Attempting to repay capital and interest, Bank could help us..

K

krattapopov

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Hi folks, am looking for and appreciate opinions on the situation my wife and myself have found ourselves in.

Some background: I am in full time, good & secure employment, bringing in 3500 Net a month. My wife was made redundant 2 and a half years ago and we have just had a child, so she will not be going back to work for a year (and that's even if she can get a job then). We have cut back spending in a big way and we are doing our best to get out of the debt that we currently have.

We have been in constant communication with lenders about repayments etc and have never missed an agreed payment with them.

We have a mortgage that we took out in 2007, that for the last 18 months has been on interest only, €1000 a month, the balance is huge. Which works out at roughly €18,000 we have spent on that. We have a loan with the same bank that costs €450 a month, capital and interest the balance is €19,000. We also have a Credit Union loan which is approx €350 a month, capital and interest with a balance of €9000 (loan - shares).

So servicing our debt at the moment works out as follows:
1000+450+350 = 1800

I have applied for a top of of 9000 to our loan with the bank, which would bring the balance up to 28,000 over a term of 7 years, with a repayment of 475 a month. The current loan term was 7 years, of which there are 5 and a half left.

Our normal mortgage repayment would be 1400 a month, so 1400 and 475 would be 1875 a month, 75 quid more in the difference.

Our application has been denied by the bank. It is very frustrating, they have recommended going to the credit union to get smaller payments, but that won't help, it will only cost more interest. The bank have offered us a further 12 months interest only. Which I feel, would be a wasted 12k on our behalf.

We are doing our very best to pay everything back, have never thought about not paying this money back, have never looked for a handout but I feel like we are being taken advantage of in someway, because they know we can repay the interest only no problem!!

Has anybody got any suggestions that could help me out here? Anything at all?!?!
 
I am a bit confused. You have a huge loan and you can only service the interest on it. Yet you want to borrow a further €9,000? Of course, the bank won't give this to you.

You have gone interest only on your mortgage which is the cheapest loan - this was the right thing to do.

you should ask/tell the Credit Union to set your shares against the balance outstanding to reduce the interest you are being charged.

The Credit Union is probably the dearest loan, especially if they refuse to set the shares against the balance.

See can you get the bank loan to interest only to allow you to pay off the Credit Union first. It's unlikely that they will allow it though.

Brendan
 
Your present monthly debt repayments are almost 50% of your monthly income on interest only, that is outside any banks criteria and not surprised they refused you a top up. Were you intending paying off the credit union from the top up or what as you did not include that repayment in your second calculation?
 
Brendan, wbbs, thanks for coming back to me.

wbbs - yes we are planning on paying off the credit union completely, leaving us with the mortgage and one bank loan. Yes our debt payments are more than 50% of our income, we've lived with this for a year and a half already, it is our reality. What I've proposed keeps the repayments approximately the same but we will also be hitting capital.

Brendan - We are trying to consolidate the short term loans in order to get back to capital and interest on the mortgage. As above the 9k, is to get rid of the CU loan completely (which does have the shares offset against the loan - thanks to this forums advice already).

I have demonstrated the above to the bank and their sales representative agreed that it makes sense to try this, otherwise I'm going to end up repaying a further 12k on interest only, while negative equity gets worse and the mortgage term gets extended by a further year.
 
OK

So you are asking the mortgage lender to consolidate the term loan into the mortgage, so that the interest rate is lower.

This would be helpful to you, but I can see why the bank would not do it. They gave you an unsecured loan at a higher rate. By consolidating it, they are not getting any additional security as you are in negative equity.

I am not sure if you can do anything about it. Have you asked them to allow the term loan to go on interest only? Of course, the sooner you pay the capital off this the better.

Brendan
 
I see your plan but its not going to happen, it may well be the best option and the most obvious thing to do but in the present situation the bank is not going to increase their debt to pay off another lenders debt. It would also be outside their criteria even if you are already paying almost the same, their lending is being watched carefully (too late we know!) and those sort of repayments to income ratio would just not be a runner.
 
You say you feel you will waste 12k on interest only on the mortgage. The actual repayment for the year would be 4800 which in itself would not make a great dent in your mortgage outstanding. Given that this would be offset against the CU loan you will have put a total of 4200 and 4800 towards that over the year. The outstanding amount then is the interest which while probably quite a high rate will be easy to clear in a month or so. So this time next year you will have cleared the CU loan and you can start on the capital repayments. This is not as bad as it appears to be fair and given as stated the banks won't agree anything else, I'd say the glass is half full. Just my 2 cents.
 
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