Can I trade up with an AIB split mortgage?

S

Stephanie33

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Hi Brendan,
I currently have the following debt:

Mortgage Term Remaining 18 years

105,000K @4.75 Tracker incl recent increase monthly repayment approx €698 a month.
Warehouse Parked Loan 133,000K @ 0% interest.

The loan is with AIB and I have 39 months left to avail of the 70/30 percent incentive and an additional five years on top of that to avail of the 80/20 incentive.

I have 30 K saved and I am currently also saving 800 euro in this account for the purpose of going off the mortage before the 5 years is up.I expect to have 61,000K saved in the 39 months.

The letter of offer quotes that the bank request you pay any extra payments off the warehoused part.

I would love to trade up in the next 3 to 6 years but it may not happen. At the moment I am unclear if this will be an option. The bank advised the loan is classed as performing when I raised the question of trading up.

Current value of property is 370K.
With the tracker rates the way they are at the moment I have still chosen to stay on this rate.

I was going to hold on until just before the end of the 5 year term to pay off a lump off off warehoused part. Is this the best option.

I am unsure how best to proceed if I hope to trade up but as it may not happen I still want to do what makes best economic sense overall.

I am putting myself in best possible position I can. Have another 20k saved fir car/rainy day fund. Trade up house would cost approx 110K extra.

No other debts.

If the house was being sold does the bank take the incentive into account when clearing the mortgage for a new mortgage or only a saved lumpsum.

Thanking you
 
You have 39 months left. So are you saying that AIB gave you this very generous split mortgage only 21 months ago?

Brendan
 
Summary

Value €370k

Active loan: €105k

Warehouse: €133k

Term remaining : 18 years

39 months left to avail of 30% discount on early repayment of warehouse

€61k saved in 39 months
+€20k emergency fund

In the event that you wish to fully or partially redeem your Split Loan Account prior to the the 5th anniversary of this Letter of Agreement, the Lender will consider your contribution to be 70% of the overall reduction applied to the outstanding balance on your Split Loan Account with the lender making up the 30% difference (Lender Further Reduction). For example; if you lodge E7,000 to your Split Loan account, your outstanding balance on your Split Loan Account will be reduced by El0,000. Please note that this will only apply in the event that the lodgement by you is a minimum amount of €1 ,000.

After 5 years, it's 80/20. So if you pay off €80k, they will write off an additional €20k.
 
I don't believe that either AIB or any other lender will consider you to have a clean credit record. I don't believe that AIB or any other lender will give you a mortgage until 5 years after you have cleared the split mortgage.

So, your priority is to clear your warehouse as soon as possible. Don't wait for the 39 months if you can do it earlier. The earlier you do it, the sooner you can trade up.

What do you need an emergency fund for? Well getting a 43% top up on it would strike me as an emergency, so in reality, you will have €80k available.

If you pay €80k off your warehouse, AIB will write off €35k - meaning that you will reduce the warehouse by €114k which leaves €19k on the warehouse.

If you can find another €13k, then AIB will write off the remaining €6k.

So
1) At the very least, you should pay off all available cash including your emergency fund off the warehouse before the 5th anniversary.
2) If you still have about €18k left, you should turn to your friends and your family and see can you raise €13k extra. If you are saving €800 a month, you will have the loan paid off in 16 months. Again, means that the 5 year clock to clear your credit record begins 16 months earlier than it would otherwise.

3) I think you should talk to family and friends now. It would cost you €93k to clear the warehouse today and start your financial recovery.

You have €50k. So you need borrow "only" €43k to start the repair of your credit record. At €800 a month, you will have repaid the loans in just over 4 years. Just in time for you to trade up.

Brendan
 
Thank you for response.

I am unsure if it is best to pay my lumpsum off in 3 years off the warehoused part of the loan while I still have the 70/30 incentive. Maybe the best option is to keep saving and revisit in three years time. I am unsure whether to try pay money off the performing part of the loan for the next three years then pay the warehoused part when I have the next part of the incentive still available up to eight years from now/ the 80/20 incentive. My problem is that I might be looking to trade up so need to take that into account also when making a decision.

Thank you,
Stephanie
 
Thanks Brendan
I only saw the full responses now.
At the moment I have 50k in total savings. I had the 20k kept aside for when my car gives up and for college fund for my child college is 5 years away.
Brendan Burgess said:
I don't believe that either AIB or any other lender will consider you to have a clean credit record. I don't believe that AIB or any other lender will give you a mortgage until 5 years after you have cleared the split mortgage.

So, your priority is to clear your warehouse as soon as possible. Don't wait for the 39 months if you can do it earlier. The earlier you do it, the sooner you can trade up.

What do you need an emergency fund for? Well getting a 43% top up on it would strike me as an emergency, so in reality, you will have €80k available.

If you pay €80k off your warehouse, AIB will write off €35k - meaning that you will reduce the warehouse by €114k which leaves €19k on the warehouse.

If you can find another €13k, then AIB will write off the remaining €6k.

So
1) At the very least, you should pay off all available cash including your emergency fund off the warehouse before the 5th anniversary.
2) If you still have about €18k left, you should turn to your friends and your family and see can you raise €13k extra. If you are saving €800 a month, you will have the loan paid off in 16 months. Again, means that the 5 year clock to clear your credit record begins 16 months earlier than it would otherwise.

3) I think you should talk to family and friends now. It would cost you €93k to clear the warehouse today and start your financial recovery.

You have €50k. So you need borrow "only" €43k to start the repair of your credit record. At €800 a month, you will have repaid the loans in just over 4 years. Just in time for you to trade up.

Brendan
Click to expand...
As I only have 50K now and no access for further funds through family I felt that if I paid any money off now as it would not be cleared I wouuld be in the same position until it is cleared. I understand that the moritorium is on my credit record but if I showed the 800 being saved towards the split loan and I save another 500 a month also it would show long term stability but maybe I need to speak to the lender.
Brendan Burgess said:
You have 39 months left. So are you saying that AIB gave you this very generous split mortgage only 21 months ago?

Brendan
Click to expand...
No they gave the split earlier but due to an error on their side they agreed to start the incentive on their side at a later date. I wonder what will the banks do with the large amount of split loans left will they just take them out of estate?
Brendan Burgess said:
Please confirm so our discussion is not wasted.
Click to expand...
As above AIB made an error with the split loan. The date from the incentive was amended.
 
Stephanie33 said:
As I only have 50K now and no access for further funds through family I felt that if I paid any money off now as it would not be cleared I wouuld be in the same position until it is cleared. I understand that the moritorium is on my credit record but if I showed the 800 being saved towards the split loan and I save another 500 a month also it would show long term stability but maybe I need to speak to the lender.
Click to expand...

To be honest, the only "speaking" you can do is to apply for a mortgage. It does not matter what they say to you today.

You have an impaired record while you have a split mortgage and rightly so.

You are correct, there is no financial advantage in part paying it before the 5 years, so do wait until just before the 5 years.

But the sooner you pay it in full, the sooner you can trade up.

It's remotely possible that AIB or another bank might consider you for a trade up if you have a small warehouse. I doubt it, but it could be worth clearing the warehouse now for the optics.

You will have to make choices. Clear the warehouse or trade up. And trade up or send the child to college. But you don't need to make those decisions until close to the deadline.

I assume you have the new deadline in writing, clear and unambiguous.

Brendan
 
I do have the new incentive date in writing. Like you say I dont know if I have the option of trading until the time comes. I understand the lending criteria at that time would apply. I am saving an additional 500 on top of the 800 a month. The only other option to save more is reduce what I am paying into my pension but aged 47 I only currently have approx 95k in my fund.
Thank you for your advice it is making me prioritise the split loan even more than I have been. I am doing without a lot on a personal level to get to this position.
 
Just one more question to trade up in this case if the value of the property being sold is 370K and the new property is 380K do you need a seperate deposit from the banks perspective.

Eg you had 270K from sale proceeds after clearing mortgage or does the bank require you to have a seperate deposit saved.

I understand that you will need solicitor fees and estate agent fees etc.

Thank you
 
If you sell your old house, you will have €270k so you will only need a mortgage of €110k.

Not sure I understand the question, so I don't know if that answers it.

Brendan
 
Stephanie33 said:
Just one more question to trade up in this case if the value of the property being sold is 370K and the new property is 380K do you need a seperate deposit from the banks perspective.

Eg you had 270K from sale proceeds after clearing mortgage or does the bank require you to have a seperate deposit saved.
Click to expand...
In this case your deposit is the €270k and you would borrow the additional €110k. You wouldn't need any additional deposit.
 
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