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Handing back the keys of house

If you cannot afford your mortgage can you just hand the keys back and can the Bank then claim for negative equity? Thanks, Dave.

Hi Dave, 

You have hit on a problem that is increasing as the value of property goes down and the burden of debt rises.

To understand this you must realise that a mortgage is merely a security for a debt already incurred and it is the ‘debt’ upon which we must focus.

The debt remains regardless of the performance of the property market and if you hand back the keys with a mortgage debt of say €200,000 and the property is worth only €150,000 as a result of the slump,  they you continue to owe the €50,000 balance.

One thing that the Banks and Building Societies are doing at the moment is that if you hand back the keys they may be open to negotiation that you can continue to live in the property paying an economic rent which would be about half the cost of your mortgage.   You should explore this possibility because the balance of any debt over and above the value of the house will affect your credit-worthiness for years to come.

Declan and Brian then discussed the whole problem of management of debt and both advised Listeners that they should, at the first sign of trouble, contact the mortgage holder and explain everything to them, if possible coming to an arrangement - and continue this contact because if the bank etc hears nothing from the customer they will issue court proceedings.

The issues raised in the answer to this NewsTalk listener's question are dealt with in a general way as can only be the case on live radio. Before relying on the advice given in this answer, whether you heard the broadcast or are for the first time reading the issues here please do not rely on the broad advice given. For a detailed professional opinion please consult a qualified legal advisor and for further details read our disclaimer on the Home Page.

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