We bought a four bed family home in a good area in Dublin in May 2007. We paid 1,050,000 (plus stamp) and spent another 80k modernising. Our mortgage is 950k which costs 3.5k a month and we have no savings. I am a well paid so no pressures meeting the mortgage but, like many others, am contemplating the possibility of losing my job. If the (not so) unthinkable happened it is unlikely that I would be in a position to find alternative employment paying enough to cover the mortgage.
I am struggling to identify the likely chain of events which would start from the moment I call the bank to say I am going to miss my first payment. If the bank forecloses and I find some low paid employment and rent a place to live for my family will the bank still “own” me forever? Is there ANYTHING I can/should do at this stage to hedge against the doomsday scenario?
Unfortunately there is not much you can do, but, I do have a few ideas which you may wish to consider. Your house is now worth considerably less than your mortgage. If your job stays safe and you continue to pay your mortgage, eventually you will own your house or at some stage property prices will go up again to more than the value of your mortgage and you will be ok.
If you do loose your job and can’t pay your mortgage, eventually, your house will be taken from you. This will take a long time as the courts are slow to allow this once you have been making an honest attempt to deal with your financial difficulties. In this case, when the bank sell the house, there will be a shortfall and they will look to you for this. They know that it is unlikely that they will ever get this from you but that won’t stop them making your life difficult for some time.
My suggestion is that if you think it is likely that you will end up defaulting on your mortgage then you should consider changing your mortgage to interest only payments now on the basis that there is little point making any further capital payments on a house that you will loose anyway. I think the banks may be agreeable to interest only payments now if you tell them you are having some difficulty financially but will be able to make the interest. If things do work out ok for you then you go back to making capital payments in a year or two once your job security returns. If they don’t, then at least you will have some kind of a nest egg in the shape of the money you saved on capital payments in the meantime.
Also, if you have some spare cash, then you may want to consider where you would like this to be when the banks come knocking.
If, as I guess, you own your house (and mortgage) with your wife you may wish to consider changing it in to one of your ownerships if that is possible so that in the event of default at least one of you might retain a good credit rating. I don’t know if this is practical.
Sorry for the doom and gloom advice and best of luck.
I don’t think this chap needs to be reminded of his mistake, let’s stick to giving proper advice.
The fact that you have a mortgage of €1 million and no savings strikes me as insane What if you lose your job, or someone in your family gets sick? It’s entirely possible that you could lose the house within three months of that happening.
The first thing you need to do is to slash your expenditure until you have at least three months salary saved. That will give you a buffer should the worse happen regarding your job. If you go over to the Money Makeover section in askaboutmoney.com, there are some great tips on saving money.
I think you should try and devide up the house. Let rooms - at least one with a bathroom. it is easy to put up a Studd Partition wall. Immediately let as much as possible and programme your entrances so that the entrance doors are seperate. Put it up for sale immediately - even though you will possibly not. Someone may be really interested in that house and you will be mooving ahead of the Banks if they ever come. Prepare to Downsize fast. Talk to your parents and see if they would be willing to help in some way, i.e. minding the children for a few months. Get the Granny moving - even the Obamas are mooving and putting a Value on their Granney. Sell some furniture and valuables at local auctions. Reduce your spending substantially. Do a deal with the Banks. Ask them to reduce your monthly Mortgage payments and increase the length (years) of the Mortgage. Now that you can still Think Straight - do all these things and more. Get the children out of fee paying schools etc. Sell a Car. Buy a Bicycle and Good Luck as everyone needs Luck! Stop Drinking!
Save some money in cash ASAP. Put it under the mattress, not in a bank/post office. If things go really wrong you will at least have access to this money. If you have credit cards run them up to the limits with you day to day spending so you can save the money quicker.
I’m just shocked that you paid 80k doing up a house that you just paid 1 million for.
If I paid 1 million for a gaff, I’d expect to just turn the key, saunter in, throw my jacket over the leather chaisse- longue(comes with house), as I pace the lush carpets in my jim-jams (comes with house), smoking a pipe (comes with house).
I have absolutely no advice for you, other than to try and keep your job or embark on an illicit relationship with a member of the Cabinet.
As you are in a well paid job, it’s criminal and totally irresponsable that you do not have any savings. You are obviously an intelligent person, but fail drastically in your handling of personal finance, and budget.
I think I know someone in a similar-ish position regarding the size of mortgage but aren’t in such a doomsday position with regards employment. If you lose your job does the State help you out and to what extent ?
In terms of the system breakdown we’ve had I’d humbly suggest that folks in your positions use a website like this or another or set one up, purely with the aim of dealing with potential cases like this as well as ye offering valuable feedback as to how we all think the system went funny in the first place and how this shouldn’t be allowed to happen again.
Someone somewhere needs to be prosecuted, though the consumer is partially to blame for stepping on the panic culture boom bus that swept the place in the last ten years. It’s a combination of consumer frenzy but authoritative irresponsibility but someone somewhere needs to be put away. (and it’s probably savings … )
The country is in debt up to it’s tits due to irresponsable spending, people trying to look flash and savers derided as “scrooges” or " having no balls". I’ve no apology for the above post. It’s high-time the next generation learn from our mistakes and these mistakes must be pointed out. The guy pays 3.5k every month for a mortgage and has zero savings, whereas he could’ve got a decent home for half the price save possibly 2k a month, and not have to post here looking for advice.
the very first thing i would do, and i would do it fast, is sell your house and move the family into rented accomodation. its gonna be less than what you paid for it but they still have a long way down to go and if you get out now you mightn’t be too badly stung. find out what the market clearing price is for a similarly sized/speced house in the area and put it up for sale at that price. no higher.
there’s lots more but that is step 1 and i wouldn’t hang around if i were you. i know thats not a nice thing to hear when you’ve just bought the house but its the sensible thing to do and you’ll be glad you did so in 2 years time.
How does maxing the credit card help? For mr average joe soap, a 5k CC might last 6-10months paying the mort to keep the wolves at bay. For this guy, it wouldnt last two weeks
My advise, would be to carry on regardless, because lets face it, being able to service a 1M mortgage requires a special pay packet. i doubt if the poster would be able to get “another” job paying anyway near that salary again.
If he does lose his job, and is unable to get a “new” one, he is instantly buggered.
Most people with a Reasonable mortgage, could hit the panic button, consolidate loans, GO IO on the mortgage, send the Old doll out to work, and get SOMETHING resembling a pay packet, and just maybe, scrape through till better times.
With a Mort of 1M. its Giddy game over.
No, he should carry on regardless, and live life to the full.
Should he lose his job, instanlty declare bankrupsy and go on the scratch.