Negative equity: a positive outcome
The property went on sale soon after March at €225,000. “Having to accept that our savings and help from family of €100,000 was gone west, wrecked my head,” she admits bluntly. Connolly explains: “The carrot for us in selling was that what we could afford had dropped percentage wise too. ”
They speak of how confusing the process was in progressing their negative equity mortgage with the bank.
“We seemed like a test case,” Connolly says. “The branch we were dealing with said we were their first and only case.”
They received mortgage approval of €300,000 to buy a new property, including a sum of negative equity pencilled in as €30,000, pending a sale of the D5 property. Shortly afterwards, they accepted an offer of €206,500.
“When they put in the offer, we had to go behind the scenes and see if the bank would accept it,” Devlin says. “We didn’t want the buyer to know we were awaiting approval from our bank. We were afraid it would all collapse.”
All this time, they were continuing to pay their mortgage on the Dublin 5 property, reducing the amount of negative equity every month. It had started as €30,000. By the time they found another house to buy, it had reduced to €27,700.
In the interim years, they had saved €30,000. This was to be the deposit of 10 per cent now required for a mortgage.
They found a house in Dublin 16 for sale at €298,000, with stamp duty of €2,980. With their deposit of €30,000, an additional sum reserved for fees, and the sale of the D5 house, the mortgage loan came to €269,393.
The negative equity of €27,700 became what the bank called “tranche two” of the mortgage. In all, the two collective sums loaned to them for the purchase of the D16 house was €298,000. The full loan for the house, combining the mortgage and loan for negative equity, was €297,093: the current market price of the house.
They moved into their new home less than a month ago, still not quite able to believe they had navigated their way out of negative equity. They have shared their story, because, as Connolly explains, “We’re not the only ones in this situation. For us, there was a positive outcome. Negative equity sounds impossible, but it’s about breaking something massive down into a series of small chunks as you go through the process.”
“I have a lot of friends and family who bought in the boom years and are totally caught up in negative equity situations,” Devlin says. “And most of our friends did not spend wildly. They just wanted to have a home. As we did.”
Boom, bust and bounceback: A timeline of savings and equity
€370,000 house purchase
First-time buyers Elayne Devlin and Mike Connolly, with a joint annual income of €77,000 and no children, bought 1,150 sq ft three-bed second-hand duplex in Dublin 5. The couple’s deposit of savings and family assistance totalled €100,000. Stamp duty and solicitor’s fees came to €17,467.Their mortgage was €287,467 over a 30- year term. Monthly payments would vary between €1,060 and €1,594 .
€140,000 increase in value
Property valued at €510,000 by National Irish Bank.
Value drops by €115,000-plus
House valued at between €350,000 and €395,000
House on sale at €395,000
One expression of interest at €275,000.
Sale price drops to €330,000
Sale price drops to €225,000 No offers.
Property sells for €206,500
A statement two months later stated the couple owed €234,184 including sale price, on their mortgage, leaving negative equity of €27,684.
€298,000 house purchase
In July 2012, with a joint income of €100,000 and two children, the couple bought a 1,050sq ft three-bed house in Dublin 16 for €298,000. The deposit was €30,000 ,with stamp duty costing €2,980.