At least one lender has begun to offer unsecured ‘negative equity’ loans to mortgage holders forced to sell their house in negative equity, a prominent mortgage broker has claimed.
Frank Conway, director of Irish Mortgage Corporation, said he was aware of one case of a couple who needed to sell their home and were offered an unsecured loan for the difference between the property’s selling price and the outstanding balance on the mortgage.
He said that the lender was prepared to offer a €140,000 personal loan at 1.1 per cent over the ECB rate, which was the tracker mortgage rate the couple were on for their mortgage.
‘‘The property owners owed about €380,000 on their mortgage but were unsure of the value of the property,” Conway said. ‘‘They were hopeful they could achieve €240,000 but fearful they would only get €210,000.The lender offered a €140,000 personal loan. Since the couple was only three years into their 35-year mortgage, the lender was prepared to offer the couple the same term of 32 years.”
No mortgage lender contacted by The Sunday Business Post said that they were offering negative equity loans. AIB, Bank of Ireland, National Irish Bank and EBS all said they would not issue loans in these circumstances.
A spokeswoman for Ulster Bank said that it would, in theory, lend any amount to customers, providing they can meet its conditions, but it has not yet issued a loan in these circumstances.
Conway said the only condition imposed by the bank was that the separating couple were asked to take on the negative equity loan jointly.
‘‘While not ideal, this appears to be the least bad of a bad lot for the couple,” Conway said. ‘‘Not only had their marriage broken down, the value of their home had also fallen significantly in the three years since they first purchased the property. Sharing a €140,000 negative equity loan jointly was tough medicine but in the words of the consumer, it was a ‘whole lot sweeter than sharing a house’”.