Assuming an already open mortgage

eoin95

I'm considering trying to give my house away for free to anyone that would take over the mortgage. I now live on the other side of the country from the property which was never in my plan!! So now I want to get rid of the house but it is in negative equity so selling is not really an option. I have spoken to the bank and if someone agrees to take over the mortgage as it is I can walk away. (i\'m sure its not that simple but that\'s the idea in principal!!) The benefit to the incoming party is they will need no deposit.

What do people think of this? Would it be something you might consider?

Thanks

Sleepy

It'll all come down to what the shortfall is and whether the bank judge the new person to be capable of meeting the repayments.

Personally, speaking as someone who could afford mortgage repayments but hasn't got the deposit, I couldn't see myself doing it unless it was my absolute dream house, I could easily afford the mortgage and it was no more than 5/10k in negative equity.

leonidas83

eoin95 wrote: »

I'm considering trying to give my house away for free to anyone that would take over the mortgage. I now live on the other side of the country from the property which was never in my plan!! So now I want to get rid of the house but it is in negative equity so selling is not really an option. I have spoken to the bank and if someone agrees to take over the mortgage as it is I can walk away. (i\'m sure its not that simple but that\'s the idea in principal!!) The benefit to the incoming party is they will need no deposit.

What do people think of this? Would it be something you might consider?

Thanks

Yes im sure its something alot of people would consider but you need to give more details, how much is it in negative equity roughly, what type of house it is, how much is the mortgage on the house, what side of the country is the house on, etc.

Not to be pessimistic or anything though, I just dont see the bank allowing someone to take over a mortgage who is unable to save up for a desposit themselves, they would also need to earn a very strong wage & have good security of employment. Something which very few people in Ireland have at the moment

StillWaters

I can't see any benefit to the purchaser in this. They will still need a deposit, as the bank will only allow the new mortgage to be max 95% of value. And they would be taking over negative equity. It would be madness.

Stheno

StillWaters wrote: »

I can't see any benefit to the purchaser in this. They will still need a deposit, as the bank will only allow the new mortgage to be max 95% of value. And they would be taking over negative equity. It would be madness.

Same here. Wouldn't make any sense to me tbh.

eoin95

Stheno wrote: »

Same here. Wouldn't make any sense to me tbh.

I have been told incoming person would need no deposit. Yes, they would need to show they could afford it but that goes with out saying. There may also be solicitors fee's and stamp duty but bank wouldn't want anything.

Benefits could be seen if you consider how long it takes to save up a deposit, let's say 30k of a deposit is needed, person can save 500 a month (a healthy sum!) it would take 5 years to save deposit. Add to this the cost of renting for the 5 years, average rent, 700 per month. This is €42,000 wasted on rent! Why not skip the hassle of renting and saving. Take over a mortgage 50k in negative equity where repayment were in region of 850/month. This still leaves €350 from available funds above. if half of those were put towards capital, then mortgage will be in good position after 5 years!!

To be honest I'd even have to think long and hard before entering an agreement like this but don't think the idea should be wrote off so easy!!!

D3PO

its an idiotic idea and theres no way the bank said this to you. You have clearly misunderstood what they have said.


besides which nobody is going to pay over the odds for a house when they could get the one next door or up the road for less.

donalg1

This makes no sense to me either as if your house is in negative equity then chances are they will find a similiar house in the area for the market value price of your house, without then having to pay off the NE portion. Basically they will find a similiar house for less nearby.

eoin95

D3PO wrote: »

its an idiotic idea and theres no way the bank said this to you. You have clearly misunderstood what they have said.


besides which nobody is going to pay over the odds for a house when they could get the one next door or up the road for less.

I never said this would be simple but bank had no problem with the idea in principle, obviously there would be forms and approval from bank etc. It would need full approval by bank, there would be solicitors etc involved.

Also yes someone might get property next door for €50k less but if someone is not in a position TODAY to purchase they will need to save a deposit and unless they get free rent, the money they pay in rent needs to be taken into account to make a balanced argument.

Someone with 35k in the bank won't be interested in this idea, i get that but someone who is in a financially stable position with no savings, it could be an option for them. I haven't done actually figure but what I posted above can't be too far out.

Ritchi

Anyone who can not save a deposit should not buy a house, nor should the bank lend to them.

And nobody should take this house off you at over the market rate.

eoin95

Ritchi wrote: »

Anyone who can not save a deposit should not buy a house, nor should the bank lend to them.

And nobody should take this house off you at over the market rate.

I couldn't see the bank approving someone that was not in a position to take the mortgage but that is a decision for the bank.

The current interest on the mortgage is ecb+1% so its very low, the argument could be made also that by taking on this deal the incoming party would save hundreds of euros for the next few years on interest payments alone. I don't have the current interest rate for new mortgages but I'm guessing its up at 5 or 6 % at least. The kind of difference in interest rates would equate to about €400 less in interest each month at least, maybe more.

Add this to the money saved in rent and it becomes an even better idea.

StillWaters

I think you really need to get clarity from the bank. I don't think they agreed to what you believe they agreed to eg you won't be able to pass that tracker rate on, and purchaser will need to pay down the NE before taking out a mortgage.

djimi

Im not really sure why anyone would want to take over €50k worth of negative equity, when they could get a new mortgage to buy a property now and most likely have relatively little or no NE on it. Most people are looking to move to get away from negative equity, or those of us who do not have mortgages currently would run a mile from the idea of being put in the very situation that so many people in this country are desperately trying to get out of.

Im not really sure who you are hoping to go along with this idea.

djimi

Effectively what you are asking people to do is pay €50k over the odds for your house. If they were to get their own mortgage they could buy it (or one similar) for €50k less than the amount that you would be expecting them to repay.

eoin95

djimi wrote: »

Effectively what you are asking people to do is pay €50k over the odds for your house. If they were to get their own mortgage they could buy it (or one similar) for €50k less than the amount that you would be expecting them to repay.

It could be put that way but the more I think about it the more benefit I can find. Fair enough, someone is taking on mortgage with a capital amount currently greater than the market value of the property but when you consider the cost of the finance would you make up the shortfall there.

Ok, I haven't done the figures on it as only had the idea today but can someone tell me a mortgage of 230k at 2% verses 180k at 5%. Over the life of the mortgage, which costs more? lets say, over 30 years. And yes I know, both interest rates can change but I can't see a time where variable rates will be as low as trackers so there will always be a 3-4% difference.....


As it is only an idea at the moment I don't have that much detail from the bank but the nice lady did offer to post out the necessary info pack. she gave it a name but can't remember. She said that it is more common to happen in commercial situations but also does happen in residential

Rasmus

For a house in negative equity for those kind of repayments, you would have to pay me in monthly installments to take it over. The mortgage assumer would hae nothing to gain with this deal.

djimi

eoin95 wrote: »

Ok, I haven't done the figures on it as only had the idea today but can someone tell me a mortgage of 230k at 2% verses 180k at 5%. Over the life of the mortgage, which costs more? lets say, over 30 years. And yes I know, both interest rates can change but I can't see a time where variable rates will be as low as trackers so there will always be a 3-4% difference.....

Bear in mind its €230k vs €180k less their deposit which would amount to €153k at an 85% mortgage.

I agree with other posters; I dont think that the bank agreed to what you think they agreed to, but even if they did, I really dont know who in their right mind would go for this. Noone needs to buy a house this instant, and I cant think of why anyone would not choose to rent over taking over a mortgage on a property that is in significant NE. Even taking into account rental costs, I dont know anyone who wouldnt find it preferable to save the deposit and get a mortgage when they are ready to get one.

tony81

Op you could always look for someone who is willing to swap their neg. equity property for your.

Alternatively, try to rent out your property and pay the shortfall yourself.

eoin95

Rasmus wrote: »

For a house in negative equity for those kind of repayments, you would have to pay me in monthly installments to take it over. The mortgage assumer would hae nothing to gain with this deal.

This has been said several times in this short thread but I'm not convinced. (ok, i can't see myself going down this road but still I am starting to be convinced that there is benefit and that maybe it is worth exploring) No body has backed up the statement with figures or even elaborated on the point.

No one has even contradicted the figures I have posted, albeit figures that were a bit rough!

If someone is in a house for life then negative equity isn't an issue, the bigger issue is the cost of the interest in the mortgage. If bank agree to transfer tracker to incoming party then big gains can be made on the interest portion of the mortgage...

StillWaters

eoin95 wrote: »

If bank agree to transfer tracker to incoming party then big gains can be made on the interest portion of the mortgage...

I think noone has disputed your figures as it is an academic exercise. Certainnly if you can assign your mortgage to another party and they keep the tracker rate, that adds substantial value. The problem is you cannot transfer the tracker.

killers1

I think OP what you are really thinking of doing is trying to rent out your house on a rent to buy basis. This may be an option for you if you can get someone to buy it and agree that the payments they make towards the current mortgage will go against the agreed sale price in 3 or 5 yrs (or whatever timeframe you decide on). The problem you face is that nobody will buy the property at €50k over the market rate. You could try getting someone in and agreeing that in 3/5 yrs time you will agree a purchase price but will need to clear any negative equity to allow the sale go through. The other problem you have is that a tracker is non-transferable to another party so ultimately the new owner will have to borrow at current rates.

I can see your point regarding the repayments i.e €230k over 30 yrs @ 2% = €850pm V €180k over 30 yrs @ 5% = €966pm but whilst this part seems to make sense to you, you are forgetting that the new owner will obviously want to have the property registered with them as the owners so that argument is irrelevant...they can't keep the tracker no matter how you look at it.

I think your best bet is to try to rent it out to cover it's costs and eventually you'll get to sell & break even. Let a tenant pay the mortgage until you reach that point...

eoin95

killers1 wrote: »

I think OP what you are really thinking of doing is trying to rent out your house on a rent to buy basis. This may be an option for you if you can get someone to buy it and agree that the payments they make towards the current mortgage will go against the agreed sale price in 3 or 5 yrs (or whatever timeframe you decide on). The problem you face is that nobody will buy the property at €50k over the market rate. You could try getting someone in and agreeing that in 3/5 yrs time you will agree a purchase price but will need to clear any negative equity to allow the sale go through. The other problem you have is that a tracker is non-transferable to another party so ultimately the new owner will have to borrow at current rates.

I can see your point regarding the repayments i.e €230k over 30 yrs @ 2% = €850pm V €180k over 30 yrs @ 5% = €966pm but whilst this part seems to make sense to you, you are forgetting that the new owner will obviously want to have the property registered with them as the owners so that argument is irrelevant...they can't keep the tracker no matter how you look at it.

I think your best bet is to try to rent it out to cover it's costs and eventually you'll get to sell & break even. Let a tenant pay the mortgage until you reach that point...

Yea, I was under the assumption from the phone call I made to the bank that tracker would be transferred. I didn't ask directly if it could or not. still not "completely" convinced it can't!!! Will be ringing bank in the morning to seek clarification but not holding out much hope, that said banks have done stranger things!!

killers1

eoin95 wrote: »

Yea, I was under the assumption from the phone call I made to the bank that tracker would be transferred. I didn't ask directly if it could or not. still not "completely" convinced it can't!!! Will be ringing bank in the morning to seek clarification but not holding out much hope, that said banks have done stranger things!!

They may be open to you selling the property and transferring the NE & Tracker Rate to a new property and these are the types of products you'll see more and more of coming to the market

eoin95

killers1 wrote: »

They may be open to you selling the property and transferring the NE & Tracker Rate to a new property and these are the types of products you'll see more and more of coming to the market

Yea, keeping this in mind and also the benefits to it over the above idea.

ted1

Ritchi wrote: »

Anyone who can not save a deposit should not buy a house, nor should the bank lend to them.

And nobody should take this house off you at over the market rate.

Not strictly true, song people are paying rent which is dearer than a mortgage would be. So how are they suppose to put a deposit together.

Senna

eoin95 wrote: »

Yea, I was under the assumption ........

I think this is your problem, you spoke to someone who was trying to be helpful, but he/she has given you false hope and now you have started making assumptions to fill in HUGE gaps.
The whole idea (as your have stated) is complete and utter nonsense.

Procrastastudy

I'd get someone to live in the house and pay me a sum of money each month. I'd use this money to pay the mortgage, and maybe put in a bit myself. Jesus I think this is a cracking idea!

Maybe if someone else did this near where I wanted to live I could pay them a sum of money to live in their house!

The_Conductor

From the banks perspective- its a win, win- they get their pound of flesh.
From your perspective- its a win, win- you get shot of a property the other side of the country and you get someone else to assume the debt associated with the property.
From the perspective of the prospective buyer its....... certainly not a win, win.

Its akin to me knocking on my neighbours door and suggesting they hand over 50 grand to me, or their new BMW 7 Series.........

Why should anyone assume the negative equity in your property?

If you changed this around- and said-

' I propose to clear the negative equity associated with the property, and sell the property on the open market'- that makes sense. Its all above board. Any prospective buyer knows what they are paying, and is not playing mindgames with you or the bank.

As for the bank not requiring a deposit? That is making an assumption that the actual mortgage is being taken over- not that Person X requires a mortgage to buy your property- that your mortgage is being taken over by Person X. You realise there is a difference.

What happens if 5 years down the road your hair brained scheme begins to unravel- because Person X decides they want to emigrate to Oz, and damn you and your mortgage? It is still your mortgage- unless they have written you a cheque for the negative equity (or handed over their 7 Series BMW or whatever). You get a call out of the blue from the Bank Manager- Hey, Eoin95, Person X has done a legger. They've been paying interest only on your mortgage (and whatever way you look at it- you still have a legal attachment to the mortgage)- you now have to pay us (blah) a month.........

Why do you imagine that there is any upside to a prospective purchaser to take over your mortgage? They'd need to be nuts to even contemplate it........

Kosseegan

eoin95 wrote: »

It could be put that way but the more I think about it the more benefit I can find. Fair enough, someone is taking on mortgage with a capital amount currently greater than the market value of the property but when you consider the cost of the finance would you make up the shortfall there.

Ok, I haven't done the figures on it as only had the idea today but can someone tell me a mortgage of 230k at 2% verses 180k at 5%. Over the life of the mortgage, which costs more? lets say, over 30 years. And yes I know, both interest rates can change but I can't see a time where variable rates will be as low as trackers so there will always be a 3-4% difference.....


As it is only an idea at the moment I don't have that much detail from the bank but the nice lady did offer to post out the necessary info pack. she gave it a name but can't remember. She said that it is more common to happen in commercial situations but also does happen in residential

It is very common on the continent. It was also very common in Ireland until the 70's for mortgages on second hand houses to be assigned rather than redeemed.
The bank is already in negative equity so why should it should not be concerned whether it is you or anyone else.

The_Conductor

Its a massive win, win for the bank- of course they're going to be happy.
Finding a fool willing to take on your end of the deal- is going to be the difficult bit.......

Ritchi

ted1 wrote: »

Not strictly true, song people are paying rent which is dearer than a mortgage would be. So how are they suppose to put a deposit together.

If they can't put a deposit together, then they won't be able to deal with the mortgage when the inevitable further rises in interest rates happen.

Go rent somewhere cheaper if you're trying to get a deposit.