Negative equity nightmare - the real cost of the property bubble

scobysnacks · 07-03-2011 03:24PM #1

I am Irish and bought into the property bubble in 2004. My apartment in Dublin 13 now sits at 70 grand less then I paid (if I am lucky), that's 50% down on the peak price . At the time 250 grand didn't seem unreasonable for a lovely two bed, two bathroom place with parking. It's not one of those empty places as it was finished well before the recession hit. I saved very hard for the deposit working two jobs. I didn't buy because I was greedy or stupid. I bought because I was sick of renting and wanted a place of my own. I didn't over borrow and bought within my means at the time. I thought as the years went by and wages went up it would get better but how wrong I was.

I went traveling and lived in Australia for a few years. I got recently made redundant and lost my visa (long story). So I am now back in Ireland with no job for the first time in my adult life and not entitled to dole. I'm 33 and have to live with my pensioner parents cause I can't afford to pay the mortgage (although the rent is now so cheap that it's only paying about half). My mother owns 50% of the apartment as I couldn't get one on my own at the time.

I've always been able to make the repayments but six years in and I am really feeling the strain as I an unemployed. My savings are dwindling, mostly been swallowed up by the mortgage repayments and there is no sign of a job (although I am really trying). I just don't know what to do. I can't hand back the keys as my mother could lose her house too but I reckon within the next three months I will no longer be able to make the balance payments.

I really feel like ending it all as then the insurance would cover the balance of the mortgage and my parents would be OK. I can't see light at the end of the tunnel. I'm sure I'm not the only one. Is there any way out of this mess? Will Ireland turn a corner in the next five years or are we screwed for the next fifty?

mikemac · 07-03-2011 03:28PM

scobysnacks wrote: »

I really feel like ending it all as then the insurance would cover the balance of the mortgage and my parents would be OK.

God, don't do anything drastic here! And the insurance might not pay out anyway unless you fake it somehow

I don't have detailed advice but the crew here will or Personal Issues forum
www.mabs.ie

You can post up your financial details over on www.askaboutmoney.com and you get good advice, though a lot of sneering replies too

eastbono · 07-03-2011 03:30PM

Who said you were not entitled to "dole". Go to your local social welfare office and apply for jobseekers allowance. While that is being processed (which might take some time) go to your community welfare officer and apply for supplementary welfare allowance. I am not in a position to advise you with regard to your mortgage someone else may have expertise in that area and be able to advise.

tanyabond · 07-03-2011 04:42PM

scobysnacks wrote: »

I really feel like ending it all

There are people who lose their loved ones to wars, accidents. There are people who survived through horrible abuse as children, the list is endless just pick up any paper or magazine with vivid pictures... And you are willing to end your life for financial burden? The banks are not chasing you with guns "give us the money!" - you have plenty of time to sort out your life and there are plenty of those like you. I'm sure if you asked your parents if they would like to have the appartment debt sorted and loose you they'll kick you so hard you might qualify for disability allowance!

fricatus · 07-03-2011 05:29PM

scobysnacks wrote: »

I really feel like ending it all as then the insurance would cover the balance of the mortgage and my parents would be OK.

I hope you're joking... your parents would be far from OK!

Tons of people are affected one way or another by the negative equity crisis, myself included. Granted I'm at the easy end of the spectrum (stuck in our little wendy house for the next decade... sigh), but remember there are people way worse off than you or I are now. Just read any of the horror stories and you will see that yours is not nearly the worst.

What I'm trying to say is not "stop feeling sorry for yourself and man up", but please understand that this crisis is a huge one, affecting tons of people, and it's not our fault. It's the fault of the banks and the politicians.

By the same token, we can not sort it out - only they can, and sooner or later they will have to fix up some sort of a solution for people like us who are in this situation, because it's a massive social problem.

You can only do your best in this situation - which you seem to have been doing so far - and nobody could blame you now if you went to the bank and said you can't pay any more. Loads of people are well in arrears now, and you'll only be joining a long queue. They can't throw you all out of your homes!

Chin up and keep plugging away. Don't let the situation grind you down!

Ortiz · 07-03-2011 05:39PM

Talk to your bank about switching over to interest only repayments. Communicate with your bank about this issue early and they'll be more reasonable to deal with.

You're right there are MANY people in this same situation and as depressing and terrifying it may be, it isn't insurmountable to overcome

the_syco · 07-03-2011 08:26PM

scobysnacks wrote: »

I really feel like ending it all as then the insurance would cover the balance of the mortgage and my parents would be OK.

If you're thinking what I think you're thinking, I really doubt insurance covers it. You think you're in a bad situation? You'll be condemning your parents to hell for the rest of their lives because you are not around.

Please contact www.dublinsamaritans.ie at 1850 60 90 90

Senna · 07-03-2011 10:50PM

Go into your bank, tell them your situation, they may offer you interest only or extend term etc.
If they can not help, tell them you will pay half the repayments (money from the rent). If they say they can not accept that, make the payments anyway by DD into your mortgage account. Get everything they say in writing and keep all correspondence.
There are thousands in a similar situation to you and there will be many more people in trouble in the coming years. Your situation is far from the worst, its not ideal staying with your parents, but again, not the worst. Do not worry about how this will affect your mother, if you do anything stupid, it will only create more problems for her. With you around, you can deal with the banks etc, dont leave it to her.
If you are seen to be contributing to the mortgage (the money from rent) it will bode well for you should the banks taken any action. But they wont in the medium term, with interest rates rising, someone make some repayments is worth more to the banks that the thousands that dont pay anything.

Its seems bad now, but you have a roof over your head, you can pay something towards the mortgage and this country is so screwed you'll soon realise your situation is far from dire.

ricman · 08-03-2011 08:05PM

You can get general advice,re welfare ,and the mortgage from centrecare, mabs will give you detailed financial advice, you should be able to switch to a interest only loan.
At this point there are many people on reduced income and in negative equity.
see http://www.centrecare.ie/ .
So you owe 120k approx ie half the mortgage,its should be possible to deal with this ,with help from those organisations.

Treehouse72 · 08-03-2011 09:27PM

OP, the most important thing in your parents' life is YOU. You should know this already. It would destroy them if anything happened to you. Do not, under any circumstances, even dream of putting them in a position where they have to deal with that.

All is not lost. Absolutely no way. At the very worst, you have the rental income to give to the bank. That is a hell of a lot more than other people have. And any judge would have to very seriously consider whether he can order the sale of a pensioners' home. IMO, we will not see this in Ireland. So I think your parents home is safe in all honesty.

Contact all the organisations linked to in this thread and I promise you they will between them find a sane way through this. Also, you will be eligible for dole soon. People aren't allowed to just exist on no income.

Stick in there and fight the fear. Fear about reality is what makes you scared, not reality itself. The reality is a pain, but it's not the end of the world. It really, really isn't.

Arciphel · 08-03-2011 09:34PM

If you are renting out your place and it isn't covering the mortgage repayments, would you not be better moving in there yourself and then apply to social welfare for help with paying the mortgage as it is your primary residence? Feel free to correct me if I am off base here.

dearg lady · 08-03-2011 10:43PM

It is a horrible situation to be in, I'm in negative equity myself and I try not to think about it too much. Not burying my head in the sand, just no point stressing over something you can't change.

I know you feel lousy now, but try to think of the positives. I always list the good things in my life, my health, great family and friends. Seriously that is whats important in life!! Try to remember that, and that you mean more to your parents than an outstanding loan

Caoimhín · 08-03-2011 11:48PM

Im sorry to hear about the situation you find yourself in, but look, financial difficulties is not a reason to even consider harming yourself. You are in a bit of a hole but there is a way out of it.

The very first thing you need to do is to talk to someone, anyone, about the trouble you are having. Getting advice or evenhaving a sympathic ear really will make you feel better. With someone behind you, if even to talk to will help you make the first small stem towards fixing this.

Next, get yourself down to MABS. Those guys see this sort of thing every day, there are tens of thousands of people in the same situation as yourself. MABS will be able to give you professional and constructive advice about how to deal with this.
I also think that once you have spoken to MABS, go to the bank and discuss your situation with them. Believe it or not, the bank staff may be in the same situation or have children in the same situation as yourself. If you are open and honest with them they may be able to offer some way of paying a smaller amount until you find work.

Look, most of all, you are not alone, it is important for you to talk to someone and stop trying to deal with this alone. At the moment you sound like you are just driving yourself crazy thinking about it. The first stem can seem like the hardest but just take one little step at a time and you will overcome this.

I do hope you work this out.

Mr. Loverman · 09-03-2011 12:04AM

I'm watching a programme on TV about kids in India who live in tiny wooden shacks with their entire family and have nothing, and never will have anything.

Kind of puts things in perspective.

Your mother won't lose her home.

Move to England, get a job, and start paying back the mortgage.

mortgage · 09-03-2011 12:35AM

Relax there fella. This situation is not the end of the world. There are lots of options open to you. As well as mabs there are a lot of local groups springing up in every town in Ireland. And i can assure you, i for one would swap your position with mine anyday!

Stay positive, think of the social chaos that would happen if 250,000+ people are "thrown on the streets" (memories of the famine stuff) or 250000+ people just coming together and declaring bankrupcy! (let the state administer your estate for 12 years+) THIS IS NOT GOING TO HAPPEN!
I am with a group that has up to 600 members and if partners and wives are included possibly 1000! That is a big demographic! 250,000 is a revolution! 250000 if they vote can get 25-35 tds elected!
Hang in there friend and do do anything drastic!

stepbar · 09-03-2011 12:59AM

I would advise that you look at this website - http://www.helpinghomeowners.ie/

However I will say (from my understanding) is that the code does not apply to Buy to Let property (however you could easily change this). You have options. But above all you need to talk to your bank now. They can't help you if you don't let them know.

Tomtata · 09-03-2011 01:29AM

Could you sell the property - pay your parents 50% and let them chase you for the remainder?

nadir · 09-03-2011 08:35AM

Heres what I would do in your situation.

Get whatever money you can. Move abroad, where there are jobs, mainland europe/UK , Asia, or the states if you can get a visa.
Get a decent job, not sure what skills you have, but you got english, and whatever else experience you have, there's lots of work in other countries.
Rent abroad, and pay off your debt back home! Think of it as an investment.
Ireland is a dive with no future imo, well for 10 years at least.

Unrealistic · 09-03-2011 12:23PM

eastbono wrote: »

Who said you were not entitled to "dole". Go to your local social welfare office and apply for jobseekers allowance. While that is being processed (which might take some time) go to your community welfare officer and apply for supplementary welfare allowance. I am not in a position to advise you with regard to your mortgage someone else may have expertise in that area and be able to advise.

The OP mentions he has just returned from Australia. Rules were put in place to prevent welfare tourism from other EU member states to Ireland. Unfortunately, because of the principle that all EU citizens must be treated equally by member states we could not make a rule that only Irish citizens are allowed to claim the dole in Ireland. Therefore a rule was put in place that only people resident in Ireland were entitled to assistance with a cut-off of two years. If you return to Ireland after being away for more than two years you are going to struggle to get any sort of assistance. I wonder how many of the people currently heading off to Australia understand this?

OP, there are arguments you can make to demonstrate that Ireland was still your place of permanent residence while you were away. Having kept a home here puts you in a good position to do so. Google the advice services for returned immigrants for more info. You are far from being the only one facing this issue and others have succeeded in getting Social Welfare decisions reversed.

WalterMitty · 09-03-2011 01:21PM

you paid the government over a 100,000 in taxes when you bought that apartment. Get to the social welfare and demand some welfare payment , if you have no assets ( an apartment in negative equity isnt an asset,, dont let them tell you it is) you will pass a means test, you only own half the house anyway and half the debt. Go to citizens advice centre if you need help accessing welfare. go to GP and get certified sick (mental health) and you will get disability benefit or other emergency payments. Consider selling property for whatever you can get and getting parent to take the loss as a personal loan which you can repay at later stage.

ongarboy · 10-03-2011 06:54PM

I understand to be eligible for dole payments on your return home from abroad, you would need to have been paying PRSI contributions (or stamps as known by some) for a minimum period of at least a year if not 2 years so the fact that you paid x amount of tax in the past makes no difference.

Follow the advice of all the other posters here and seek assistance from MABS and the other support organisations. Labour, who are now in government, promised new legislation that would ensure anyone who was co-operating with some form of minimum repayments to banks for their mortgage would not have their homes re-possessed. Have meetings with your bank and explain your circumstances and work out a plan that allows you to pay as much as you can afford right now.

Please, please,please do not consider the drastic actions you proposed in your OP. Please also talk to the Samaritans as hearing a non judgemental voice will help you put things into perspective and lift you out of this black hole you see yourself in. Your parents would rather lose 20 homes and all their material possessions then lose the son or daughter they brought into this world and love and cherish. I know it's tough but giving up is not the answer. Best of luck.

scobysnacks · 19-03-2011 07:04PM

So now the situation is even worse. I decided to try and do something about it. Just to give you a bit more background. I am fixed into a three year interest rate so can't sell. My husband is Brazilian and is now in Brazil trying to find work. I am suppose to move there too soon but I have put it off to sort out my financial mess first. Also I can't speak Portuguese and the job prospects are not great for non natives. Realistically I'm looking at earning 700 Euro a month teaching English if I am really lucky.

I also didn't pay stamp duty on my place as I was a first time buyer, it was a small new unit and I had every intention of making it my home. I planned to go traveling for three months and come back and live in it.

So I went to see an accountant this week and he flipped when I told him about the stamp duty. He said on top of everything else I would be likely to owe tens of thousands in fees, penalities and interest. He is currently investigating the seriousness of the situation. I paid 252,000 in November 2005. I really don't understand tax. Does anyone have an idea what I would be liable for? Do the Revenue show any mercy given my circumstances if I pay the original stamp duty or is it just black and white?
I am just so scared. I just don't know what to do.

highgiant1985 · 19-03-2011 07:58PM

scobysnacks wrote: »

So now the situation is even worse. I decided to try and do something about it. Just to give you a bit more background. I am fixed into a three year interest rate so can't sell. My husband is Brazilian and is now in Brazil trying to find work. I am suppose to move there too soon but I have put it off to sort out my financial mess first. Also I can't speak Portuguese and the job prospects are not great for non natives. Realistically I'm looking at earning 700 Euro a month teaching English if I am really lucky.

I also didn't pay stamp duty on my place as I was a first time buyer, it was a small new unit and I had every intention of making it my home. I planned to go traveling for three months and come back and live in it.

So I went to see an accountant this week and he flipped when I told him about the stamp duty. He said on top of everything else I would be likely to owe tens of thousands in fees, penalities and interest. He is currently investigating the seriousness of the situation. I paid 252,000 in November 2005. I really don't understand tax. Does anyone have an idea what I would be liable for? Do the Revenue show any mercy given my circumstances if I pay the original stamp duty or is it just black and white?
I am just so scared. I just don't know what to do.

your accountant is either incompetant / screwing you... or your leaving out some information in this post thats relevant.

First time buyers were exempt from paying stamp duty in 2005 on new / send hand houses and apartment. You do not owe stamp duty on that purchase IF eveyone involved in the purchase was a first time buyer.

Bluetonic · 19-03-2011 09:33PM

highgiant1985 wrote: »

your accountant is either incompetant / screwing you... or your leaving out some information in this post thats relevant.

First time buyers were exempt from paying stamp duty in 2005 on new / send hand houses and apartment. You do not owe stamp duty on that purchase IF eveyone involved in the purchase was a first time buyer.

It wasn't her primary place of residence so therefore she should have paid stamp duty on it. In effect it was an investment.

Sheep Shagger · 20-03-2011 01:10PM

Does the clawback on stamp duty not end after a couple of years (can't remember if it's 2 or 3)?

D3PO · 21-03-2011 11:15AM

Sheep Shagger wrote: »

Does the clawback on stamp duty not end after a couple of years (can't remember if it's 2 or 3)?

Clawback is two years so unless the OP did one of the following

rent within 2 years of buying

OR

Bought the house via affordable housing then there is no clawback

If one of these 2 things happens however the OP could owe a fair few quid.

Highgiant you dont know all the detail so calling the accountant incompetent or accusing him of screwing the OP is quite frankly ignorant

phormium · 21-03-2011 11:49AM

Clawback is only before 2 yrs for properties bought from 2007 onwards, 5 yrs before that as far as I know.

Sheep Shagger · 21-03-2011 12:05PM

re Clawback.

Where a property was purchased before 5 December 2007 but was rented on or after that date, there is no clawback of stamp duty relief if it is rented in the 3rd, 4th or 5th year of ownership.

http://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/stamp_duty.html

phormium · 21-03-2011 05:38PM

OP bought in 2004, not clear from what year it was rented?

snubbleste · 22-03-2011 11:59AM

In post#1, OP states that the mother went 50% on the mortgage, therefore unless the mother is also a first time buyer, the apartment is liable for stamp duty.

My mother owns 50% of the apartment as I couldn't get one on my own at the time.

scobysnacks · 22-03-2011 12:00PM

It was bought in 2004, but not finished until 2005. It was rented from mid 2006 when I went traveling. I only planned to go for a year or so but couldn't come back due to the recession. Then I got made redundant and lost my Australian visa.

I know I owe the stamp duty due to the clawback, but I don't have the money. I could beg, borrow and steal to find the original stamp duty but I just can't pay all the interest and penalities etc. I have no job but have set aside savings to cover the shortfall of the mortgage for a few months. If I give everything I have including my savings, laptop sell my clothes etc I will not even cover the stamp duty and will default on my mortgage. Do the revenue assess each case and their financial situation and take what people can realistically afford to pay, or are they happy to take everything people own and leave them with a debt for the rest of their lives?

Negative equity nightmare - the real cost of the property bubble

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