Case study I can pay my mortgage but not my arrears

PatrickJ said:

Folks, an offer has been put on the table. I'm completely illiterate when it comes to interest rates etc so any input would be great please:

Remaining mtg: €380,000
Substantial arrears: €60,000
I pay my mortgage in full each month.

Offer from bank:
Recapitalize arrears which brings the over all debt up to 440k on a current house value 220k
Pay debt off within the original time frame. No elongating of mortgage duration which will increase the monthly repayment to €2200 per month
I presume this includes the interest on the arrears.

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I''m confused, at post number 39 on this thread you stated the 380K included the arrears of 60K?

Can you confirm:
Mortgage:380K on which you are paying 1720 capital and interest
Arrears: 60K, on which you were paying 800 at one point and are now paying ?

PatrickJ said:

I'm gutted to say the least.

; sitting looking at the work I'd done with my bare hands to see it all whether away but I suppose that's the price of the game.

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Far better to look to the future and all you have. The sooner you get out of this mess the better for you. If you recapitalised you would be really really stretched and totally finished if interest rates rise.

You have a good job, you have the experience of buying a property, yes it went wrong, but all of life has it's ups and downs and we have to learn from them. You have two good parents. There will eventually be an inheritance there. You can sort this mess out, probably without your parents money, and don't tell the bank about the possibility there, whatever you do. When the mess is sorted, you can start again. What's to stop you.

Can you tell us what the PIP suggested. You most definitely need a second opinion on whatever a PIP offers.

In relation to the work you've done to the house, that will come back to you in the price the house achieves.

Thank you Bronte.

I got an emergency appointment with a PIP yesterday. Luckily enough I had previously ordered my file from the bank months prier so PIP was happy to flick through them when I was there and he said he will digest them further over the weekend.

Firstly, he was surprised how I had a accumulated such high arrears considering I was in MARP for most of the time I was unemployed. This will have to be looked further into.

I was told under no circumstances should I leave the house.

He was confused by the amounts owing as you are too.

However, what we do know is I owe 380k inclusive of arrears which they say equates to a repayment of 2,200 per month on a variable rate.

PIP was shocked when he was informed of my age (early 30's) and could not believe the mortgage was not extended by at least 10 years.

It's a tough situation that you've found yourself in PatrickJ.
I hope the PIP will be able to see his way through the whole thing.

If you do have to leave, then you should walk away with your head high. You've done the best that you can. Life does move on & every terrible situation fades & becomes just a memory eventually. Just wanted to wish you the best of luck.

Thank you very much Butter.

Last week was a tough week. Having chatted with people on this forum and meeting with a PIP I am no longer blaming myself for whatever outcome is to be.

The PIP said the bank done me no favors while I went out of my way to pay and do what was right.

Recapitalize arrears which brings the over all debt up to 440k on a current house value 220k

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There are a number of thyings you now need to consider:
1. You may be attached to this house but not to the extent where you can carry a debt burden of 440k on a house valued 220k. I have moved house a number of times through work. All of them carried good memories and plenty of personalised improvements. However, no house is worth the worry you are now being put through. Your next house will also be your home!!
2. You need to find a final resolution that suits you and your circumstances. You canot do this alone and I don't know whether you have taken the previously repeated advise to get yourself a professional advisor.
3. Banks are not there to help you. they want their money back. In this instance tere should be no way for them to get their 440k but they do have to work towards this objective. You are currently insolvent. In that position you should postpone any gift from your parents until you resolve your insolvency position. A PIP offer is likely to be refused by the bank so you may need to consider bankruptcy. This is not the end of the world but an opportunity to get a new start.
Don't postpone action unduly. You need to take charge of your own life again and realise that these issues are resolveable. Financial difficulties are bad but they can be fixed and a new start is possible.

Thank you 44brendan.

It has finally been confirmed that the debt is 380k including the arrears. Yes you are correct in saying the PIP offer is likely to be refused. I was told it will be 99% refused because of my earnings.

The thought of bankruptcy is scary but I will read up more on it over the coming days.

Do you believe if the mortgage term was extended and a fixed rate applied it would be more affordable?

Patrick as per your original post you are a single man and I presume relatively young. Lets be realistic! On a salary of 3.2k pm you cannot afford to carry this level of debt. Even on an extended 30 year term, mortgage payments will be 1,925 pm over 30 years. Do you want to carry this burden when you don't have to? Bankruptcy will mean little change for you other than resolving your debt problems in a short term. SAssuming that you would want to retain your current job, the UK option whilst being considerably shorter may not be realistic. Irish option will be for a 3 year term. Looking at your financial overview you are not a high spender and under bankruptcy you will still have €1,045 pm to cover living expenses. This is more or less what you will have also if you pay your mortgage in full (accounting for 300pm in other loans). The added bonus is that in 3 years time the balance of loans will be wiped out. You can also manage to hang on to your current house and get rid of the negative equity. Discuss this option with your PIA!

Folks, the latest in this long running saga. Things have moved exceptionally quickly. The bank were informed that I sought the advise of a PIP. I did not pay this months mortgage and am now in receipt of a letter saying that legal proceedings will commence in 10 days and a figure for their legal fees which I am required to pay.

I have been promoted in my job. This is an extra €400 approx per month bringing total take home up to €3,600 per month. Bank want €2,200 per month off me on a variable 4.5%.

I am placing the property on the market tomorrow and on sale of same heading straight to the UK. I will obviously have to hand in my notice. PIP has said that his offer is likely to be refused. So I know the UK is my only option.

PatrickJ said:

Folks, the latest in this long running saga. Things have moved exceptionally quickly. The bank were informed that I sought the advise of a PIP. I did not pay this months mortgage and am now in receipt of a letter saying that legal proceedings will commence in 10 days and a figure for their legal fees which I am required to pay.

I have been promoted in my job. This is an extra €400 approx per month bringing total take home up to €3,600 per month. Bank want €2,200 per month off me on a variable 4.5%.

I am placing the property on the market tomorrow and on sale of same heading straight to the UK. I will obviously have to hand in my notice. PIP has said that his offer is likely to be refused. So I know the UK is my only option.

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Patrick,
Tough calls for you .
Do you need /want to go to Uk.
Ask PIP,s advice.
Good luck.

Hi Gerry,

I personally don't believe the bank will commence legal action in the 10 days, maybe I'm wrong. I had an estate agent come to the house this morning. I gave him a rough outline of the full story. He told me fair and square that the sale proceeds of the property would not be any way near what the bank would be happy with. The negative equity situation raises it's ugly head again. He told me I was wasting my time putting the property up on the market without the written consent of the bank. He said he had a list of perspective buyers but the long drawn out "will they, wont they allow me to sell", would put off approved buyers. I've now to contact the bank and ask their permission can I sell even though they are threatening legal action. It's all absolute madness.

I honestly don't want to go to the UK and I most certainly don't want to leave my job for a not to certain future across the pond.

I'm back at the point of saying, should I just sign the agreement the bank have proposed, keep paying and shut my mouth or simply walk from it all.

Patrick, you are currently in a quandry, somewhat directionless and uncertain of what option will best suit your circumstances. This is a good forum for obtaining general advice and pointing out various options that may be available to you. However as I mentioned previously "putting the head down" is not an option that will lead to any desired conclusion. You need to start taking charge of your life and in order to do that you need a "good" financial advisor. have no worries about the Legal threat. It will take at least 15 months for the Bank to get to a position of eviction. Unfortunately many PIPs are limited in the advice that they give and mereley point out options which may or may not suit your own circumstances. Is there any possibility of you getting a leave of absence from your job.
A 12 month period would be sufficient for you to go to the UK and go through the full bankruptcy process. You can then return to Ireland debt free. Also you have the option of Irish bankruptcy which is slightly longer at 3 years. The UK is not your only option and even if you do decide to go there you may be in a position to agree a 12 month break with your employer to give you this flexibility.

44brendan said:

The UK is not your only option and even if you do decide to go there you may be in a position to agree a 12 month break with your employer to give you this flexibility.

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Would the OP really be able to claim the UK as centre of main interest if they had a job waiting for them back here? Steve Thatcher's [broken link removed] doesn't address the point directly, but seems to suggest it could be problematic.

Has been done on a regular basis to my certin knowledge. Perhaps the facts were somewhat obscured when COMI issue was established, but it certainly was done in the past.

Thanks 44brendan. My head is all over the place. Sometimes I feel I don't care and other times I'm generally scared of legal action etc. etc. If I'm honest it's an absolutely horrendous time. I am also grossly embarrassed.

After reading your suggestion regarding putting my job on hold and going to the UK - I put this to the PIP and he thought it would be best if a clean break was made and I made alternative arrangements overseas. It would make it all less complicated.

I have tossed with the idea of bankruptcy in Ireland and feel this would not be beneficial as did the PIP. He also believed a PIA would be turned down.

Just as a by the way. I received correspondence from the bank telling me that if I were to send in an SFS requesting any different type of restructure, to the one they already have on the table, it will be turned down. I found this odd. I understand they need to work with you to come to a resolution that is suitable for both parties but are they able to place a brick wall in the middle of communications?

Also there are a mammoth amount of credits put back into my mortgage account. I believe these to be related to miscalculations of interest rates over a very long period of time.

Hi PatrickJ

Sorry to hear about your situation. You've definitely come to the right place for advice. This forum has saved me so many times !

I see that you are considering going to the UK to file for bankruptcy. I went over in late 2013 and am due to be discharged soon. It's not ideal to have to leave the country but I only spent a total of 9 months over there inclusive of the 6 months it took to build my COMI and i'm nearly out the other end of it. If you have any questions, feel free to ask.

NM

Thanks NM. Nine months sounds good. If you don't mind me asking what was your level of debt? What do you feel are the positives and negatives of the whole procedure?

I owed 260k on a mortgage along with 15k arrears. The property was only worth 80k. Then i had smaller loans which added up to about 15k.

The positives - a) not having to deal with creditors anymore, b) getting out debt free after 12 months, c) my bankruptcy is on a register in the UK for 6 years but over here I would be on it for life, d) I feel they punish you for becoming bankrupt over here whereas they treated me like a human over there - I was even able to open a bank account over there days after i became bankrupt but yet they still won't give me a bank account here.

The negatives - a) It was lonely being over there not knowing many people, b) I felt I couldn't build up many close friendships because I couldn't let anyone know what I was doing, c) I had to attend court and sit in front of a judge (no different to Ireland but still a negative), d) in my case my advisors were awful and there were a few hiccups along the way because of it but I only went with them because I thought I would be dealing with Steve Thatcher - he knows the system inside out.

Do I have any regrets? It was a tough few months but I can't really put a price on the relief I felt when I was finally declared bankrupt. And I'm sure I will feel the same sense of relief when I am discharged.

Compared to the irish system, i felt the UK was the better option. I still stand by that.

Thanks very much NM.

Absolutely, the Irish system is not the way to go.

Feel free to tell me to take a hike but do you mind me asking how did you manage to survive when you moved country re money, rental etc?

I can't really give the OP advise as to what he should and shouldn't do but her is my tuppence worth

• If you move to the UK then you will need to have some sort of funds available to tide you over until you find work and until you get paid. You may need a deposit on a place to stay as well as travel and flight costs and living expenses and they all add up. Without knowing your background or what you do, perhaps you should engage with some UK employment agencies to see what your prospects are?
• If you do move to the UK and want to keep your costs down, avoid London
• In terms of negative equity, that is only an issue if you sell. If you don't and are happy for this to be your own home going forward, then it is an irrelevance from a practical perspective. Remember every month you make the mortgage payment the outstanding mortgage falls and the negative equity is likely to be reduced and that gap will close even faster if property prices continue to rise
• Will a court grant a bank a repossession order for a mortgage you can quite clearly afford to pay and for which you potentially could make slow but steady inroads into the arrears? I doubt it.
• Have you contemplated taking in a lodger for a couple of years?
• In terms of the overpayments, would you be better to put a large chunk of this into a savings account at another bank? Building up your own lump sum perhaps added to by a small donation from your parents might give you extra wiggle room for any discussions with the bank