Q – I have major debts including arrears on a mortgage that is in negative equity. I’ve now been offered a chance to work in Australia. If I hand back the keys and walk away from these debts, how long before they are written off?
WITH BILL TYSON
A – Creditors can take legal action for six years from the accrual of a debt. In your case, this would be when the house is sold, which could be several years from your departure.
If the creditor gets a judgement (which may or may not be pursued when you are in Australia) it could stretch this out for a further 12 years. That’s a possible 18 years, plus however many years it takes to sell your house.
Your credit rating would be affected and could be checked by Australian banks if you go for a loan there.
Judgements are held on record by the Irish Credit Bureau for six years but records of them could still be found for 12 years or more in a thorough search.
You might be better off making a clean break of things with the bank and using our imminent departure as leverage to negotiate getting at least some of our debt written off or parked.
Q – We are a couple in our early thirties who want to buy a house for around €240,000. We have saved 10% of this. We are both self-employed. What are our chances of getting a mortgage? We have accouts with AIB and Ulster Bank. How much would we have to repay and which is the lender with the best interest rates?
A – Your best bet is to apply to all the main lenders. They all require the same paperwork so it’s not too much extra hassle. Banks all share your crtedit details and use similar criteria to assess borrowers, so it’s easy to shop around. They certainly wouldn’t show loyalty to you if you don’t meet their criteria for getting a loan so why should you be loyal to them?
Here are the best variable rate deals (Figures courtesy of bonkers.ie) based on a couple borrowing 90% of a home worth €240,000 over 20 years.
There’s not much difference between the main lenders. The difference in monthly repayments between the cheapest (EBS) and the most expensive (BoI) is just €5.82 per month, which would add up to €1,400 over 20 years. But Bank of Ireland has now come out with a deal that turns that mortgage table on its head.
Bank of Ireland will refund first time buyers 1% of the mortgage value. In your case that would amount to €2,400 – or €1,000 more than the difference between it and EBS, turning itfrom the dearest lender to the cheapest. That’s real cash at the time when you need it most and could be used to pay the stamp duty on the property or buy furniture.
To apply for a loan you will need:
- Three years of certified accounts
- Bank statements
- A tax clearance certificate (they may not ask for this but it’s worth including anyway)
- Proof of any extra income
- Proof of identity and address, i.e. passport and utility bill.
You will also need a good credit ratin, a record of paying rent and as few debts as possible. A big plus would be any contracts that guarantee long-term income for you or your business.
The harsh truth, however, is that self-employed people are bottom of the heap when it comes to getting credit (or social welfare for that matter) and you will face an uphill struggle.
But the lending environment has improvded in recent months so you may be in luck.