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Apartments in negative equity

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  • 29-06-2015 3:23pm
    #1
    ndilly
    Registered Users Posts: 52 ✭✭


    Hi,
    My husband and I got caught up in the Celtic Tiger property bubble and purchased apartments in Dublin with our siblings. I have an apartment with my sister and my husband has one with his sister.
    Both are rented out for the last few years and we are in a rented house. We would love to get a mortgage as we have decent salaries and savings for a deposit and could afford to pay a mortgage however banks will not even look at us. I don't think we will be able to get a mortgage for a while.
    Any suggestions on what we could do as would love to have our own family home.


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    #2
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    What banks have you approached? AIB told me they would offer a mortgage, but I haven't officially applied


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    #3
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    KBC gave me a mortgage with 'Negative Equity' I did fiddle the valuation a bit by printing off DAFT/Myhome adds of total dreamers in my area but if all they're looking for is that level of proof they're building that in.

    They'll look at income including rental income.


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    #4
    ndilly
    Registered Users Posts: 52 ✭✭ndilly


    I only approached BOI but the fact that said they could give us nothing i thought there was no point going anywhere else. The rental income covers the mortgage and we have no other debts and would have the deposit.

    Something had to be done for people like us who bought apartments in the boom and need to upgrade now due to family size increasing etc.


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    #5
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    ndilly wrote: »
    I only approached BOI but the fact that said they could give us nothing i thought there was no point going anywhere else. The rental income covers the mortgage and we have no other debts and would have the deposit.

    Something had to be done for people like us who bought apartments in the boom and need to upgrade now due to family size increasing etc.

    Plenty being done, just not by BOI :pac:

    BOI wouldn't touch us either and neither would EBS. AIB couldn't give us enough (apparently), Ulterbank would loan, so would KBC.


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    #6
    ndilly
    Registered Users Posts: 52 ✭✭ndilly


    Oh really. Do ye have two apartments in negative equity? Strange .Might look around again so.That gives me a bit of hope.

    Just think whats the point in saving if they won't give you a mortgage.


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    #7
    lima
    Registered Users Posts: 1,239 ✭✭✭lima


    ndilly wrote: »
    Something had to be done for people like us who bought apartments in the boom and need to upgrade now due to family size increasing etc.

    Why? You bought in the boom so you got unlucky with a bad investment decision.

    Personally I think people with clean slates (FTB's) should be given priority over people with bad investments.


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    #8
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,507 Mod ✭✭✭✭johnnyskeleton


    ndilly wrote: »
    Oh really. Do ye have two apartments in negative equity? Strange .Might look around again so.That gives me a bit of hope.

    Just think whats the point in saving if they won't give you a mortgage.

    could you sell the apartments, pay off the negative equity and then save up for a deposit?


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    #9
    MrWalsh
    Closed Accounts Posts: 2,664 ✭✭✭MrWalsh


    ndilly wrote: »
    Any suggestions on what we could do as would love to have our own family home.

    Move into one of the apartments?


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    #10
    El_Dangeroso
    Users Awaiting Email Confirmation Posts: 5,620 ✭✭✭El_Dangeroso


    lima wrote: »
    Why? You bought in the boom so you got unlucky with a bad investment decision.

    Personally I think people with clean slates (FTB's) should be given priority over people with bad investments.

    That's really unsympathetic, and also totally impractical. One of the current contributors to the lack of supply is that so many people are stuck in unsuitable accommodation due to negative equity. The whole market becomes stagnant and the flow of sales is stifled.

    The OP is paying off their debt and saving like they should, why shouldn't they be entitled to a mortgage?

    OP, try other banks for sure, BOI are much stricter than others. Engage the help of a mortgage broker.


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    #11
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    OP, with the greatest of respect ya haven't made much effort. Well actually ya made the effort with the hardest bit, saving the deposit! Seriously, try other banks, don't give up so easily!


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    #12
    ndilly
    Registered Users Posts: 52 ✭✭ndilly


    Hi
    Thanks for your messages.I do think you are a bit harsh. We are paying our mortgage and not looking for it to be written off. Saving really hard as well so why shouldn't we be entitled to a mortgage if we can afford it.

    Cannot move back into the apartments as had to move away for work reasons. Will just have to check some other banks I suppose and maybe wait a while.


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    #13
    mariaalice
    Registered Users Posts: 12,496 ✭✭✭✭mariaalice


    ndilly wrote: »
    Hi
    Thanks for your messages.I do think you are a bit harsh. We are paying our mortgage and not looking for it to be written off. Saving really hard as well so why shouldn't we be entitled to a mortgage if we can afford it.

    Cannot move back into the apartments as had to move away for work reasons. Will just have to check some other banks I suppose and maybe wait a while.

    Go to a good broker in a situation like your its the best thing to do, you are coming across as giving up too easily tried one bank they said no the end.


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    #14
    ndilly
    Registered Users Posts: 52 ✭✭ndilly


    I am not giving up I just thought the fact that they said no outright was a sign that we might not get one anywhere else.
    I will look around at a few more places and might just make an appointment with a broker


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    #15
    lima
    Registered Users Posts: 1,239 ✭✭✭lima


    El_Dangeroso wrote: »
    One of the current contributors to the lack of supply is that so many people are stuck in unsuitable accommodation due to negative equity. The whole market becomes stagnant and the flow of sales is stifled.

    If they sold their apartments and took the hit on the outstanding amounts they owe then it would free up stock that FTB's could access. It would even lower prices. They are part of the problem.

    People with existing boom mortgages would naturally be a higher risk due to their exposure.


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    #16
    MiaG
    Registered Users Posts: 43 ✭MiaG


    why would they sell the apartment in loss if the rent covers the mortgage? There is such a healthy demand for rental apartments in some areas. May be it's inconvenience in some ways short term - but if the rent pays big part of the mortgage - it can act as long term pension investment.

    I am sorry that I won't sell a long term investment at loss and take a hit, considering it costs me next to nothing when the rent covers the mortgage, so you can buy it cheaper. Not.

    good luck to the original poster. Shop around as others suggested


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    #17
    lima
    Registered Users Posts: 1,239 ✭✭✭lima


    MiaG wrote: »
    why would they sell the apartment in loss if the rent covers the mortgage? There is such a healthy demand for rental apartments in some areas. May be it's inconvenience in some ways short term - but if the rent pays big part of the mortgage - it can act as long term pension investment.

    I am sorry that I won't sell a long term investment at loss and take a hit, considering it costs me next to nothing when the rent covers the mortgage, so you can buy it cheaper. Not.

    good luck to the original poster. Shop around as others suggested

    Some investment really being in negative equity

    Rent in a lot of cases doesn't cover the mortgage, especially because of the 52% tax being paid on it.

    If they don't want to sell then they are holding onto a risky asset therefore they wouldn't (and shouldn't) be given access to credit.


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    #18
    uberwolf
    Registered Users Posts: 7,580 ✭✭✭uberwolf


    lima wrote: »
    Some investment really being in negative equity

    Rent in a lot of cases doesn't cover the mortgage, especially because of the 52% tax being paid on it.

    If they don't want to sell then they are holding onto a risky asset therefore they wouldn't (and shouldn't) be given access to as muchcredit.

    fixed your post. Naturally if you want to treat the apartment as a liability in a stressed situation then it is a drain on the level of cash available for debt servicing. But to suggest that as a rule, no one with an apartment should have any access to any credit is a nonsense. And incorrect, as many people are being granted access to a level of credit.


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    #19
    Electric Sheep
    Registered Users Posts: 2,107 ✭✭✭Electric Sheep


    No one is "entitled" to a mortgage, it is always at the bank's discretion. If the bank chooses to lend to you, great, but you are not entitled to it.


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    #20
    TheDoc
    Registered Users Posts: 23,137 ✭✭✭✭TheDoc


    El_Dangeroso wrote: »
    That's really unsympathetic, and also totally impractical. One of the current contributors to the lack of supply is that so many people are stuck in unsuitable accommodation due to negative equity. The whole market becomes stagnant and the flow of sales is stifled.

    The OP is paying off their debt and saving like they should, why shouldn't they be entitled to a mortgage?

    OP, try other banks for sure, BOI are much stricter than others. Engage the help of a mortgage broker.

    I'd be unsympathetic.

    Due to reckless borrowing and lending, and people making poor property investments, led to legislation and criteria changes that wiped out home ownerships prospects for people like me, overnight.

    Now I'm stuck in an endless renting cycle, with no real prospect at saving unless I get a monster bump in salary (and assume my rent doesn't increase year on year). And I'd be on the sort of income that would historically have been deemed ahead of the curve for my age.

    Saying that something has to be done for those who made reckless investments, but now need an improvement in their situation (which showed poor longterm planning) is literally the exact reason so many bad things happened in this countries economy.

    Not having a pop at you OP, and I hope you get sorted, but I'd quickly snap out of your sense of entitlement for a mortgage, and looking for sympathy. (although that sounds harsh I know, atleast you own two properties)


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    #21
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    Is the mortgage on the apartment interest only (buy to let), or is the rent also paying down the mortgage principal?

    Negative equity comes into play when you are selling. You are not selling, why would you. That would force a loss to be crystalised, whereas now it's fluid and the chance remains that the market will rise and carry your apartment with it. If it's rented out for another number of years and you keep paying down the mortgage, your equity will come back again. The thing about looking for more credit is that it takes a snapshot in time, and so for their calculations, it is crystallised now, at this point in time, as if you were selling. Plus, they also run stress tests, and look at both options. So while interest rates (especially on a tracker) are very low right now, they will work out your net disposable income based on far higher mortgage repayments, while keeping the rent the same.

    I have properties rented out, and was looking to move house in 2012/2013. In 2006/2007, those properties would have looked awesome on my balance sheet, heck, lenders were even phoning me asking if I wanted to 'release' equity and buy more. But in 2012/2013, those valuations were looking far sadder.

    A lot of where you go from now depends on how much neg equity you are in, and what your interest rate is on the old mortgage. You could look at paying down that mortgage faster until the property value and mortgage remaining meet in the middle. You will then have a much better chance of getting more credit. So, my suggestion is to divert your monthly savings into the other mortgage until you are in a better position.


    FWIW, ulsterbank and KBC were offering us the biggest mortgages in 2013. Worst rates though.


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    #22
    ndilly
    Registered Users Posts: 52 ✭✭ndilly


    Thank you for all your replies.TheDoc i am not asking for money that I cannot afford. I mentioned that as we have the properties rented and can afford to save and have a deposit I don't see why we cannot get some sort of mortgage. I am not looking for anything huge and admit I made a bad investment decision.

    As you said yourself you are on a salary above the curve therefore you should be able to save and that would help you get a mortgage.


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