Interest only period almost up..advice on proposal to bank

J

Jizzy

Registered User
Messages
16
Income details
Net monthly: 3000 private sector
Net monthly income partner/spouse: 4000 private sector
Amount of child benefit received 260

Personal circumstances so we can calculate your reasonable living expenses
Two adult family
Do you need a car for work or do you use public transport? Yes two cars tax & Insurance 1480pa
Number of 4 - 11 years old: 2 KIDS
Monthly childcare costs: 800
Montly spend on special circumstances: e.g. exceptional healthcare costs: 200



Home loan
Lender: BOI
Amount outstanding: 500K
Value of home: 380K
Interest rate: tracker
Monthly repayment 2200 cap + int
Property tax & house Insurance 1000 euro

Amount in arrears Not yet

Summary of discussions and agreements with the banks: Interest only on Investment properties expires April 2014. Trying to prepare proposal


Investment property One –
Lender: BOI
Amount outstanding: 460K
Value of home: 320K
Interest rate: tracker
Monthly repayment 770 int only on most, a little capital.
Amount in arrears NOT YET..int only expires April 2014
Monthly rent received 1400
Property tax & house Insurance 800 euro
Case V tax 3000 approx.
Mgt fee 1400 pa

Investment property Two –
Lender: BOI
Amount outstanding: 200K
Value of home: 150K
Interest rate: tracker
Monthly repayment 170 int only at present
Amount in arrears NOT YET
Monthly rent received 950
Property tax & house Insurance 500 euro
Case V tax 3000 approx



Credit Union
Amount of shares N/A
Amount of loan outstanding N/A
Monthly repayment N/A
Term left N/A


Other loans and creditors -
Credit Card - monthly amount you are paying 3000 approx

Other savings and investments NONE

Do you expect any lump sums in the medium term future?
NO.


How important is retaining the family home to you?
Which of the following best describes your situation?

I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


Any other relevant information

What is your preferred realistic outcome?
We really want to keep our tracker……if that goes we can never repay our debts
If we start to hit capital on our BTLs then in ten years we might be able to sell and breakeven but this would mean we can’t pay cap + int on our home. Would bank entertain this? What's best course of action?
 
10 years is up on the 25 year term so 15 years left to pay all capital. Assuming existing tracker rate then that would be 4400pm & also 2200 on home
 
what percentage of one's total net income do the banks expect you to pay over on a monthly basis? We have to pay the property tax and case V income tax too ...Tax man takes priority.
 
So,if you sold both investment properties,and repaid the 190k shortfall at your tracker rates over 15 years,(approx 1200 a month),you'd have about €3800 per month after your own mortgage is paid.
 
Don't think the banks will let us stay on tracker though. That's the problem. If we are put on variable then god knows how the repayments grow as int rates increase. Also we would then be using our home as security for that extra 190k too.
 
From what I can see you have circa 5k left from income per month after all outgoings that you have listed.
Where is this money going?
Surely if you were paying the difference of the rent received and interest only (minus expenses eg house ins, property tax, tax etc) you would be making a dent in the capital of the investment properties.
Have you any savings?
 
No savings as it goes on case v tax & prop tax & repairs & maintenance.But yes u are right we could cut back & come up with an extra 500 or 600 a month. We don't spend much.. No car loans etc. just goes on kids, utilities etc. We just wondering best approach to take. Everything with BOI
 
no where near 5k if you amortize out our annual fixed costs over the 12mths
I'm not arguing the fact we can and will definitely have to pay off more on a monthly basis but going back to my original question which loans should we concentrate on hitting cap & Int repayments and which will the banks want us to pay?
 
You have €7,000 of net income

The Reasonable Living Expenses for a family of 4 with one car are €1,800 per month.

This leaves you with €5,000 to pay your creditors.

Knock off €2,000 for your home loan and you have around €3,000 a month to contribute to your investment properties as well as the rent of €2,400

You say that the full capital and interest repayments would be €4,400 - is that for both investment mortgages?

So you would still have around €1,000 a month, but that will go to paying the costs and tax on your rental profits.

Given the income you are on and the profits you have been making from the investment properties to date, it's would be tough for you to cut back to the Reasonable Living Expenses. You would have to get rid of a car.

But you have very profitable investment properties and a very cheap tracker on your home, so it's worth cutting right back to retain these.

Bank of Ireland will extend the interest only period but only if you change to SVR. That will destroy you.

So what are your options?
1) Try to do a deal with Bank of Ireland - but refuse any deal which involves surrendering the tracker.
2) If they refuse a deal, cut right back and try to pay as much as possible. You will go into arrears but they probably won't take any action, as they have more urgent priorities. But it's hard to tell.
3) Bankruptcy or a Personal Insolvency Arrangment. I don't think that this would be a good idea for you as your trackers make your home cheap and your investment properties profitable.

The best way for you to recover is if house prices rise significantly. I am not forecasting this, but it's the only way out for you. So you need to stretch this out as long as possible. If house prices increase and if you make capital payments, you could get out of the negative equity.

What to propose to Bank of Ireland

Bank of Ireland will do what they can to get rid of three cheap trackers, so it will be hard to do a deal with them.

Ask for the home loan to be rescheduled to interest only under MARP.

Offer to sell the smaller investment property and ask them to write off the shortfall in exchange for early repayment of the tracker. They will refuse but might allow you to add the deficit to your home loan and warehouse it. Interest would continue to apply but you would not have to make any payments on it. That would ease the pressure a bit.

Maybe agree to sell the other investment property after 5 years and hope that capital repayments and price increases eliminate the negative equity.
 
So if we go interest only on our home we can keep tracker ( under MARP) & pay capital & Interest on the two Investment properties so we don't break the loan agreement so they can't take the tracker from us. Is this the case? Can we do this with or without bank agreement?
Realistically we can't survive on 1800. I'm not willing to either. I'd rather default & take my chances
 
Jizzy said:
So if we go interest only on our home we can keep tracker ( under MARP) & pay capital & Interest on the two Investment properties so we don't break the loan agreement so they can't take the tracker from us. Is this the case? Can we do this with or without bank agreement?
Click to expand...

Hi Jizzy

Under MARP, the bank must consider all aspects of your case. But they have no obligation to offer you interest only. I only suggest it as they are more likely to facilitate you on your home than on a buy to let. It's worth asking for, although I expect them to reject that as well.

Depending on the mortgage agreement, they can probably appoint receivers to your investment properties without even going to the court. (They are unlikely to do this if you are genuinely engaging and paying the full rent to them.) You could default on your home loan and pay your investment properties instead. It would take them a long time to repossess your home. I am not recommending this. I am just saying that you have more rights on your home than on your investment property.
 
Jizzy said:
Realistically we can't survive on 1800. I'm not willing to either. I'd rather default & take my chances
Click to expand...

There are a lot of people surviving on a lot less. This is a very reasonable figure. You borrowed the money, you can afford to pay it back so you should.
 
jizzy;

Please do not fall into {i,d rather default & take my chances} .
If you do that you will certainly draw fire onto yourself. Boi have a lot more harder cases than yours and I think if you play hard ball they will hang you !

You still have 2 months.
For the next 2 months cut back on everything, itemize all expenditure.Offload things like Sky packages etc.
Given your income you may be surprised at the savings.

You will then have real handle on income in V income out.You can then really make a proper poposal to boi armed with real knowledge of your lifestyle and what you can or will or must do.
Fom reading the thread you are close to being ok.

Hang in and negotiate.

Wish you luck.
 
Thanks Gerry & Brendan...really appreciate the constructive advice.
Don't appreciate the judgemental comments made by others.
 
Jizzy said:
Don't appreciate the judgemental comments made by others.
Click to expand...

It does read like you have the Cash Inflows to sort this out but it wouldn't leave enough to sustain your current lifestyle.

I can completely understand your reluctance to commit to this because yourself and Spouse must have successful Careers to earn the salaries you do, and there is a certain expectation and entitlement from working hard to get to this point.

However, you made the same mistake that many did, and you have borrowed at least €1.2M to purchase 3 Properties. This is an huge amount of money to repay and you are relying on 'goodwill' of banks to facilitate you.
 
We do aim to pay back the loans but we can't if they put us on variable. If we stay on tracker we can chip away at the capital & eventually hit break even so we can sell the BTLs. We are not anticipating any favours from the bank and don't expect to be bailed out, despite the fact the government bailed out the banks! if we knew property would fall so far & mortgage int relief would drop to 75% then we wouldn't have held on to those BTLs but we had no crystal ball.
 
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