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Q. I am in negative equity on a house I bought for rental in 2004. I bought it for just over €300,000 and am about to come off a fixed rate and onto a standard variable rate
which will mean my repayments go from about €800 a month to about €1500 a month.
I am young and don’t want this noose around my neck as I am thinking of emigrating. What would happen if I handed back the keys?
Johnny, County Meath
A. You are in a quandary shared by thousands of people who bought property in the peak years of the boom. If you are young and unencumbered by dependents, it might seem tempting to just hand back the keys like they do in America. We spoke to lawyers at the Free Legal Advice Centre who told us this:
“The difficult question of whether or not ‘handing back the keys’ of the property rather than waiting for a repossession case to be brought is not easily answered. If you ‘hand back the keys’ of your house to your mortgage lender, you will remain liable for any outstanding debt, including any accrued interest, charges, legal, selling and other related costs. The current negative equity in most properties means that borrowers can be sued separately for any shortfall owed following the sale of the surrendered property.
“Also, when a property is voluntarily surrendered, the borrower loses control over the sale, added to which the costs of sale (solicitors, auctioneers etc) are generally greater than if the borrower were trying to sell it him/herself. It is also likely that the lender will get less for the house. Thus, what you gain in not incurring legal fees, you may lose in other costs.
“The question of emigrating and abandoning property is a decision that should not be taken lightly. It should be noted that it is now much easier to enforce court judgments across borders within the European Union and lenders are now hiring private investigators to track down borrowers who have emigrated. It must also be remembered that a person will have personal and family ties in Ireland and may wish to return at some point in the future, but may still be liable for the debt concerned.
“This course of action may have other impacts in relation to, for example, your entitlement to social welfare benefits. You should get independent legal advice before considering this course of action.”
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