Pay off my mortgage early - Query

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Gulliver1

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Hi all,

I am looking for some advice: -

In 2006 I took out a mortgage in the amount of 270,000 Euros and purchased a home in Wicklow for 300,000 Euros. The home is now worth 150,000, roughly.

I have approximately 260,000 Euros left on the mortgage. I am on a variable rate.

My elderly Father passed away and I am due to inherit approximately 270,000 Euros from his Estate in the coming months. I struggle each month to meet my mortgage payments, but I do meet them - just.

I was wondering if there is anyone on this Forum who would be able to tell me if I would be wise using the full amount of my inheritance to pay off the mortgage, even though the house is only worth around 150,000? This is a big deal to me as I will never have this amount of money coming to me again and I just want to ensure I use it smartly. Alternatively, if I go to my lender and offer around 200,000 (60,000 less than what is owed) is there any reality of them coming to an agreement with me to allow me pay 200,000 and forgive me the 60,000? I am reading conflicting stories on various Forums about banks 'doing deals'. Would I need a Solicitor to deal with this on my behalf? What is my best avenue to explore?

I have recently ordered a Redemption Figure from my Bank and am awaiting this in the post.

Thanks in advance everyone,
Jim.
 
Hi Brendan,

Thanks for your reply. I was hoping to come to an arrangement as the home is in such negative equity, but from a humane point of view I take your point! Just a killer paying 260k for something worth 150k - seems like I would be flushing 110,000 Euros approx. down the swanney! I just thought an agreement would be possible as a lot of people in Ireland aren't paying their mortgages, at all, and I thought the Bank would be glad to recoup 200k on a 270k loan!
 
The bank didn't make the purchase decision, you did?

Are you suggesting that someone who borrows €3k to go on a holiday, should get a write off because they have nothing to show for it?

The fact that "a lot of people aren't paying their mortgages at all" doesn't mean you should not pay your mortgage.
 
I was only asking for people's advice Brendan, as it's a lot of money at stake and I want to ensure I use it properly because I will never come across that amount of money again.
 
Gulliver1 said:
In 2006 I took out a mortgage in the amount of 270,000 Euros and purchased a home in Wicklow for 300,000 Euros. The home is now worth 150,000, roughly.

I have approximately 260,000 Euros left on the mortgage. I am on a variable rate.
Click to expand...

How come you still have €260,000 left to pay on the mortgage after 9 years? Did you remortgage at some stage?
 
moneybox said:
How come you still have €260,000 left to pay on the mortgage after 9 years? Did you remortgage at some stage?
Click to expand...

Hi Moneybox - I couldn't afford to pay my mortgage for a little over two years. That's why there is still so much owing.
 
Gulliver.

See the threads on Standard Variable Rate(SVR) .

I would keep my extra money for now, since it may be Banks will be forced to repay or at least lower interest rates.

On your mortgage your SVR has cost your, circa k30 more than it should.
Also depends on which Bank you are with,eg Danske look like they are in trouble over their overcharging and probably the rest may well be in trouble on overcharging.

Get the k260, make sure Tax etc is sorted and review then.
Get trusted solid advice.
Do not make a quick decision.
 
Your house may be worth €150,000 now but that's only a value at today's date. Negative equity won't exist forever.
Why not pay off enough of the mortgage to bring your monthly payments down to a level you can comfortably afford?
How would paying €100,000 off the mortgage change your monthly repayment?
What interest are you currently paying?
 
I agree with Butter. In addition you need to decide what you will do with the money you have left after part paying your mortgage.

Can you give us the figures Butter asked for to see how much a) you should pay off to make the mortgage manageable and b) how much would get you to a level that might secure you a better interest rate.

And stop reading about people doing deals, those are generally broke people. There are plenty of people paying off NE, including myself. It doesn't matter the NE, not if you can afford the mortgage. You are in a very very lucky position as you can sort out your finances. Ideally you should fill out the money makeover thread to get a better sense of what you can do.
 
Hi Gulliver

I think you should decide whether you are happy to stay in your current home long-term before deciding whether to pay much off the mortgage. If you want to move closer to work or something in a couple of years you will find it easier to pay cash for the new house and then sell the current house and deal with the neg equity shortfall than pay off the mortgage now and try to get a mortgage for a new house with your impaired credit rating.
 
Thank you everyone for your replies.

I am currently on a variable interest rate of 4.330% and my monthly mortgage repayments are 1,270 Euros. I just received my Redemption figure in the post and it is 255,000 Euros.

If I am going to pay off the mortgage, shouldn't I pay all of it instead of a chunk, in order to avoid paying more in the long term with interest etc.?

I didn't know there was a Money Makeover thread - thanks for letting me know!

I could see myself in the house short-term but not long-term. I really don't know whether to pay off the mortgage in full, or just put the money in a bank account and let it sit there.
 
I'm not sure what you mean by being better off paying off the lot rather than a chunk, well obviously you would be as in you would have no mortgage but paying off a chunk will save you the interest on the portion that is gone and you will only be charged on the amount left. The advantage is that you would have savings left and a lower repayment. I would definitely keep some of it if you think you will be moving in the future.
 
If you decide to put inheritence in bank, choose a bank different to your mortgage lender. That way, in theory, lender will not know your assets
 
Let's summarise here:

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In general, you should not borrow at 4.33% to invest at 0.5%.

So unless, you have some short-term need for the cash, you should pay off your mortgage. I do not understand the suggestion that you should pay off the negative equity portion only. This might provide some psychological comfort, but it makes no logical or financial sense.

If you are in arrears, you should pay off these arrears immediately. This means that you begin the 5 year process of restoring your credit rating. It is also a contractual obligation.

The only situation in which you should not pay off the mortgage in full, is if you have a short-term need for the cash. You can now afford to buy a bigger house if you want to. You will not be able to get a mortgage, so if you want to buy a house for €270k, you can do so. You could then let out your current home. Or you could sell it and move the mortgage shortfall to your new home.

If you pay off your mortgage in full now, you will be left with a house worth €150k and cash of €10k. You will not be able to trade up as it will be difficult for you to get a mortgage. If you are unlikely to be trading up within 5 years, then pay off your mortgage in full.

If you want to keep some of the mortgage for some reason, then you should enter into discussions with your bank. Tell them that you will pay down the mortgage to [€100k] if they reduce the interest rate.

Brendan
 
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