Case study €800k mortgage - AIB wants me to sell the family home

mortgagemad

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Hi,
First time poster seeking advice. We have been on an interest only tracker mortgage with AIB for 3 years. The total outstanding mortgage is 800k and the value of the home is now approx. 500k. We are due to receive a 250k lump sum in 3 years .

Requested an extension to the arrangements in December, and we also offered a contribution to the principal - we have a load of unsecured debt and there isnt anything left. Received a response last week stating that as the bank considers full replayments can be made we should sell the house immediately or make arrangements to 'hand the keys' back to the bank.

When we recovered from shock we dumped our health insurance; house insurance and will sell 2nd car. This will give us enough to make 50% of the mortgage each month.

Question is this...how do we negotiate the appeals process? Do we really need legal advice at this stage? I think we are a good candidate for a split mortgage as the 'parked' component will be paid in full within a short number of years. Do we act 'strongly' with the bank or roll-over and die? Have the bank acted fairly under the Code in failing to discuss options before reaching a conclusion? We cant sleep and with 4 small children the prospect of loosing our family home is terrifying.

Any advice welcome. Particularly from anyone who has emerged positively from the appeals process.

Thanks
 
Hi mm

Sit back and think this one through.
It's always better to give the full information in the format in this post.


AIB has asked you to sell your family home. You will be left with a shortfall of €300k.

Why not put a counter proposal to them? As you have a cheap tracker, they will be gaining from its early repayment.

Agree to the sale of the home on condition that they accept the proceeds in full and final settlement of the mortgage. They might agree to this - I just don't know. But if they do agree, you will be debt free. When you get your lump sum, you will be able to buy another house.

There will be some temporary embarrassment in trading down from a €500k house to a €250k house, but you will be mortgage free and your family will be financially sound.
 
Thanks for the prompt response Brendan.

Why would the bank prefer this option to a split mortgage option where they have an option to get all of their money back and we get to keep our home? That looks like a 'win-win' to me. We have a decent income and a good record - so they will defiitely get their money. Are split mortgages a reality or just banking 'spin' I wonder?

Can I ask whether they should have had some more discussion about the various options rather than just giving one option? I thought the Code indicated that all options should be explored before the family home is disposed.
 
As I said, it's better to give the full details in the Case Study format, so that you can get a proper opinion.

Brendan
 
Hi,
First time poster seeking advice. We have been on an interest only tracker mortgage with AIB for 3 years. The total outstanding mortgage is 800k and the value of the home is now approx. 500k. We are due to receive a 250k lump sum in 3 years .

Requested an extension to the arrangements in December, and we also offered a contribution to the principal - we have a load of unsecured debt and there isnt anything left. Received a response last week stating that as the bank considers full replayments can be made we should sell the house immediately or make arrangements to 'hand the keys' back to the bank.

When we recovered from shock we dumped our health insurance; house insurance and will sell 2nd car. This will give us enough to make 50% of the mortgage each month.

Question is this...how do we negotiate the appeals process? Do we really need legal advice at this stage? I think we are a good candidate for a split mortgage as the 'parked' component will be paid in full within a short number of years. Do we act 'strongly' with the bank or roll-over and die? Have the bank acted fairly under the Code in failing to discuss options before reaching a conclusion? We cant sleep and with 4 small children the prospect of loosing our family home is terrifying.

Any advice welcome. Particularly from anyone who has emerged positively from the appeals process.

Thanks


Hi there, re the underlined, are you repaying the unsecured debt? Because it's very likely that if the bank are saying you have the "ability" to repay your mortgage, this could be why.
 
Hi Mortgagemad

Can you give us a breakdown of all the unsecured debt so we can see the full picture?

Whatever happens, you cant afford to be in an 800k plus house. paying interest only for three years wasnt the best option to choose. You should have sold it before now, paying only interest is akin to renting from the bank.

You seem to be of some financial means if you have 250k coming down the line, but you seriously need to cut your financial cloth accordingly and make some tough decisions. I'm not sure what you mean when you say can the bank demand repayment - you borrowed this money and need to pay it back.

Ok, it might be a shock to live in a different area, in a normal housing estate like many others but thats reality. The taxpayer cannot be expected to make up the shortfall to keep people in what could be seen to others as luxury.
 
Hi Tax Payer,

Just to be clear....we borrowed the money and are fully committed to paying the bank back in full. We arent looking for debt forgiveness, personal insolvency, running away to the UK for bankruptcy. All we really want is for the bank to restructure the loan over the remaining term of the mortgage so we can pay it in full. I would have thought that is no an unreasonable request - particularly as the same bank agreed to loan us this money in the first place.

Brendans suggestion that we ask the bank to settle for a short payment is not something that I find particularly attractive. Similarly, I have a real problem with 'not paying' unsecured debts and if the bank will agree to a 'split' arrangement then everyone gets sorted. And as the earlier poster said...the bank get repaid early on their tracker anyway under our proposal.

The original question is really whether banks are open to 'split mortgage' arrangements, I havent seen anyone posting on this site who has managed to get agreement on this approach.

BTW we are tax payers too and dont expect our fellow tax payers to pick up our tab...that has never been in question. Like a lot of Irish people we werent too smart during the celtic tiger period, but we plan on doing the right thing.
 
Hi MM
Thanks for your clarity, hopefully the lender can agree to your suggestion and agree to paying the full amount back over the term. Your position is unusual as you have a substantial funds coming down the line.
Best of luck and hope it works out.
 
I note while you've been requested to do out your full details you still have not done so.

Why does the bank think you can make full repayments on the loan?

You mentioned you offered the bank some 'capital' ? Where is this coming from ? And if you have some capital why not use it to pay your mortgage monthly?

So far there have been very few split mortgages - from reports in the media

You can be sure that if you continue to think that you can try and argue the bank around that they will be eying up the 500K to be realised on a loss making tracker and with a lump sum of 250K coming their way too and no doubt an income that can be used to pay off the remaining 50K (500 + 250 + 50 = 800) and plenty of costs piled on top of that.

Which house insurance did you cancel? Is it house or life cover?
 
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