Selling BTL in negative equity?

There are two sides to this equation. On one side is your contribution to keeping the house. On the other is the amount you are paying off the capital each year. I think Brendan's point is that as long as the capital reduces by more than your contribution then it is profitable.
It might be hard to see it like that at the moment but if you sell and have to repay that €80000 at a high rate per month for years with no asset at the end, then that is a bad idea. How much would you save per month? And would it really be worth it.

Yes, you're caught between a rock and a hard place at this moment in time. But only at this moment in time. Investing in property, shares, a savings account takes money from today to have tomorrow. In three years time your investment will look very different.

You are entitled to charge a market rate rent by the way. You are not a charity and eventually the government will have to pay the going rate for housing social welfare tenants. It's not your job to make up that shortfall.
 
Looking back at the numbers you are contributing €900 a month. You are reducing your capital by about €1300 a month.
If you sell and repay the shortfall according to one poster you could pay €871 a month. You'll save nothing by selling & will have lost your asset.
 
JanuaryJones said:
At the moment we are paying both mortgages in full but it is killing us
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That is the key issue here, current and future repayment capacity. You are having difficulty now, perhaps in a pre-arrears stage. When the ECB rate eventually rises from the current almost zero rate, a lot of people will be affected by increased tracker repayments leading to arrears and defaults.

Some observations.......

CBI has guidelines concerning sustainability of a mortgage, which have to take into account both borrower affordability and the capital impact for the bank.

The 3 modes of a sustainable solution are;

1. Forbearance (some change to original repayment terms)
2. Personal Insolvency Arrangement
3. Repossession (voluntary or otherwise)

Under Provision 46 the bank can seek to move you off your tracker if the new alternative repayment arrangement is

a) affordable for you
b) a long-term sustainable solution consistent with CBI policy

As the bank is losing money on your tracker, extending your term compounds the loss further for the bank, therefore it is not sustainable per the guidelines.

Interest only is not a sustainable solution for a tracker mortgage. Interest only can be a sustainable solution for SVR mortgages for low LTVs and also potentially for all BTLs.

So, if you want to keep your rental property and can't afford the agreed current tracker repayment schedule, CBI sustainability guidelines will guide a revised arrangement which doesn't include your tracker at your current rate.

What is the original LTV% of the rental property mortgage? I don't consider it a BTL as it wasn't bought to let as such, presumably it is/was a private residential mortgage. My basic understanding is that there can be differences in the contracts.
 
STEINER said:
What is the original LTV% of the rental property mortgage? I don't consider it a BTL as it wasn't bought to let as such, presumably it is/was a private residential mortgage. My basic understanding is that there can be differences in the contracts.
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It was valued at 410k in 2006 and the mortgage on it was 340k. It is a BTL mortgage and the first 3 years were interest only. There were a few periods of interest only in between (maternity leave etc).
 
epicaricacy said:
I'm struggling with your idea of a 'profitable investment'.
The house is in negative equity of 80,000.
The Market rent is currently 350 less than monthly repayment.
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You clearly are struggling with distinguishing between capital and interest payments. It's fairly basic, so I don't really know how I can express it any more clearly. But I will try...

Say you have a loan of €300k at 1% over 10 years on a property worth €300k.

The rent is €600 a month.

Is this a profitable investment or not?
 
Hi January

There is a very important point here which many people miss.

Your home is protected by the Code of Conduct on Mortgage Arrears. Your investment property is not.

If you go into arrears on the investment property mortgage, the lender can move fairly quickly on repossession. They might also be able to appoint a receiver. While these are unlikely to happen, they could happen.

They are extremely unlikely to happen to you if you go into arrears on your home loan as it's protected by the CCMA and a general sympathetic approach anyway.

So if you find that you cannot keep up both payments, then pay the investment property mortgage in full. Go into arrears on your home loan. You are more likely to get a rescheduling of your home loan than your investment property. If you are paying the interest on your home loan in full, and some capital, then the bank is unlikely to take any action other than calling your and sending you letters.
 
You are more likely to get a rescheduling of your home loan than your investment property.
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Not the case I'm afraid!! Any request to a bank for forbearance will be treated in accordance with affordability. I.e. Amount of funds available to meet loan repayments after deduction of standard living expenses. Every bank will expect that Home Loan payments are prioritised. I.e. in order to be regarded as complying with MARP you will be expected to meet HL repayments first and if you don't the Bank can treat you as non-cooperating and exit you from MARP.
 
Hi brendan

Very good point.

So let's say January goes into AIB and they refuse a restructuring because they reckon he can afford the full repayments. But January is stuck and can't make the full repayments. He has to choose between the home loan or the investment loan? Which one would you recommend that the prioritise?

Brendan
 
He will need to prioritise the HL repayments Brendan! As I mentioned in my previous post MARP may seem like an option. However, from my own experience I am seeing the ASU departments of all banks not accepting any deviation from HL prioritisation. I.e In the majority of circumstances those in MARP must pay their HL first. If not they can be exited from MARP and while reposession may not be an immediate risk, surcharge will be applied to loan arrears and a bank is entitled to commence proceedings for either reposession or other!
 
44brendan said:
surcharge will be applied to loan arrears and a bank is entitled to commence proceedings for either reposession or other!
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Hi brendan

Has this happened in practice? I have not yet heard of anyone being charged a surcharge of interest on their home loan. They are allowed to do it, and I think it's a good idea for tracker mortgages. It's just I have not heard of it yet.
 
Yes it has Brendan. I have seen these decisions been made by our own ASU department and I have also seen letters sent out by competitor banks. There is a change now occuring (some banks leading the charge) where revised repayment proposals are not being implemented unless external loan repayments are either reduced or stopped altogether.
I don't want to alarm anyone as some banks are less aggressive than others on this, but those who are prioritising external payments need to be aware that this will not be tolerated on an ongoing basis. The CB are totally behind this and in a recent audit have commented on the leniency being given to some mortgage holders.
 
We take the total external debt owed, extend it over 60 months and then allow for 20% to be repaid. If borrowers don't make the payments in line with this affordability, the restructure is withdrawn. We do allow 6 months for them to restructure the external debt.
 
Macavity, I presume that is for unsecured debt only.

In this case, the OP has two mortgages with the same bank, AIB.
 
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