Case study Separated with children - unsustainable mortgage

S

St. Bernard

Registered User
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Hi Brendan

Could you offer any advice on the following.

We are married but seperated in May 2011. We have joint custody of our 2 children. Not legally seperated yet as the house / mortgage is the big sticking point.

Personal and income details
Income self: €42,000 Private Sector
Income history: Safe enough job but no pay rises in last 3 years and none expected soon.
Income partner/spouse: €0 Stay at Home mom
Income history: Has not worked since birth of first child in 2006
number of children 2
Amount of Mortgage Interest Supplement received €0
Home loan
Lender: PTSB
Amount outstanding: €285,000
Value of home: €150,000 approx
Interest rate: Tracker + 1.85%
Monthly repayment Currently €332 interest only. Should be €1,100 approx
Amount in arrears €0

Summary of discussions and agreements with the bank In Marp since May 2011 . Have been on mortgage moratorium then interest only since then.



Other savings and investments
€0

How important is retaining the family home to you?
Very important as it is my children’s home.

Any other relevant information

I am currently renting a house for €750 pm.
I am paying €500 pm into mortgage account.
I am paying €800 per month maintenance.

Left with approx 700 per month for bills, food, petrol etc.


Reality is this mortgage will never be repaid.


Thanks in advance.
 
Hi Bernard

The actual cost of your family's accommodation is "only" €7,400 a year (€285k@ 0.75% + 1.85%)

If you lose the house, finding new accommodation will, presumably, cost a lot more.

The value of the house is largely irrelevant in these circumstances. In fact, the low value may be beneficial. If it rises towards the mortgage amount ptsb might be more likely to seek repossession.

Reality is this mortgage will never be repaid.
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This isn't very important at this point in time, where survival is the key issue. As you can afford the full mortgage interest, it is unlikely that ptsb will seek repossession. They might put you under pressure to increase the repayments, but you can't.

The only solution to your financial problem is for your wife to start working in a paid job or for you to get pay increases.

Brendan
 
ptsb Split Mortgage

Just wondering if anyone has taken this option with ptsb. I am currently on interest only and have been advised by ptsb that this would be the best LONG term solution for me as i have requested something long term instead of having to review interest only every 6 months.


Any advice greatly appreciated.



SB
 
Hi St B

Can you give the details of the split mortgage offer. It's not possible to assess without these.

Brendan
 
Brendan

Don't have any figures yet. Have asked ptsb to send out specific details of the offer for me to review.

I received a letter from them advising that the split mortgage would be best for me taking into consideration my circumstances.


I will post details once i receive them for further advice / comments.

Cheers
SB
 
St Bernard

Can you provide details of what they have offered?

In your original post, you say:

Interest rate: Tracker + 1.85%
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but now, it's

I have a tracker of ECB & 1.1%
Click to expand...

I presume that the current rate is 1.85% which would be ECB 0.75% + 1.1%


Your fundamental problem is that you are trying to pay for 2 houses and a stay at home wife out of an income of €42,000. Handing back the keys won't work as you will then have to pay much higher rent to a private landlord on your family's behalf.
 
Hi Brendan

The letter they sent states that the split mortgage is what they feel would be a long term solution for me.

The offer is to pay for 6 months a restructured amount of €666 which is what the split mortgage amount will be if and when it is put in place. After this initial 6 month period they will re-assess my financial situation and then offer the split mortgage.


The paperwork is the same as what they use for offering interest only in that it details the restructured amounts and term plus the cost of this restructured payment over the term of the mortgage etc etc.

I don't really know what to do, as I will be paying a lot more to the bank as well as other outgoings leaving me with little to live on.

You are correct my interest rate is 1.1% & ECB of .75% (sorry for the confusion).

SB
 
Something that stuck out for me is that you stated your wife's income is € 0. If you don't live with her, in fact you said you rent elsewhere, why did she not apply for State Support such as FIS, OPFP etc.?
 
Did they not tell you something like the following

"Your mortgage of €285k will be split into an active mortgage of €200k and a deferred portion of €85k". This is the most important bit.

Brendan
 
Brendan

No it mentions nothing like that. Just the usual type of info for a restructured agreement, eg. Current Capital Bal, Current Term Remaining etc etc.

I have written to them to tell them it's not something I am willing to sign up to and requested they offer an alternative arrangement that will be suitable and long term.


Will wait and see what kind of reply I get.


SB
 
Hi St B

If you reject a split mortgage, you are more or less accepting that your mortgage is unsustainable and that you should sell the house.

I would imagine that this would be their response.

Brendan
 
Thats exactly my thinking, the mortgage is unsustainable in the long term. If we sell the house i will be worse off and so will the bank as i am the only one working so i could not afford to pay rent for myself, rent for the ex and kids, maintenance and then pay off the neg equity. Looking after myself and my kids will come first no matter what so the bank will loose on this one.

SB
 
Hi St B

But your family will be homeless? You will still have a mortgage shortfall, which they may not write off.

I am surprised that you have been offered a split mortgage on a tracker. You should think very carefully before you reject it. It seems a lot better to me than being repossessed.

Amount outstanding: €285,000
Value of home: €150,000 approx
Interest rate: Tracker + 1.85%

€285k@ 1.85% = €440 per month interest cost. Presumably you could not rent an equivalent house for that?

If they split off €85k into a warehouse and don't charge any interest on it, the interest cost will be reduced to
€200k@ 1.85% = €300 per month.

You will be paying some capital off the €200k and gradually paying off your mortgage. You could well end up in positive equity after a few years.


Brendan
 
Brendan Burgess said:
If they split off €85k into a warehouse and don't charge any interest on it, the interest cost will be reduced to
€200k@ 1.85% = €300 per month.

You will be paying some capital off the €200k and gradually paying off your mortgage. You could well end up in positive equity after a few years.


Brendan
Click to expand...

It is PTSB. They have said 1% interest on shelved part of mortgage
 
ClaireM yes its PTSB. And you are correct it will be 1% Variable rate on the warehoused amount.

In conversation with them they said the maximum they can shelve is 50%.

I don’t know how they come up with their figures but the restructured amount they have requested is €666 per month which i can not afford, hence the reason i have not accepted it.

Obviously i don't want them to repossess the house, that’s the reason i am corresponding with them to try come to a suitable arrangement.

SB
 
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