sensible and mature thing to do. Team up with the brother so that we could both get on the property ladder. How stupid!

Jasper79

turniphead wrote: »

Yes, we have a spare bedroom which we rent from August to May. It's a huge help. We haven't declared it to revenue though because we can't afford to pay tax on it.

You don't have to pay tax if renting out room/rooms and getting less than 10k a year, it's different to renting out the house as a whole where there is income tax to be paid.

turniphead

NIMAN wrote: »

But this is why I advised to seek legal advice, because I am sure to declare yourself bankrupt is a very serious step, and one which might not be the best option if you can still afford your mortgage.

What about renting out the full house OP? Is it in a location where it could be attractive to a family? Say you even got 1000 rent per month, it would half the outlay from you and your brother every month and maybe bring a bit of relief?

We've often considered renting the whole house. It's in Maynooth and would have guaranteed rent from Aug-May.

The most we'd get renting it is about 950 per month. So we'd pay the remaining 1000. Add to that the extra rent we'd have to pay to live elsewhere (minimum 350 each per month)

So our remaining monthly outlay is minimum 1,700 (not including tax on rental income, bills, etc.) By my reckoning we'd hardly save anything moving out and renting it. Might even cost us more!

turniphead

Jasper79 wrote: »

You don't have to pay tax if renting out room/rooms and getting less than 10k a year, it's different to renting out the house as a whole where there is income tax to be paid.

Thanks Jasper. I wasn't aware of that. Unfortunately I don't have great knowledge of revenue matters - what rent is taxable, what rent isn't

Jasper79

turniphead wrote: »

Thanks Jasper. I wasn't aware of that. Unfortunately I don't have great knowledge of revenue matters - what rent is taxable, what rent isn't

No problem, how much negative equity is the house in ? If not too bad could see about selling and converting shortfall into a personal loan between you and your brother .

turniphead

Jasper79 wrote: »

No problem, how much negative equity is the house in ? If not too bad could see about selling and converting shortfall into a personal loan between you and your brother .

I'd love that but unfortunately the gap is too big. Roughly about 360,000 still owed and the value is max 200,000 at the moment

turniphead

Jasper79 wrote: »

No problem, how much negative equity is the house in ? If not too bad could see about selling and converting shortfall into a personal loan between you and your brother .

I'd love that but unfortunately the gap is too big. Roughly about 360,000 still owed and the value is max 200,000 at the moment

Jasper79

turniphead wrote: »

I'd love that but unfortunately the gap is too big. Roughly about 360,000 still owed and the value is max 200,000 at the moment

yeah that's bit much alright, renting the rooms as you are doing is probably best option, is it one spare bedroom for rent ?

turniphead

Jasper79 wrote: »

yeah that's bit much alright, renting the rooms as you are doing is probably best option, is it one spare bedroom for rent ?

Yeah. Just the one spare. Grateful to have it and rent it. We'd have no chance otherwise

Jasper79

turniphead wrote: »

Yeah. Just the one spare. Grateful to have it and rent it. We'd have no chance otherwise

Yeah least have that, 400k for a 3 bedroom house in Maynooth seems crazy even for 2006.

NIMAN

You are in the Catch 22 situation where you have a mortgage that technically you can afford to pay, but which means you have no life outside of that mortgage.

I am sure the country is full of thousands of others in the same situation, you hear about the 'working poor' all the time, simply working to pay bills. Of course there is more to life than that, but whether you take the course of action that some may have done, and stop paying your mortgage, is a big decision not to be taken lightly, as if it ever came to a court case or judgement, you will be seen as having the income to pay your debts.

Again all I can say is talk to them in person (forget about filling in forms), chat to MABS or Citizen Advice centre or a solicitor and all the best.

niceoneted

What's your take home pay like for you both. Is there ways you can cut back on some hints to make money free for other things.

jcon1913

turniphead wrote: »

Yes, we have a spare bedroom which we rent from August to May. It's a huge help. We haven't declared it to revenue though because we can't afford to pay tax on it.

another poster already picked up on tax relief on renting a room in your own home.

turniphead

Thanks everyone for the advice. There's some really helpful points being made. The mortgage is due out on Monday and we simply do not have the 1,950 to pay. Our lodger has moved out so we get no rent to help us for the next few months.

We have a direct debit set up but obviously it wont go through due to insufficient funds. We're going to go to an EBS branch with roughly 1,200 and hopefully pay that in. Does anyone have an opinion on this?

The way we see it is that it's better than paying nothing at all and shows that we're making an effort.

niceoneted

Yes that's good to lodge what you have but you should Leo write to the bank. You could look for a period of interest only. Bank will look to have sfs forms filled out which will detail all income and expenditure. Perhaps you could some of that info and people may be able to tell you where you might make savings. Might it be a case of mismanagement of money.

ShowMeTheCash

It looks like you both got stung here and because you probably don't really have the circumstances to perhaps just walk away you now have a huge burden to pay back.....

What % interest are you paying? Is it fixed? Tracker?

Do you like the house? Do one of you think you will want to live there long term?

Even at todays rate say 4% your interest on the remaining balance is 14K a year and thats just the interest.

Thats 7K a year each and in 10 years it will be 5K 15 years 3.5K...

If you are looking to get rid you are not going to be able to walk away from the debt whilst still working like you guys are, but you can always seek leagal advice around this.. you never know!

If you sell the house and you get the 200K for it.
You guys will have a 160K shortfall... 80K each.

Granted you will have nowhere to live but your burden is much smaller...

If you guys paid back a debt of 160K at 2000 a month like you doing at 4% you would pay the shorfall in 8 years.
The interest on it is 6400 a year and not 14000.

Paying back the house at 360000 is going to take 24 years.

This might sound harsh but you abviosuly did not buy the house as a home it was more an investment else you should be able to afford it.
Your investment like any business I guess has tanked...

The housing market in Dublin is on the rise so you might be able to get a good price for the property.

You do not want to walk away, if the house went to auction the bank could sell for 100K and still come after you for the 260K...

Personally I would be looking to sell for what I could get see what offers you get and decide with yout brother what is an acceptable loss..

Considering you are blowing 14K a year on interest alone.

turniphead

ShowMeTheCash wrote: »

It looks like you both got stung here and because you probably don't really have the circumstances to perhaps just walk away you now have a huge burden to pay back.....

What % interest are you paying? Is it fixed? Tracker?

Do you like the house? Do one of you think you will want to live there long term?

Even at todays rate say 4% your interest on the remaining balance is 14K a year and thats just the interest.

Thats 7K a year each and in 10 years it will be 5K 15 years 3.5K...

If you are looking to get rid you are not going to be able to walk away from the debt whilst still working like you guys are, but you can always seek leagal advice around this.. you never know!

If you sell the house and you get the 200K for it.
You guys will have a 160K shortfall... 80K each.

Granted you will have nowhere to live but your burden is much smaller...

If you guys paid back a debt of 160K at 2000 a month like you doing at 4% you would pay the shorfall in 8 years.
The interest on it is 6400 a year and not 14000.

Paying back the house at 360000 is going to take 24 years.

This might sound harsh but you abviosuly did not buy the house as a home it was more an investment else you should be able to afford it.
Your investment like any business I guess has tanked...

The housing market in Dublin is on the rise so you might be able to get a good price for the property.

You do not want to walk away, if the house went to auction the bank could sell for 100K and still come after you for the 260K...

Personally I would be looking to sell for what I could get see what offers you get and decide with yout brother what is an acceptable loss..

Considering you are blowing 14K a year on interest alone.

Thanks very much for your reply. That's the harsh reality of it.

We've discussed at length cutting our losses and selling but we simply can't afford to pay a minimum of 2000 per month for 8 years with nowhere to live.

The house means absolutely nothing to us. We'd be gone tomorrow if we could. Selling just isn't a viable option. The 160000 shortfall is just too much.

We pay a variable rate with EBS. I'm not sure what the exact % is but in total we pay just shy of 2000 per month.

It seems being employed with stable jobs is almost punishment. If we were unemployed we would apply for bankruptcy and gladly move out and give back the house. Eventually we'd be debt free and have no home. That option just isn't available to us because we're working.

Thanks again for your help and advice. There just doesn't seem to be any solution for us

hillbloom

I feel very sorry for those lads! Maynooth is a great town in which to own a house. There is a terrible shortage of rented accommodation for professionals there. Just look at Daft.ie & the number of viewings on any particular house to let, a couple of hours after been advertised. Ye would be able to rent it no bother but then where do ye live! Dont despair!!

turniphead

hillbloom wrote: »

I feel very sorry for those lads! Maynooth is a great town in which to own a house. There is a terrible shortage of rented accommodation for professionals there. Just look at Daft.ie & the number of viewings on any particular house to let, a couple of hours after been advertised. Ye would be able to rent it no bother but then where do ye live! Dont despair!!

Cheers for replying. I'm sure we'd rent it out no bother alright.

I've mentioned previously how we don't think renting is viable because we'd still be paying almost 2000 per month by renting and making up the monthly mortgage deficit.

It's a three bed semi. We've already one room rented. For the income we'd get for the other two rooms we'd nearly spend on renting two rooms ourselves.

jcon1913

turniphead wrote: »

Cheers for replying. I'm sure we'd rent it out no bother alright.

I've mentioned previously how we don't think renting is viable because we'd still be paying almost 2000 per month by renting and making up the monthly mortgage deficit.

It's a three bed semi. We've already one room rented. For the income we'd get for the other two rooms we'd nearly spend on renting two rooms ourselves.

Have you thought of sharing a roonm or is that a bridge too far?

Could you rent one of the ''reception'' rooms downstairs i.e. the ''dining room'' not the TV room, if you have one.

Could you convert a garage or anything else to rent out?

Have you considered renting to someone for the whole year as opposed to part of the year? i.e. not a student.

draiochtanois

This post has been deleted.

ShowMeTheCash

You should talk to mabs they might be able to give you advise.
Are you guys married? kids?

Houses in London are going nuts again, Dublin will follow.

My prediction is this, Ireland got hit hard with the down turn, mostly peopel with a trade, smaller towns and smaller county's got it the worst.

So what is happening now is people are emigrating but some business are beginning to pick up, the bigger cities are usually the places that will pick up first so in the UK its london and ireland it's Dublin.

So for the rest or us that decided to stay we need to travel to the bigger cities for work, not all but more.

This drives the housing market up in the city and surrounding areas.

Maynooth is just close enough to Dublin to be workable for people, also it has the University so it is always a good rental area, and Intel just down the road. (I used to live in Beaufield green across from the spar and apache pizza ). Where in Maynooth is your house?

In the next few years you might find you can unload the house with a lesser shortfall....

You say 160K is too large what do you reckon is acceptable?

turniphead

OP here...

Just looking back on this thread and remembering all the hardship we went through but we managed to stick it out and come through the other side. It definitely was not easy but we sold the house this summer for just over the same price we paid for it. I never thought we would see the day. I can't fully explain how much weight was lifted when we sold it.

The main reason I'm resurrecting this thread is to give hope to anybody else who bought at the wrong time and have been struggling. If we got through it then anybody can! When we bought back in 2006 it wasn't out of greed or stupidity. We were 24 & 25 years old with full-time jobs and no home. Please remember that the narrative at the time was that 'prices are continually rising' and 'if you don't get on the property ladder now then when will you get on!?' I'm sure we've all heard various experts over the years saying how stupid people were to buy between 2005-2007. Hindsight is a great thing but so many people did not buy for reasons of greed. They bought for reasons of necessity and even fear. They were afraid if they didn't buy at the time then they'd never own a house. Obviously we have a different outlook on all this now but the assertion that everybody buying houses during those years were greedy or reckless is a complete nonsense. I'm sure the majority of people who did buy suffered the consequence and paid the price for their mistake.

I do not know what to make of the current property market. The fact that we got slightly more for our house than what we paid in 2006 suggests to me that it is a crazy time to be buying. We have benefitted from the current market and we are very grateful.

Best of luck to anybody who was in a similar situation to us or is still struggling to get out of the hole. I really hope our situation shows that you can come out of it.

Jim2007

There is a basic problem with housing in Ireland and that is that the voters believe that a housing policy based on taking on huge amounts of debt or relying on social programs to provide a roof over peoples head is a good idea... so yes to a great extent you are limited in your options in may parts of the country and it is very easy to get carried along in a bubble, that is why bubbles happen.

But there are still two marketing gimmicks that you need to challenge before making a decision: getting on the property ladder and the idea that paying rent is dead money. If you take away all the hype and look at it purely from a financial point of view it can't be recommended. From an investment point of view it is high risk asset class with a poor rate of return as opposed to other asset classes and from a utility point of view you will for the most part your life be paying for over capacity.

Property bubbles are not a new thing, they have been around for a long time and they are not going away anytime soon. And for that reason people need to be very honest with themselves when making a decision:

• If you suffer a 20% loss of income, who will that impact your ability to live comfortably
• If you buy in an out of the way location and you loose your job, how will you manage
• If renting is an alternative what is genuinely wrong with it that would make taking on a huge financial burden a better option - dead money is not the answer. Because if it was there would be a lot of other things you would not be doing either.
• Taking on a huge financial risk should be a reluctant last option

This should be a cold calculated decision, not something that you do because everyone is doing it. If fact when everyone is doing anything related to financial products, it is usually a time to be very cautious.

SuperO'B

Delighted it worked out in the end. Started reading the thread and didn't notice the year was 2014. Very happy to see at the end that it's all turned out well for you guys.

amdublin

Fair play to you and so glad it worked out in the end!!! Do you mind me asking how did you do it? Did you continue leaving together for the next 7 years? Renting the room etc?

What are your thoughts now? Will you buy again (separately) the pair of you etc?

Effects

Glad it worked out, and that you came back to give an update after such a long period.

https://www.boards.ie/discussion/comment/117925833#Comment_117925833

Please show your workings for renting making financial sense. Because where I am a grand a month of a mortgage will get a lot more than the same in rent. Even assuming (which is mental) that the house isn't going to be worth anything at the end.

Rents are more expensive than buying right now. That's part of what's causing prices to rise. And as long as the government keep subsidising and effectively putting a floor on rents they're going to stay extremely high.

turniphead

https://www.boards.ie/discussion/comment/117980707#Comment_117980707

Thank you. I don't really have a definitive answer for "how did you do it?" because so many things happened over the years. We just had to stick with it and make the best of our situation. There were definitely some dark times but we supported each other. At the time of starting this thread I really felt our future was very bleak. My brother was a bit more positive but everybody is different. Personally I thought it would never end and we were burdened for life.

My brother and I continued living together for a number of years but we also shared the house with a couple of students under a licencee agreement. Obviously that wasn't ideal as it was quite cramped at times with 4 adults under the one roof, sharing a kitchen & bathroom, but we needed the financial support. In 2017 I moved out and rented a much smaller place in Dublin with my partner. The extra payment I had towards rent each month was difficult but it was manageable due to an improving work situation. We were in our mid 30s at this stage so our lives had to progress at some point.

My brother remained in the house and eventually his partner moved in with him. They had to live with students too which was far from perfect for them but it meant we could pay our mortgage every month. We were very lucky sharing with students to be fair to them. We weren't greedy and charged under the market value for the rooms because we hoped they would be appreciative of good quality accommodation at a very fair price. Thankfully we never had an problems with the people sharing with us. The appreciative feeling was also mutual because we really would've struggled without the financial support.

Apart from the licencees we have had to be very sensible with our money. The mortgage still had to be paid every month. I wasn't reckless with my money and only spent what I needed. I have a 15 year old car and I have not been on any extravagant holidays. I can still recall days where there was no money in the account until payday and cornflakes for dinner but overall those days were few and far between. I learned that if I was careful with my money I could manage month to month. The mortgage was the priority and everything else would fall into place after that.

My thoughts now are quite mixed. My overall feeling is relief. I am so relieved that we managed to sell our house for slightly more than what we paid for it in 2006. I never thought we would see that again. For example, in 2012 the house next door sold for over 60% less than what we paid for ours. We were in a colossal amount of negative equity. In fact, as recently as 2019/20 we were still hovering around the negative equity line but in 2021 the market seems to have gone crazy. We took a chance and put our house on the market and ultimately couldn't believe the price we got for it in the end. We possibly could've gotten even more because there was a bidding war for it but we weren't greedy and took a best offer at an agreed deadline. We just wanted to progress the sale as quick as possible rather than let a bidding war drag on.

We're both renting now with our partners. I know rent is crazy money and that we're paying into something we don't own but I feel it gives me breathing space at this moment. Of course I would love to buy again but my gut is telling me to hold off for now. I am certainly no expert but I just feel the whole market is crazy right now and I don't want to get burned again. We were 15 years paying for our mistake of purchasing in 2006; I don't want to make the same mistake again.

amdublin

Good for you! And Good Luck in the future!!! Enjoy that breathing space for now