Case study PTSB - Most Realistic Restructuring on BTL -

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WizardDr

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I have it on reliable authority that the PTSB have made a number of restructurings of BTL along the following lines:

Loan €1.2m
Current market value of property €500k
Arrears: over €10,000 at least

Capital and interest payment today: €3,500
Rental: €2,200
Rate- tracker

Cant make up shortfall - if repossessed and sold there would be shortfall of €700k. Legal advice - let them chase you - no assets.

Proposal:

New loan to refinance 25 years
Rate - tracker
Payment- €2,300

Won't clear loan - bullet at end.

Logic - PTSB believe that property prices will comeback and they will get their money back.

Comment: I think this is the most imaginative proposal.


Any others come across this?
 
Assuming there are good underlying financials (income) the above makes total sense. PTSB should be commended for facilating, and looking to the future. However, some will say it's just kicking the can...
 
Thanks for that info Dr, do you know if they are doing similar creative solutions with commercial property, retail ,with good tenant and lease. Currently being screwed on the interest rate circa 7% ,pushed up over the years the ECB was coming down. The rent is just paying all the interest ,12 years left on loan term but in substantial negative equity .
I'm looking for them to reduce the interest rate and allow some of the rental income go toward reducing the capital ,extend the term to 25 years and I would also offer to add 5k a year off the capital, if they don't play ball I'm thinking of going rogue. Found them terrible to deal with over the last few years, its went to the precipice a few times over the last 2 years. Any tips on strategy welcome .Thanks.
 
Hi Wizard

From the borrower's point of view, this is a break-even investment.

Rental income| €26,000|
Interest|€21,000 |Assuming ecb +1%
Other costs |€3,000
Tax|€3,000
Loss|€1,000
If rents rise over the coming years, and interest rates fall or don't rise too much, this could become a profitable investment.

On the other hand, it could become loss making.

If I had other assets which could be targeted to pay the shortfall, I would go for this deal.

But house prices have to rise by 140% before the negative equity is recovered.

Personally, I would prefer to get rid of such a millstone. Either through a voluntary arrangement, a PIA, a DSA or bankruptcy.

I might propose a 5 year deal to ptsb. "I will manage this investment for 5 years and we will see how it turns out. If I make the repayments for 5 years, I will have the option at any stage of selling the property and having the shortfall written off"

If property prices or rent spike upwards over the next 5 years and this becomes profitable or at least the end of negative equity is a bit closer, then I would keep the investment.
 
That is looking at the investment on its own merits.

But what about the guy's general financial situation? You should complete the Case Study format, so you might get a more comprehensive view.

Any savings he makes over the coming years will become available to ptsb. If he goes bust after 10 years, ptsb will be able to call on those savings. So there will be no incentive for him to earn more or to save until the negative equity is eliminated on the investment property.

Similarly, if he has a family home with no equity in it or in negative equity? If he has a cheap tracker, he is probably making the repayments on this. In time, he will eliminate the negative equity and start building up value. But all of this will be available to ptsb to call on if he defaults at a later stage.

If he has a family home, a PIA would be the ideal solution for him. It will be protected. After a maximum of 6 years, he will have got rid of any other debts.

Dr - this could be a potentially very interesting case study as it's the first time where I have seen a PIA being potentially very beneficial and worth the hardshop. You might complete the Case Study format.
 
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