Bank have refused further Reduced Payment period. What to do?

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daveh123

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Hello,

My question is a bit of a combination of a financial one and a moral one, but hopefully there is somebody here who can guide me in the right direction....

House bought in 2007 for €330k, very run down and requiring major refurb. 100% tracker mortgage received from AIB for €330k (single applicant, despite having partner, but not married at the time). Spent approx €60k of our own money on doing the house up. Current mortgage approx €322k inc approx €5k arrears, loan expiry date 2042, interest rate 1.85%. Currently worth approx €200k to €220k. Lost my job in 2009 and after looking unsuccessfully for work for 12 months (and maintaining mortgage payments from savings) we decided to move to the UK. Found work in the UK earning a lot less that I had been in Ireland and continued to make mortgage payments using a mixture of UK income and rental income. Following family situation changing in 2010 with the birth of our son, we suddenly found ourselves unable to supplement the rental income in order to maintain the mortgage payments. AIB agreed to interest only payments (approx €500 / month) for 12 months, then extended for an additional 12 months but having recently completed a further SFS and went to the AIB for a meeting to discuss my situation, I have been refused any further reduced payments. At the meeting with AIB I offered to increase payments to €700 / month. The AIB person agreed at the meeting that my SFS paperwork backed up my UK outgoings matching my UK income, meaning the only discussion was regarding my rental income vs my mortgage payments. Rental income is €900 per month, but with insurances, upkeep, tax return, etc. my €700 offer was my absolute upper limit. Yesterday I received a letter from AIB stating that they are "not in a position to offer you an alternative repayment arrangement as significant support has already been made available in your case". The letter goes on to advise me that I may wish to consider the following:

1) Trading Down - "You should ensure that you would have enough funds from the sale to buy another property after paying off the mortgage on your current property"

2) Voluntary Sale - "...you will need the approval of the bank to accept an offer before the sale is finalised....... where the proceeds of the sale do not redeem the balance of your mortgage account, you will remain liable for the outstanding along with any charges, ..........and other costs"

3) Voluntary Surrender - "...the bank takes full ownership of the property in order to sell it. Where the proceeds of the sale do not redeem the balance of your mortgage account, you will remain liable for the outstanding along with any charges, ..........and other costs".

Obviously, none of the above 3 options appeal to us greatly, as we have ploughed all our savings into what we expected to be our home for a long time and feel that these options only suit AIB.

I cannot see any way out of this situation while managing to keep our house so we are now considering another option:

Stop making any payment to AIB, continue receiving €900 / month in rent, wait for the house to be repossessed and in the hope that that will take approx 2 years, we will have recouped circa €15k of our money. With us no longer living in Ireland, any court judgement will have no ill effect but will obviously effect any plans to move back to Ireland.

Can people please advise on the financial and / or legal implications of my possible plan. I would also be interested in hearing if people consider my option to be immoral / wrong, but perhaps this is the wrong forum for this question.

Thanks
 
Obviously, none of the above 3 options appeal to us greatly, as we have ploughed all our savings into what we expected to be our home for a long time and feel that these options only suit AIB.
Click to expand...

This is not at all obvious. You owe €320k on a house worth €200k.
You are living in the UK.

Would you not consider entering into discussions with the bank to sell it and try to sort out the shortfall?

You are in the UK so your threat of going bankrupt would be something they would have to take seriously and they may do a deal.

Why you might keep it

rent |€11,000|€900 per month
less interest|€6,000 |€320@ 1.85%
Other costs|€2,000|
Profit before tax|€3,000

It's a reasonable investment, but if you could get out of it without the debt following you, then you should try that.

You should take professional insolvency advice from a UK insolvency expert. Steve Thatcher operates in Ireland and the UK.
 
I don't understand option 1 Trading down.

You should go for option 2 and hope they leave you alone for the shortfall. You might have to agree to pay off this shortfall in order to get the house sold. But after the property is sold and your income in the UK is all taken care of they cannot realistically force you to repay them. Presumably they'd have to go to the UK courts for an instalment order, if there is little prospect of you being ordered to pay anything that it would only be a further cost for them. You should consult an expert on this. So far on AAM no one has told us that the banks are chasing people in the UK.

As you asked, based on your situation, I think you would be wrong to take the rent.

For others, would you mind scanning that full letter (delete all identifing features)

Last bit of advice, forget about how much this house cost you and get on with you life.
 
I would only consider pocketing the rent if you were unemployed and struggling to make ends meet
 
Here is another option, for you to consider.

Pay AIB the €700 per month, which appears to be €200 per month greater than IO.

Don't worry about the AIB "approving" of this arrangement. Its your loan, your property, and your life. If they don't like it, what can they do about it. Very little I suggest. I do not think that in 2013 or 2014 either properties are being repossessed where interest is being paid on the loans, let alone interest and some capital.

Thats if you want to keep the property, if you don't, then I agree with Bronte's advice. Especially forget how much the house cost. That is irrelevant now.

Finally don't keep the rent and pay nothing. I don't offer that as a moral point, your morality is your own business, though obviously you know it would be wrong. I just think for €15k its not worth it
 
I do not want to hog your thread but I will tell you that I too have received a letter, only today with the exact same three options.

We took out a 107% ( believe it or not) mortgage in 2006 from A.I.B. of €317000. Tracker of 1.85%

House valued at 15000-17000 max.
€302,000 left to pay.
Combined salary of 40000 net per year to service mortgage, credit union loans, everything else.

Looking like I will now wait and see a p.i.p or go to the UK.

Must be the standard reply of late from them, but I phoned today and innocently asked about other options such as split mortgage etc.
Was told to expect a phone call in next few days from somebody who deals with this, so fingers crossed.
Ring them and ask for other options!
 
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