What happens if interest only is not renewed to mortgage

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priscilla

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Hi,

A friend has a number of investment properties .

He has interest only mortgages on all these properties with KBC for about 10 yrs.

He has about one and a half yrs left on interest only.

He has made all repayments as due but will not be able to repay if his interest only is not renewed.

His solicitor has been receiving many enquiries , checking if planning and council regulations have all been adhered to which makes him suspect KBC are planning not to renew his interest only, forcing him to default which will allow them to seize the properties and sell them off themselves to get rid of outstanding mortgages.

Whilst he dosen't really care if the investment properties are taken off him, he does have concerns that KBC will force bankruptcy on him and seize his principal residence which has a tracker mortgage from KBC also. All repayments are up to date on this property also. Solicitor has also received enquiries within the last yr on this property even though it is now about 15 yr old. There is about €95,000 outstanding on this account, approx 8/9 yrs left of mortgage.

Would KBC be able to seize all properties even though principal resident is seperate on a tracker mortgage and not used as collateral for any other property?

Thanks in advance.
 
I would agree they are checking the title with a view to selling as they know he cannot repay the capital.

Yes, his equity in his home could be at risk. If he's married, if his spouse is a co owner, her equity is also at risk if she also signed the investment loans. Is the home worth much. It does not matter that the home was not used as collateral for the investments.

You have given zero figures so it's hard to see how to advice on a strategy to manage to try and save the bank taking them.
 
Thanks Bronte,

Unfortunately I don't have any figures, just they have about €95,000 outstanding on principal residence and pay about €870 per month on that. Property may be worth €200,000 but it will be a hard sell as it is an unusual build and not in compliance with planning.
Would it be an idea for a family member to purchase the property for €95,000 to close that mortgage off?
The investment properties are all very much in negative equity.
 
He needs to address this now before the interest only period expires and he goes into default.

He should post all the details here.
Value
Mortgage
Interest rate
His salary
etc.

If he has €100k equity in the family home, he could sell it and keep up the repayments on the investment properties.
Could he move into one of the investment properties?

I don't think he should sell his home for less than it's worth as this would probably be reversed or cause trouble in the event of a Personal Insolvency Arrangement or Bankruptcy.
 
This is what is likely to happen if he does not get an agreement.
1) KBC will appoint receivers to the investment properties.
2) They will sell the properties.
3) They will get a judgement for the shortfall.
4) They will register the judgement against the family home.

I think it's very unlikely that they will try to get an order for possession on the family home. They might try, but it's unlikely that the court would grant it.

If he ever sells the family home, the judgement mortgages would have to be paid off.

But he might do a deal with KBC. Sell all the properties himself and give the proceeds to KBC - they might agree to write off the shortfall.

Or they might agree to something like sell off the properties himself and then add €100k to the home mortgage but write off the rest of the shortfall.

Brendan
 
Thanks for your reply Brendan.

Very difficult situation.

One of the couple is due to retire in next couple of years and the other is in temporary employment .
Their combined wages are probably about €70,000 a yr but with loan and debt repayments, their home pay is very small.
They are not in arrears of any loans but they will be unable to maintain them if interest only is removed.

Would it be possible for a family member to buy their property , pay off their outstanding mortgage of €95,000, allow them to live in the home?

The house had been on the market for €200,000 but failed to sell.
 
"I don't think he should sell his home for less than it's worth as this would probably be reversed or cause trouble in the event of a Personal Insolvency Arrangement or Bankruptcy.

Brendan, can you please explain ?
 
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