Walk Away

mrthumb · 9 March 2009 at 11:19AM

Hi all, long time looker, first time poster really looking for advice.
My story in a nutshell is that my partner and I bought a house two years ago on a fixed rate interest only 100 % mortgage. At the time we were more than able to meet the repayments. Forward the clock on two years and our circumstances are very different. We are now both living and working in the South of Ireland. We have tennents in our house, but this is just about paying half our monthly mortgage. We're also paying rent for the house we are currently living in in the south of Ireland. Our problem is like many others we are seriously struggling to make the payments every month, and to be honest if there was any way out of the mortgage we would take it as neither of us want to move back to the UK and the house is basically just a weight around our necks. A friend who works in banking recently suggested to me that we stop repaying our mortgage and simply hand the keys back to our bank and tell them we are no longer in a position to afford the mortgage. My question is - is this possible? I'm sure there would be repercussions making it virtually impossible to get a motgage in the UK, but to be honest that really isn't a major problem for us as neither of us want to move back to the UK. any advice would be much appreciated.
MT

_Andy_ · 9 March 2009 at 11:31AM

Can you not simply sell the property?

Trying_to_be_good · 9 March 2009 at 11:34AM

You can be chased for 12 years for any shortfall in the price the lender gets for the property and how much you owe (including any early repayment penalties, legal costs etc). This would seriously affect your ability to get credit in the UK, not sure about Ireland.

It's already interest only, and fixed rate so presumably the monthly repayments are the same as when you took out the mortgage? Have you made any overpayments to bring down the capital owed? What was your plan for repaying the loan - do you have a savings or investment scheme in place?

charis18uk · 9 March 2009 at 11:41AM

mrthumb wrote: »

Hi all, long time looker, first time poster really looking for advice.
My story in a nutshell is that my partner and I bought a house two years ago on a fixed rate interest only 100 % mortgage. At the time we were more than able to meet the repayments. Forward the clock on two years and our circumstances are very different. We are now both living and working in the South of Ireland. We have tennents in our house, but this is just about paying half our monthly mortgage. We're also paying rent for the house we are currently living in in the south of Ireland. Our problem is like many others we are seriously struggling to make the payments every month, and to be honest if there was any way out of the mortgage we would take it as neither of us want to move back to the UK and the house is basically just a weight around our necks. A friend who works in banking recently suggested to me that we stop repaying our mortgage and simply hand the keys back to our bank and tell them we are no longer in a position to afford the mortgage. My question is - is this possible? I'm sure there would be repercussions making it virtually impossible to get a motgage in the UK, but to be honest that really isn't a major problem for us as neither of us want to move back to the UK. any advice would be much appreciated.
MT

If it was me I would look at selling the house and cutting my losses (depending on ho high they are). If the amount you would lose would be quickly cleared by the amounts you would save due to meeting the remainder of the mortgage left by the rent then I'd sell.

I would NEVER just stop paying the mortgage and hand the keys back. You don't actually solve any problems at all. The mortgage company will just sell the house at a below market price and chase you for the remainder.

I'd first contact your mortgage company and start a dialogue with them about the problems your facing. Keep up the repayments and get the property on the market at a realistic price and sell.

A general word of warning to everyone regarding 'handing over the keys'. If you get it to trouble with your mortgage and give up trying to do everything in your power to keep a roof over your head and take the option to hand back the keys then it has further implications other than financial. If you become homeless and have nowhere to live and require support from your local council for rehousing as a homeless person/family then there are certain criteria that need to be met. If you just give up, hand the keys back then you can be classed as 'intentionally homeless' and as such a council would be under no obligation to rehouse you or provide emergency shelter for more than 6 weeks. This could be very serious if you have children as you could potentially be put in a position of having to put your kids into care.

mrthumb · 9 March 2009 at 11:43AM

Andy - We tried to sell the property for 15 months in a rapidly declining market, and at the moment nothing seems to be moving in the area. Selling would be the ideal situation, but looks impossible, an even if we could it would more than likely be at a massive loss.
TBG - We haven't made any overpayments, at the time we bought we were advised to buy in the area as the property prices were rapidly increasing, unfortunatley we in just before the bubble burst. our plan initally was to stay on the fixed rate for the term and then begin raypayment, at that stage we both had (what we thought then were) secure jobs and had planned to stay in that house for the foreseeable future. We have no saving scheme in place as everything (and i mean everything) is going towards trgint o meet mortgage payments each month.

charis18uk · 9 March 2009 at 11:53AM

mrthumb wrote: »

Andy - We tried to sell the property for 15 months in a rapidly declining market, and at the moment nothing seems to be moving in the area. Selling would be the ideal situation, but looks impossible, an even if we could it would more than likely be at a massive loss.
TBG - We haven't made any overpayments, at the time we bought we were advised to buy in the area as the property prices were rapidly increasing, unfortunatley we in just before the bubble burst. our plan initally was to stay on the fixed rate for the term and then begin raypayment, at that stage we both had (what we thought then were) secure jobs and had planned to stay in that house for the foreseeable future. We have no saving scheme in place as everything (and i mean everything) is going towards trying to meet mortgage payments each month.

You've got to ask yourself whether you want to take the hit of the massive losses or sit it out for what could be at least a few years for the market to improve.

If you cut your losses then selling the property yourself I think is your ONLY option. It has to be at a realistic price, you've got to forget what it was worth and look at what it is worth now, reduce it slightly and shift it quick.

There is another solution, but I doubt its one you would like. Move back, thus reducing your outgoings by not having to pay out for your rental property in Ireland (if you could secure employment). Sit it out in England until the market turns and then sell and continue with your dream.

You may argue that this is not what you want but it's what I would think about doing. Short term pain for long term gain as opposed to ultimately sacrificing your future to make things easier now.

Sometimes difficult decisions that we don't really like have to be made, it really depends on your overall losses and how they would impact on your future.