Finance help please

*Summertime*

I will keep it as short as possible...

I live with hubby (both 29).
6 years ago before we met I bought a 1 bed apartment in Cyprus off plan. I was very naive but actually after watching Holiday Homes from Hell I feel lucky to have a nice apartment....
It is rented out to a single lady who pays 300euro per month. The mortgage is in swiss franks and is 646CHF per month so I send funds over each month.
In 2014 this mortage will increase - the mortgages are different over there and you pay massive amounts of interest in the first 5 years, after this time you start to chip away at rest.

4 years ago we bought a house in our home town to live in, we did so for 3 years and had our first baby there. Our baby became dangerously ill and was in intensive care when she was born, this was very sressful for us and we decided to move in with my parents so I could work part time and spend time with our baby. We rented our house out a year ago.

We have now moved into a rented house on a beautiful private estate, my husband is a Landscape Gardener and will hopefully be working on the estate grounds soon. We don't ever plan on leaving this house as it is our dream house. However, we will never be able to buy it as the properties here are not for sale.

We live to an extremley tight budget every day, as I know a lot of people do. I am happy to do this but I would love for the financial burden to be lifted a little.

My dilema - I can't sell the apartment in Cyprus as mortgages there are very difficult to get. To be honest I don't really understand the deal I have, I have spoken to my bank over there and they say I would have to pay them the outstanding amount (including the interest for the whole term) if I sell, the property simply is not worth that at the moment. I have tried to get advice from so many people but no-one can help me get to the bottom of it. I know going over there would help so I can sit down and talk to someone face to face but we can't afford that. Before we had a tenant I seriously considered just not paying but I know that would be silly.

The house here is great, in a lovely spot and I am sure would always rent out, it doesn't cost us anything (aside from the usual Landlord obligations), we don't make a profit on it but don't expect to. I would like to keep the property as part of a pension plan but part of me feels if we sold it, probably have £30k equity in it at the moment, we could send the money over to Cyprus and it would give us a bit of breathing space, but then it would feel like we are selling a good investment for short term help.

If anyone can help or point me in the right direction, or what they would do in my sitiation it would be much appreciated.

Sx

DannyboyMidlands

I am totally confused. You have a house over here that you rent out but don't expect to make a profit on and a flat in Cyprus that you rent out for 300E but the mortgage alone is costing you 500E.

Why the obsession with being a landlord?

I don't see either of these properties as a particularly good investment.

You really need to read your mortgage paperwork for the Cyprus place.

*Summertime*

There is no obsession with being a Landlord - I am one twice over by default.

My UK house is a good investment and I will make a profit in the long term, as I said it doesn't cost us anything and the mortgage is paid by rental income. In years to come when we retire this house will serve us well.

I am tied to the house in Cyprus which was a bad move, but we all make mistakes - this is just a costly one.

I can see no way out will just have to work hard and keep plugging away. Not a problem I guess more a challenge.

DannyboyMidlands

You mean accidently buying places and then renting them out? All I'm saying is that there are other investments available other than property.

Initially you didn't sound sure about the mortgage for the Cyprus place. I think you need to work out for definate whether you can sell it or not and what the penalty might be.

Brock_and_Roll

You mention that your budget is very tight at the moment - hence I guess the big concern that the hike in the overseas mortgage will push you close to the edge. So in banking terms you are "highly geared" or overstretched"

The obvious thing to do would be to start reducing the risk of bankruptcy and losing everything. The logical step would be to sell your house in the UK - heck you dont live there at the moment and as you say yourself it is not currently making you any money. When you say it is a "good investment" I presume you mean that you think it will rise in price faster than inlflation over coming years. Why? Is that what you thought with the Cypus property?

As I am sure you are starting to understand now, buying an off plan property in Cyprus was risky enough but financing it with a CHF mortgage was utter lunacy and anyone who advised you to do this should be put up against a wall. Clearly you did not have any appreciation as to the effect of foreign exchange movements. There is a reason why Switzerland has lower interest rates than Cyprus/Greece - as the Greek crisis has confirmed. The eurozone crisis has caused a "flight to quality", hence the Swiss Franc has gone throught the roof and is putting a time bomb under your mortgage.

If you defualt on the Cypriot mortgage, the bank or its assignee will come after your assets in the uk, maybe not straight away but they will. One option might be to try and negotiate a full and settlement with the lender to pay off the mortgage and sell off the apartment. I doubt this would have an effect on your credit rating in the UK.

*Summertime*

Thank you for your advice.

Brock_and_Roll wrote: »

The obvious thing to do would be to start reducing the risk of bankruptcy and losing everything.

Scary thought! But yes it is something to worry about. We don't live in our house at the moment and it is not making us money but it will and it would be something we would like to hang on to. It seems so dissapointing to have to sell this one when really we just want to get rid of the apartment in Cyprus.


As I am sure you are starting to understand now, buying an off plan property in Cyprus was risky enough but financing it with a CHF mortgage was utter lunacy and anyone who advised you to do this should be put up against a wall.

If I could turn back time......All I keep thinking is why did I ever go through with this!

If you defualt on the Cypriot mortgage, the bank or its assignee will come after your assets in the uk, maybe not straight away but they will. One option might be to try and negotiate a full and settlement with the lender to pay off the mortgage and sell off the apartment. I doubt this would have an effect on your credit rating in the UK.

Trollfever

OP has previous threads on this subject.

Mrs_Z

Well, I think the first thing to do is to get to understand your swiss mortgage deal. You really need to read the small print and get your head around it, as otherwise it is impossible to work out the best solution.

On a pratical note, as the income from the Cyprus property does not cover the outgoings - is there scope for increasing the rent? Would you be better off renting it out as a holiday let? That would of course require management, but surely there are companies that would do this for you.

It would definitely be worth renting your UK home if it is empty at present and you're paying rent somewhere else. There are risks and responsibilities involved, but your UK home is an asset and you may as well get it to work for you if you can. Re: releasing the equity - can't comment as you need to know the in's and out's of your Cyprus mortgage to work out if it's worthwhile.

good luck!

*Summertime*

Mrs_Z wrote: »

Well, I think the first thing to do is to get to understand your swiss mortgage deal. You really need to read the small print and get your head around it, as otherwise it is impossible to work out the best solution.

On a pratical note, as the income from the Cyprus property does not cover the outgoings - is there scope for increasing the rent? Would you be better off renting it out as a holiday let? That would of course require management, but surely there are companies that would do this for you.

It would definitely be worth renting your UK home if it is empty at present and you're paying rent somewhere else. There are risks and responsibilities involved, but your UK home is an asset and you may as well get it to work for you if you can. Re: releasing the equity - can't comment as you need to know the in's and out's of your Cyprus mortgage to work out if it's worthwhile.

good luck!

Mrs Z - thank you so much for your advice.

I have done some digging on CHF mortgages and it really is not looking good. Plenty of poor people have literally just handed keys back as their interest rates have increased and they have no option.

We are lucky to have a long term tenant at all in Cyprus, there are so many empty properties it is a tenants market to to speak, they have the pick and they can chose the rent! I have let it as a holiday let before but with Cyprus being a very expensive holiday destination it worked out better to have a tenant paying a lower rental yearly than shorter term holiday lets.

We do have tenants in our UK home at the moment, it is an asset and we aren't losing anything on it, even if property prices tumble the rental market here is strong so it is definitley worth our while to keep it if we can, it is just the Cyprus apartment that is causing us bother at the moment, we are not in an ideal situation at all I have sent lots of emails to various people today to hopefully get some advice on where to go from here.

Thanks again.

Sx

grey_gym_sock

the CHF mortgage is very risky (given it isn't on a swiss property). you need to consider ways to get rid of it.

how much could you realistically sell the apartment in cyprus for? how much would it cost to pay off the CHF mortgage (including any early redemption charges)?

i fear those questions don't have very pretty answers, but you need to consider them.

if there would be a shortfall (not enough from the sale to pay off the mortgage), would you be liable for it? i'm not hopeful, but it seems worth asking, because i understand that in the USA there is generally no liability for any shortfall after a repossession (unlike in the UK; and i have no idea about in cyprus).

if you'd have to make up any shortfall, could you? or can you save towards being able to do that in the future?

The_J

How is it even possible for a 23 year old girl to get a foreign currency mortgage for a property in Cyprus? I wouldn't have even considered something like that at that age, who and how the hell did they sell that to you? I have clients earning hundreds of thousands of pounds a year who wouldn't even understand or attempt it.