Sub prime mortgages, should I stay away?

[flid]

Hello there,
First time posting here.
Looking for your opinions on sub prime mortgages.
Tried to remortgage in the last few weeks, unsuccessfully.
Started working as a contractor a year and a half ago, which doesnt seem to be long enough for some of the main banks.
Went to BOS through a broker, but a few late mortgage repayments last year, due to poor organisation on my part, ruled me out for them.
Broker is suggesting going with a sub prime lender for a couple of years and then switching back to a main bank.
Is this a good thing to do, does it look bad if you go to a sub prime lender? Has anyone done this and managed to switch back to the main banks afterwards? I dont want to be stuck with sub prime lender for more than 2 years.

 

[NicolaM]

Hi Flid,
Welcome to AAM.
The problem may not only be your contractor status, but the fact that you were late for mortgage repayments last year, which means you may well have a bad credit rating. This lasts for a period of 5 years from the time it goes on your record.
Did you ask for a copy of your credit rating from the Irish Credit Bureau?
With a bad credit rating, none of the regular banks will give you a remortgage.
It's really important that you organise yourself so you don't miss or are late for any further mortgage repayments.
As far as I know, if you did go with a sub prime lender, and you are always on time with your payments, you can subsequently apply for a regular mortgage. You would need to see how much this would cost you over the period of time involved. Sub prime rates will cost you a significant amount of money, and from what I've read before, being wiht one may make regular banks look unfavourably on a further application in the future.
I would consider this carefully before you decide to go with one.
Regards
Nicola

 

[flid]

Hi Nicola,

Thanks for your reply.

Havent gotten a credit rating yet, have been approved for loans from my own boi bank branch recently enough so didnt think it was a problem.
Will check it now. My BOI branch tried to push for me to get a mortgage with them, but underwriters didnt want to go for it as part of remortgage would be used for debt consolidation with AIB, seemed to be a problem for some reason.
Yes, its the idea that the banks wouldnt approve an application from me after going with a sub primer for a couple of years that worries me.

 

[so-crates]

I am guessing flid you have already considered this but do you absolutely need to move from your current, more favourable, mortgage rate? Have you tried tackling your debts as they currently stand? Remember that re-mortgaging to cover your debt could see you paying it off over the next 20-30 years as well as converting currently unsecured debt into debt secured against your house.

 

[triplex]

should you stay away? DEFINITELY

get onto the Irish Credit Bureau and pay them €6 to get a copy of your credit rating- there may be errors on it of which you are unaware and you can rectify these, thereby improving your credit rating.

http://www.icb.ie/

Also note that sub-prime mortgage companies are beginning to agressively tackle repossession cases - they may not tolerate falling behind on mortgage payments...and may charge you severe penalties should you fall behind - simply increasing your debt

mite want to try a few other brokers...

 

[Jonathan.OB]

Firstly, you can't "rectify" your credit rating. Of course, all lenders want to tackle cases where clients aren't paying what they owe. I don't agree that these lenders are predatory in pursuing arrears. If someone didn't pay me money they owed me, I'd sure chase them for it too. And think about it, repossessions are the last thing a lenders needs. More work and you loose the interest you would have gained on the mortgage. Also, people who are being repossessed are destroying the houses they are in, just to put two fingers up to the lenders - nice touch. However, I would only use them as a last resort. Do you really need to refinance?

 

[flid]

No will struggle on, finding it a bit tight at the moment from a loan servicing point of view, to refinance would possibly free up 700 euro which would make a big difference.
I think I will stay away at this point. Not very many favourable opinions out there for sub prime lenders.

Thanks for the replies.

 

[Jonathan.OB]

Flid, approach your lender and ask if you can avail of an interest only facility on your mortgage for 12 months. This should take some of the stress off your finances, but don't take it for granted.

 

[so-crates]

Good for you flid and good luck. Perhaps have a browse around the MoneyMakeover forum key posts for some advice on culling expenditure and managing debt. Have a look at the MABS website and at www.itsyourmoney.ie as well on budgeting and tackling debt.

 

[dazza21ie]

I don't agree that these lenders are predatory in pursuing arrears. If someone didn't pay me money they owed me, I'd sure chase them for it too. And think about it, repossessions are the last thing a lenders needs. More work and you loose the interest you would have gained on the mortgage.?

The majority of reposession cases currently before the High Court relate to one particular sub prime company. Sub prime lenders act alot quicker in moving for repossession whereas a high street bank would try and look at alternative options with the customer first and use repossession as the last option. Sub prime lenders know that they are lending to customers who have been refused by a traditional bank and therefore will struggle to repay but they show very little mercy.

Also, people who are being repossessed are destroying the houses they are in, just to put two fingers up to the lenders - nice touch.

That's a very strong generalisation. Most people fight tooth and nail to keep their house. Others may simply give up and hand over the keys. If a person destroyed their house it wouldn't help them in the slighest. The bank would sell it and then come looking for the difference to repay their loan.