Prearrears, negotiating with bank

S

Springsteen

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Personal and income details
Income self: 150,000K secure private sector
Income history: very secure
Income partner/spouse: 0
Income history: Was made redundant, salary was 70,000k
number of children 2
Amount of Mortgage Interest Supplement received 0
Home loan Int only
Lender: EBS
Amount outstanding: 870,000
Value of home: 650,000
Interest rate: Tracker 0.7 Int only
Monthly repayment 1200
Amount in arrears 0

Summary of discussions and agreements with the banke.g. in Marp since May 2012 . Have been on interest only on PPR since then.

Investment property - Delete if not applicable
Lender: EBS
Amount outstanding: 392,000
Value of home: 250,000
Interest rate: 4%
Monthly repayment 1617 cap and int ( part of loan int only )
Amount in arrears 0
Monthly rent received 1250

Investment property - Delete if not applicable
Lender: EBS
Amount outstanding: 331,000
Value of home: 200,000
Interest rate: 4.25%
Monthly repayment 1793 Cap and Int
Amount in arrears 0
Monthly rent received 1050

Investment property - Delete if not applicable
Lender: EBS
Amount outstanding: 241,000
Value of home: 150,000
Interest rate: 4%
Monthly repayment 1557 Cap and Int
Amount in arrears 0
Monthly rent received 900


Other savings and investments

100,000k in savings


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 would like to retain BTL's until we break even and sell and then concentrate on reducing PPR debt. We would like forbearance of interest only to allow us to continue deleveraging on the BTL's.
 
Hi All,
The elephant in the room is getting bigger. We will very soon enter negotiations with the bank on how best to proceed. We have good income, and good future earning potential, and we're young, 32yrs. We are submitting a SFS statement every 6 months ( pain in the a%% ), the next one is due soon. We want a long term solution. We plan on repaying our debts if given the option, through forebearance or otherwise, but we would have no problem being assertive in dealing with in unfair negotiations.

We really like our family home and plan to stay.

We don't mind about the BTL's.

Nothing is cross secured.

1 BTL is in my wifes sole name. 2 BTL's are solely in my name. PPR is jointly owned.

The nature of my work makes leaving the country to declare bankruptcy very easy and very appealing as incomes for my position abroad pay better than here. We do not want to leave Ireland though. It makes no financial sense to stay, but thats what we want. Even if we went abroad and honoured our debts we'd be better off with bigger income and less tax.

Any advice would be gratefully received.
 
A lot of people get valuable advice here because their understanding of finance is limited. You seem to be well aware of your position. But if you stay in Ireland you will be struggling with this for years to come.

My only other comment would be that it makes no difference to pre-school kids where they live and for older kids a few years living abroad can be a great experience.

Good luck with whatever you decide.
 
Springsteen said:
We want a long term solution.

We plan on repaying our debts if given the option, through forebearance or otherwise, but we would have no problem being assertive in dealing with in unfair negotiations.


Nothing is cross secured.

.
Click to expand...

What is your problem exactly?

What are you hoping to achieve through negotiations? What kind of forebearance are you looking for?

Are all mortgages capital and interest?

What is the remaining term on each mortgage?
 
Bronte said:
What is your problem exactly?

What are you hoping to achieve through negotiations? What kind of forebearance are you looking for?

Are all mortgages capital and interest?

What is the remaining term on each mortgage?
Click to expand...

Hi Bronte,

Our problem is, we are currently reapplying for int only on our home loan every 6 months. This short term process of kicking the can down the road is not ideal. We would like a long term solution to assist planning our lives. If we return to full capital payments we will go into arrears.

We are open to long term forebearance suggestions. I would be happy enough with 5 plus years of int only ( or at least longer than every 6 months ) on a suitable portion of our debt to allow us pay capital on the rental properties and eventually deleverage when they are no longer in negative equity.

As per above, our main home is int only and the BTL's are on capital and int ( apart from approx 230k on one of the BTL which is int only )

Terms vary from 15yrs to 26yrs.

My intention of posting here is for advice on what other people would do in our position. We like living in Ireland.
 
cremeegg said:
A lot of people get valuable advice here because their understanding of finance is limited. You seem to be well aware of your position. But if you stay in Ireland you will be struggling with this for years to come.

My only other comment would be that it makes no difference to pre-school kids where they live and for older kids a few years living abroad can be a great experience.

Good luck with whatever you decide.
Click to expand...

Thanks cremeegg. Good advice. We do like Ireland though. If we can get a long term solution thats not too onerous we'll most likely stay. We'll see.....
 
So you're supplementing your buy to lets to the tune of €1800 per month, your PPR is costing you €1200 per month, your monthly gross pay is €12,500 - what exactly is the issue?

I can't see banks showing forebearance for someone that is meeting their obligations, has a huge salary and should, all normal spending patterns assumed, be able to continue meeting their obligations. Plus you're on a super juicy tracker.

Or am I missing something here?
 
dereko1969 said:
So you're supplementing your buy to lets to the tune of €1800 per month, your PPR is costing you €1200 per month, your monthly gross pay is €12,500 - what exactly is the issue?

I can't see banks showing forebearance for someone that is meeting their obligations, has a huge salary and should, all normal spending patterns assumed, be able to continue meeting their obligations. Plus you're on a super juicy tracker.

Or am I missing something here?
Click to expand...

In a word YES!

12500 per month gross income, 6250 net approx.

Full capital payments on all debt is 9000 approx.

Deficit 2750 per month regardless of any living expenses, tax on rental income , management fees for property, insurances etc etc etc.

You might notice the title, Prearrears! As soon as the bank move us off Interest only we're in an unsustainable situation.

Thanks for your reply.
 
Springsteen, You have the fact that all loans seem to be with EBS therefore whichever way you prioritise the loans in your own cashflow terms, EBS will be receiving all the cash. All roads currently with the Govt. initiatives etc. are pointing to giving the maximum priority to the family "Homeloan" which you have a Tracker on that I cannot understand why you would want to risk this and I would keep a very close eye on the current Central bank consultation process regards Tracker protections lessening for MARP customers seeking a deal. Prioritising BTL's over your family home, that could be a target for the bank.
 
Springsteen said:
In a word YES!

12500 per month gross income, 6250 net approx.

Full capital payments on all debt is 9000 approx.

Deficit 2750 per month regardless of any living expenses, tax on rental income , management fees for property, insurances etc etc etc.

You might notice the title, Prearrears! As soon as the bank move us off Interest only we're in an unsustainable situation.

Thanks for your reply.
Click to expand...


Sell the properties. The total NE is approx 340k, you could put the 100k savings off it and convert into personal loan.
 
ASK12 said:
Springsteen, You have the fact that all loans seem to be with EBS therefore whichever way you prioritise the loans in your own cashflow terms, EBS will be receiving all the cash. All roads currently with the Govt. initiatives etc. are pointing to giving the maximum priority to the family "Homeloan" which you have a Tracker on that I cannot understand why you would want to risk this and I would keep a very close eye on the current Central bank consultation process regards Tracker protections lessening for MARP customers seeking a deal. Prioritising BTL's over your family home, that could be a target for the bank.
Click to expand...

Thanks ASK12. I'm prioritising the BTL's as thats what EBS want! When I applied for Int only I applied for it on the BTL's with the intention of paying down as much as possible on the PPR. EBS said they would only consider Int only on PPR and to pay cap and int off BTL's. I'm stuck with their plan as I know if it all reverts to cap and Interest we'll very quickly end up in arrears, hence, the reason why I'm picking brains on this website. I am very aware that the attitude to trackers is changing, another worry!
 
commonsense,

my plan exactly, however, if I can delay the sale until the negative equity is less that would be better. BTL's are all family style homes in Dublin and I think will be the best sellers in the next couple of years.

A question on your plan to sell, will the bank let me sell if there is a shortfall? The shortfall will become unsecured, or can they request/require I cross secure it to the PPR?

Thanks for taking the time to post.
 
Springsteen said:
commonsense,

my plan exactly, however, if I can delay the sale until the negative equity is less that would be better. BTL's are all family style homes in Dublin and I think will be the best sellers in the next couple of years.

A question on your plan to sell, will the bank let me sell if there is a shortfall? The shortfall will become unsecured, or can they request/require I cross secure it to the PPR?

Thanks for taking the time to post.
Click to expand...

To be honest with you Springsteen, I think that any benefit of a possible higher sales price, in a year or two, will be completely wiped out by the arrears.

You are in a very good position. The best thing is to do up a plan showing the lender exactly what you intend to do. I honestly cannot see them refusing this option.

You have 100k savings, a good monthly income, the possibility of repaying your full PPR as well as servicing a NE debt. You are not looking for a write-down and are prepared to sell the properties and repay the debt.

I also think that given the lack of good family homes, in good areas, that you may achieve higher prices now, not in two years time.
 
commonsense said:
To be honest with you Springsteen, I think that any benefit of a possible higher sales price, in a year or two, will be completely wiped out by the arrears.

You are in a very good position. The best thing is to do up a plan showing the lender exactly what you intend to do. I honestly cannot see them refusing this option.

You have 100k savings, a good monthly income, the possibility of repaying your full PPR as well as servicing a NE debt. You are not looking for a write-down and are prepared to sell the properties and repay the debt.

I also think that given the lack of good family homes, in good areas, that you may achieve higher prices now, not in two years time.
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Cheers commonsense. There hopefully won't be any arrears if the bank extend the int only period. We can manage now, its full payments and/or increasing int rates that have me worried. I'd love to off load the BTL's and concentrate on the PPR and live a stress free life.

I will do up a plan for EBS, any gems from this thread will most definitely feature.
 
To bring a little clarity it might be better to summarise the situation,

|PPR|Inv1|Inv2|Inv3|Total
O/s bal |650k|392k|331k|241k|1.614m
Monthly Repay |1,200|1,617|1,793|1,557|6,167

Income |7,201|1,250|1,050|900|10,401

Assumes your spouse has no income, you will have a bit of child benefit and then some tax to pay on the rental income. So lets say you have €4k per month for yourself and the family.

So really the key is what are your spouses prospects of getting a job? You might be able to extent the repayment schedule but that is not dealing with the fact that you are €3k per month short on the Cap & Int which is effectively your wifes salary.
 
Springsteen said:
Cheers commonsense. There hopefully won't be any arrears if the bank extend the int only period. We can manage now, its full payments and/or increasing int rates that have me worried. I'd love to off load the BTL's and concentrate on the PPR and live a stress free life.

I will do up a plan for EBS, any gems from this thread will most definitely feature.
Click to expand...

I wish you all the best!!
 
Joe_90 said:
To bring a little clarity it might be better to summarise the situation,

|PPR|Inv1|Inv2|Inv3|Total
O/s bal |650k|392k|331k|241k|1.614m
Monthly Repay |1,200|1,617|1,793|1,557|6,167

Income |7,201|1,250|1,050|900|10,401

Assumes your spouse has no income, you will have a bit of child benefit and then some tax to pay on the rental income. So lets say you have €4k per month for yourself and the family.

So really the key is what are your spouses prospects of getting a job? You might be able to extent the repayment schedule but that is not dealing with the fact that you are €3k per month short on the Cap & Int which is effectively your wifes salary.
Click to expand...

Thanks for doing the table Joe_90. We owe 870k on PPR not 620k, 620k is the value. The current situation is manageable ( your table ), its if the PPR ( 870k, repayment cap and int approx 3600p/month as opposed to 1200 int only ) and one other loan 245k approx( unsure cap and int payment ) goes cap and int. Your table would get very scary with those numbers!
 
Situation is indeed serious.

|PPR|Inv1|Inv2|Inv3|Total
O/s bal |870k|392k|331k|241k|1.834m
Monthly Repay |1,200|1,617|1,793|1,557|6,167

Income |7,201|1,250|1,050|900|10,401

3 Options:
1. Sell all investment property and repay balance over 25 years.
Income €7,201 Ourgoings PPR €3,600 Other loan €1,450.
2. Continue current situation for 5 years, reassess then
Income €10,401 Ourgoings PPR €1,200 Other loan €3,967.
The main problem with can kicking is that in 5 years you may end up taking option 1, so its an exercise is trying to compute the reduction in the o/s loans over the 5 years under the 2 options. (No comment on the valuation of houses in 5 years deliberate).
3. Throw in the towel,
Income ? Outgoings? possibility of getting loan in the future?

I think the major thing for you is your spouses future employment opportunities. €3,500 net per month in this situation is everything.
 
I think you need to very carefully look at all different options. You've already been given some ideas. Here's another one.

Sell your PPR. Use the 100K to pay down the NE of (870 - 650 = 220) so you're be left with NE of 120K.

Move into the best of the investment properties. You've now rid of the problem of the unmanageable 870K mortgage and also wiped out the problem on one of the investment properties not giving you a return to equal mortgage repayments and it sure frees up a lot of income. If property goes up you gain on the investment properties, if it goes down you have gained by selling the PPR. (We are not allowed to talk on AAM about what way we think it will go)

You did mention that all 3 investment properties are family homes. Now I presume you are living in something even better than that. And it might be a hard sell to your spouse. You would of course have to crunch the numbers.

EBS would have to agree to let you repay the 120K as a loan. You could try and negotiate a good rate and term, they have an incentive as they sure as hell want to get you off the tracker, that's good for negotiation.

Cross secured

Like a lot of people like you are assuming that your properties are not cross secured. Wrong. In Ireland you will be liable if you default on your investments and they will go after your PPR or vice versa. So paying off one and letting the others slide is Never an option.

Just to point out something else, it's better to have loans on the investments as there is more tax relief on the mortgage interest that on your PPR.

Others will argue that one should never give up a tracker. Yes trackers are great. But you have many loans. You must do the numbers and see what makes sense.

It would be great if you would for each of the 4 loans clarify the term remaining. (to see if an extension is a good idea - you are only 32). So please redo up each mortgage with this.

BTW you're very luckly. One lender. Makes it much easier to deal with.
 
What struck me above is that you are 32 and have a gross salary of €150k which is great going. But assuming you bought prior to 2008, you would have been 27/28 (at most) when you got €1.84m of debt (probably higher back then due to cap and int payments). I'm just interested in the back story.
 
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