Case study AIB wants me to sell investment property - 3 BoS loans as well

B

BrokeGuy

Registered User
Messages
62
Hello there.

Myself and the Mrs have 4 properties, one which we live in, 2 rentals (which we used to live in) and one place in Bulgaria (don't judge!)

The debts are circa €660k broken down as follows:

Home; €290k with BOS (tracker) currently on interest only [worth €150k]
Rental 1: €140k with BOS (tracker) currently on cap & int. [worth €50k]
Rental 2: €196k with AIB (tracker), always on interest only [worth €120k]
Foreign: €35k with BOS (tracker), cap & interest. [worth €30k]

The two rentals are rented but the income barely covers the mortgages on same. We had to go interest only on the home in the last year cos the Mrs lost her job (again!).

In the past our combined income was easily €150k (excluding rent) but now it is more like €60k.

I have made contact with a crowd about doing the PIA scheme as we feel we have no choice because we can't pay these loans off long term, especially allowing for potential rises in interest rates. It is too early to go down that path so we will have to wait.

We have two kids, one on the way.

In the meantime, AIB contacted the MRS to say that she had two weeks to pay capital and interest or appoint an agent to sell the house or they will take action. Worth nothing that no repayments were ever missed or even late for this loan although I am aware the 5 years interest only which she had wasn't as originally intended (the house is in her name).

If it was sold now there would be €80k owed to the bank and they won't tell her what they will do with same. Her income is only €200 per week and her wages are never going to get back to what they were 'cos can't get full time job and even if she did she would lose 80% of it in creche fees!

I believe if she appoints the agent she will be liable to the legal fees and auctioneers fees on the sale - we cant pay them as we are skint. On that basis should we write to them and look for more time or make the bank enforce the sale. I know the price will be less but isn't it is better to owe the bank €100k and nothing to the solicitor and auctioneer than owing the bank €80k and €2k to both the auctioneer and solicitor as we will never be able to pay the bank anyway!

I am wondering what we can do given that we are going down the PIA route when possible.

Many thanks.
 
First thing I would do in that situation is to isolate your home (PPR) and continue to pay that and restructure it if necessary. If you have come to the conclusion that you won't be able to keep the whole thing afloat with your investment properties and it doesn't make sense long term, then let them go. Stop throwing good money at them and surrender them to the banks (or let them repossess if you want more time).

Then consider a DSA in several months time when the banks have sold the properties and you only have unsecured debt left! Don't be duped into selling the properties yourself as the banks will mess you around with fees and the price it's being sold for etc. Jingle mail is your only man here!! :)

Good luck!
 
Just one other thing to add which I'm sure you may have already considered is to move into one of your properties with the least negative equity so that you are shedding the maximum amount of debt under a DSA should you choose to go down that route!
 
In the meantime, AIB contacted the MRS to say that she had two weeks to pay capital and interest or appoint an agent to sell the house or they will take action. Worth nothing that no repayments were ever missed or even late for this loan although I am aware the 5 years interest only which she had wasn't as originally intended (the house is in her name).
Click to expand...
It sounds to me as if AIB have been very reasonable with you on this, if I understand it correctly. You have a cheap tracker which should be on capital and interest. They allowed you to pay interest-only for 5 years which has cost them a huge amount of money.

You have no prospect of paying off the capital so they are right to ask you to sell the property.

I have posted the text of the AIB "Voluntary sale for less" scheme It applies to a home loan, but they may do it for an investment property. In that case they have agreed to pay the legal and auctioneering fees.

Your options

1) Agree to the voluntary sale
You will have a smaller shortfall.
They probably won't write it off, but they won't chase it either.
You could apply for a DSA but I am not sure that there is much point in doing that.

2) Hand back the keys
You will just have a bigger deficit.
Probably won't matter that much but if they do pursue the deficit e.g. by registering a judgement against your home, it would be worse.

In general, you want to work with your creditors. If there is any future court cases and you have acted in good faith and reasonably at all times, you will be in a better position.

3) Apply for a PIA
BoS could veto it, but if they don't you could be debt-free after 5 years (or possibly less)
AIB probably couldn't veto it.

|secured bit|unsecured bit
BoS |230|230
AIB|120|76
Total|350
120/350 = 34% which is very close to the 35% they need to veto it.

I think that the best option would be:

1) Agree to the voluntary sale - asking them to pay the costs of sale
2) When it is sold apply for a PIA as follows
Sell all properties including the family home.
Pay any excess income to the creditors over 2 years.

After you sell the AIB property, this will be the situation

|secured bit|unsecured bit
BoS |230|230
AIB|0|80
BoS want to be out of the market and I think that they would not veto this. As they have the majority of both secured and unsecured creditors and over 65% of the total creditors, AIB could not veto it , even if they wanted to.

Messy alternative which allows you keep the family home

Sell the AIB property
Apply for a PIA which involves keeping the family home which would mean keeping the mortgage as is, so you still have a mortgage of twice the value of the property.

BoS will probably veto that as they want out of the market.
But anyway, if you can get rid of a house worth €150k and a mortgage of €290k even if it is a tracker, you should do so.

You would get a fresh start after two years in my favoured approach.

Come to think of it, BoS might approve a PIA term of 1 month. You have no surplus income so why bother chasing you?

Alternative plan or the new best option
Speak to BoS now and tell them the story. Tell them that you will sell all the houses now rather than under a PIA. This should maximise their value.

If you sell all the houses, BoS will have no further interest in you.
Your PIP can apply for a very short term DSA and it will go through by default because BoS won't veto it.
 
BrokeGuy said:
I believe if she appoints the agent she will be liable to the legal fees and auctioneers fees on the sale - we cant pay them as we are skint. On that basis should we write to them and look for more time or make the bank enforce the sale.
Click to expand...

Burgess has given you most of the options, but on this specific question, I would advise you to sell it as the shortfall will be less, but to avoid the legal and auctioneering fees, get it in writing from AIB that these come out of the proceeds of sale.

In relation to the family home, what are the current repayments and if your ignoring the rentals, can you afford to live on 60K and pay this mortgage. What is the situation with the interest only?
 
Guys, really helpful, really appreciate that.

I am aware in a up the creak without a paddle so it isn’t me calling the shots, however losing the family home is really not ideal. That said I don’t think we can afford the mortgage of €290k, it is possible but if the interest rates increased to say 4% or so we would be fecked and I know you can only do one PIA or DSA so it would be risky.
I did some some examples where someone like me (an interlocking case they call it) sell all the investment properties and that is turned into unsecured debt. That is essentially written off over the 6 years but that some person also gets a reduction on their home loan to allow for what can be afforded, e.g. the €290k owed would fall to €200k on the basis that while the property is still in negative equity the bank at least get a performing loan for once.

Pie in the sky or reality?
 
My immediate thoughts on this case is that I am not sure that you, as a couple, are "insolvent" and that is one of the key eligibility criteria, required for a DSA or a PIA.

The definition of an "insolvent" person, for purposes of the Insolvency Act is one who is unable to meet their financial commitments as they fall due.

If you have income of 60,000 and you say the rental income is barely meeting the mortgage repayments then maybe when the numbers are crunched you are not (as a couple) insolvent.
Presumbly the trackers are at a good rate. Can you tell us what the rent on each property is and also the mortgage repayment on each.

On the other hand, I do suspect that your wife is insolvent. She has little or no income, has an apartment with 80K NE and is coming under pressure to pay capital in addition to interest on her rental property.

I would advise that your wife should sell her property in an orderly fashion and then apply for a DSA to deal with the negative equity portion.

At the same time I would urge you to try and strike a voluntary agreement with BOS on your home and the two other remaining properties which might involve keeping your home, selling the other properties and writing off the negative equity portion after 6 years of payments, based on what you can afford, and after reasonable living expenses have been calculated.
 
Hi there, many thanks again.

We would be insolvent if all mortgages were on capital and interest though; no chance of paying them. It would add around €1,400 per month to the current repayments.
 
OK but remember that your eligibility for a PIA or DSA will be based on your current circumstances. You need to be insolvent as per the Insolvency act definition.

Best of luck.
 
You must log in or register to reply here.
Back
Top