Sunday, October 21, 2012

Get your violins out

Stories of negative equity, mortgage arrears and the banks

Sorcha Donohoe bought her two-bedroom house for €400,000 with a 37-year €310,000 mortgage. Herpay has been cut, and with a new child she is no longer able to rent out her second room, so she does not receive the €500 in rent that had previously gone towards her interest-only mortgage. The house has fallen in value and is “probably worth about €170,000 at a push” leaving her in €140,000 negative equity. The Government's advice line suggested she sell the property to a housing association on a mortgage-to-rent scheme. “I just wouldn’t do it. I purchased a house and I want to keep my house. I don’t think mortgage-to-rent is a solution because people invested a lot of money in their house and to hand their house over to anyone is not viable for anybody,” says Sorcha.

Posted by little professor @ 02:50 PM (2799 views)
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6 thoughts on “Get your violins out

  • 2013 will be an interesting year:

    There are new bankruptcy laws starting which will shorten bankruptcy from 13 years to 3,
    The new property tax being introduced which will be somewhere around €500 a year off disposable income.
    Car tax and other taxes set to rise.

    My advise would be to hand the keys back and seek social housing or stay put and seek the housing association option, however I can’t see them paying €310k for a 2 bed house when there are many suitable NAMA properties.

    I really wouldn’t be surprised if there is another Irish bailout after the new bankruptcy laws kick in. Someone has to pay and it sure won’t be the bond holders of such mortgages.

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  • Yet more examples of the destruction that a credit driven housing boom causes .

    Unless these people are public sector they are unlikely to have any sort of pension worth talking about either . Their plan was probably to downsize .

    It’s hard to see anything other than debt servitude for the rest of these folks life (or indeed most people lives) .

    Peoples reluctance to sell at at 47.5% loss only 5 years after buying is understandable but perhaps illogical – as if they are expecting house prices to recover in the medium term .

    Khards , initially I thought you were kidding about the bankruptcy suggestion but it may be the best option and if so then it’s better to be one of the first to declare it before everyone catches on .

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  • Guess it’s tough.

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  • greenshootsandleaves says:

    To what extent someone can be said to ‘own’ a property when they’re left owing more and more on their interest-only mortgage is beyond me, but leaving that aside, all they have to do is put all those nequity-riddled properties on the market and up the asking price a little each month (0.4% has a nice ring to it, don’t you think?). The fact that there will be no buyers is immaterial. Before long, the Irish Times will daily be filled with tales of ‘the emerald shoots of recovery’, of ‘new life being breathed in the Celtic tiger’, etc. Forbearance by Ireland’s banks will do the rest. Admittedly, this last bit would be quite expensive, but I’m sure there are ways of getting the taxpayer to foot the bill.

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  • ontheotherhand says:

    Khards at 4. BofE FSA carefully do not ask for comprehensive data on arrears or forebearance lest we should worry. They estimate it is about 8% so no miracle compared to Ireland who have interest rates higher than our in the UK.

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