Interest Only period on InvestProp ending: implications for ppr. Same bank SVR.

S

showtime79

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Hi all,

Back in the good old days of 2006 I bought myself an investment property to add to my principal private residence that I had since 2002.

Now the interest only term is over (rent just covered the interest) and I am faced with huge repayments capital & interest & a rubbish variable rate.

The problem I have is im having to subsidise the investment loan by €700 p/month on top of the rent im getting. Repayment on investment loan now €1500p/month. This, along with my repayments on my principle residence of €1700 p/month (which was managable), is causing me huge problems.

My question is.....If I miss a repayment on the investment loan as Im going to make sure I have my main residence loan covered each month first, then how does that effect my situation?

Both mortgages are with the same bank. Will the bank try to clean out any money I might have in another account perhaps to make the investment property repayment?.

Would the bank take reduced capital payments maybe on the investment loan?.Example, accept €1200 p/month if that is all I can afford for that month. As far as I know, I cant get the term extended on the investment loan or an extension to the interest only.(kicking the ball down the road I know).

And if I fall into arrears with the investment loan, then how does that effect my own home? Will bank try to repossess my home.?

I hope someone gets the jist of what Im trying to say here. Must be people out there in a similar position to me. Any reply welcome.
 
If you have any savings at the same bank, move it elsewhere, the mortgage agreements usually allow banks to take arrears out of the savings held at the same bank. Also you'll have difficulty persuading the bank that you can't afford the full repayments if you have savings with them.

As both mortgages are with the same bank, it may repossess both houses, but it will have to repossess the investment property first, if that's the one that is going to be in arrears. At least that's how I understand it.

It's unclear from your post to what extent you are unable to meet the payments, you might benefit from filling out the makeover section on this forum to give the whole picture of your income and expenses.

You knew the interest-only period was going to expire - have you been trying to prepare for increased repayments in any way? By building up savings, trying to cut down on expenses, repaying other debt (if you had any) or trying to increase your income or sell some assets?
 
Thanks for the reply Greta, Well the plan was to keep the investment property for 5years and sell it but we all know what happened then. So selling an asset now is not an option as there both now more like liabilities than assets. I have a small amount of savings but if I use this for repayments then I'll run them down in no time at all and be then left with repayments i cant make. I dont have a lavish lifestyle or anything, rarely go out or shop, and so imo im not wastefull with my money and dont see where i could scrimp and save to be honest. Im just angry with myself I suppose coz with out the investment property I'd be ok with everything, or even if I had a tracker rate on it then repayments wouldn't be so high. Seems like my once great plan is going to bite me hard. No chance of selling the investment property now. Thanks again though for your reply.
 
Showtime, there is no point being angry with yourself now, we could all have done things differently at one stage or another if only we knew... Try to just concentrate on the present and how best to deal with it.

First of all, move your savings to another bank. Then try to negotiate the extension of the interest-only period on your investment property. If both your properties are in negative equity, the bank is hopefully not very likely to push for repossession now, but it is best to avoid falling into arrears, as arrears will build up over time. And when property prices recover (they will some day, even if that day is a long way off) or when you pay down a good chunk of your main mortgage - then the bank might push for repossession to recoup the arrears. So it is best to obtain agreement from the bank for reduced payments or interest-only.

Also if you fall into arrears it will damage your credit rating. The credit rating might not be much use to you now, but if you manage to pay down negative equity on your main mortgage, you might be able to remortgage to a more competitive rate with another bank.

I'd advise you to keep a spending diary for a month or two, just to make sure that there really is nothing you can scale back on. A lot of people think that they are being frugal but there usually are still some expenses that can be scaled back.

If you can't cut back much more on expenses, how about getting any extra income? Rent-a-room, for example, and/or extra evening/weekend work, grinds, babysitting - anything that will earn you a bit of extra cash? Also selling unwanted stuff at ebay or car boot sales? I know selling a bit of unwanted stuff won't solve all your financial problems, but every little helps...

Another thing - if your investment property is considerable cheaper than the PPR, would it be possible or worthwhile for you to move there and rent your main property out instead, thereby getting more rent?
 
You need to talk to your bank to see if they will extend the interest only period. Yes theoretically they could take your home. You need to do out an income and expenditure sheet to bring with you to the bank.

Can you move into the investment property and sell your home?

Can you post up the values of both properties and the mortgage amount and term and repayments. Also recommend you do the money makeover thread. It's rare a person who cannot save on some area of their spending.
 
Thanks guys for your insight into my situation. Is it the case that once you get an interest only extension to your loan, i.e for a year or two(and post initial 5years) and that once you begin to repay capital that its quite unlikely that a bank will again allow interest only down the line if capital repayments are too high.
Reason I ask this is that a mate of mine who banks with UB, got a 2year extension to his interest only mortgage last year.He contacted UB recently to discuss going back onto capital repayments and was told that there is no problem in doing this but that if his situation/circumstances should change down the line then the bank cannot guarantee him that the interest only option will be available to him.
Is that because you only get 1 offer of interest only as a means of assistance on a mortgage?. Sounds a bit strange to me.
 
No its not limited but the danger is that if your friend needs another int only period the bank will prioritize these for people in the most need, at the rate things are going that could leave a long queue in front of your friend so there would be no guarantee they would get it.

I would stay on interest only and either just pay extra or accumulate the extra in a high rate savings account.
 
I have 5 tracker interest only mortgages with PTSB totally 769,000 the properties are now only worth around 450,000 they have wrote and told me that I have to start making capital repayments or switch to Variable Interest only for two years. Has anyone been to the bank yet to see what they are offering. I would be interested in hearing from anyone that has.
 
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