4.4% SVR has tipped us over the edge.

K

Kerrigan

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We have just had a valuer out to value the family home. He informed us we are valued in the region of 260k - 280k. Our mortgage is 380k on a 4.4% SVR with a loan repayment of approximately €2,300 per month. We are not in arrears. I want to sell as quickly as possibly and clear off the residual debt over X amount of years but my wife wants to stay put. We are not in a position to move lenders and are at the mercy of our loan provider. The monthly repayment, in my eyes, is astronomical. We asked for the interest rate to be fixed but their fixed rated dramatically exceeded the SVR so was obviously a non runner. We are deemed by our provider as capable paying customers from a recent standard Financial Statement we submitted. What should we do next? What are the odds of elongating the term of our mortgage?
 
Kerrigan said:
We are deemed by our provider as capable paying customers from a recent standard Financial Statement we submitted. What should we do next?
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Unfortunately for you the bank see you as a payer so they will say this. The only way to get their attention is to stop paying. How important is it (really) to you to keep your nose clean i.e. not go into arrears. Can you see yourself affording or even wanting a mortgage in the next seven or eight years ? If the answer is no, then stop paying and save the money up for a rental deposit and rainyday fund. Then after a few years after the legal process is exhausted forego the property and start living life again. Just my two cents worth.
 
Hi Kerrigan

You are better off filling out the Case Study information so that you can get a complete answer.

Why do you want to move house? The interest on €280k @4.4% is €12,000 a year or around €1,000 a month.

That is less than it would cost you to rent an equivalent house. So even at very high SVRs, they are cheaper than renting.

And mortgage rates should come down although our campaign has lost some of its vigour.

(Note: I have compared the interest on €280k with the cost of renting, as the NE is owed anyway.)

You are paying €2,300 a month, but €1,000 of that is capital. So you are slowly paying down the negative equity.

If you are in MARP, you can appeal the decision within 28 days. As you are in deep negative equity, you won't be able to get a mortgage for some years, so an arrears record won't affect you too badly.

If your finances are absolutely stretched and your lender won't extend the term, then you can unilaterally reduce the payment to what you can afford. Make sure to pay at least the full interest and make sure to pay it every month.

Brendan
 
Thank you all for your responses. We did not pay our mortgage last week and received notification that we are now protected under the MARP. I have a conscience and don't do arrears easily ~ stupid , I know~! They asked us to fill out a SFS and gave us some options:

Split mortgage (maximum 2 years).
Interest only.
Pay less than interest.
Term extension.
Repayment Break.
Capitalization.

I feel term extension (full principal & interest) is the only real option and the remaining options are simply kicking the can down the road.

I will post my financials later today.
 
Hi Kerrigan

If you get a split mortgage, go for it. It is effectively a reduction in interest rates. I hadn't realised that any lender was splitting for just two years.

Brendan
 
So you borrowed the money, you can afford to repay it, but you've decided to default?

Incredible behaviour.
 
Hi Gordon

To be fair, he has been absolutely clear that he intends to pay the loan.
He has also indicated that he can't afford it.
He is paying a rate of 4.4% when the average rate across the Eurozone is 2.14%. Given that it is in NE, the rate should be higher, but probably not more than 3%.
 
Hi Brendan

I'm not sure that he's indicated that they can't afford it. There's something in there about the rate being astronomical but that's it. Plus the bank say that they can afford it. Apologies for my scepticism.
 
I understand were you are coming from Gordon but to default is our only option for the bank to take heed. I certainly don't like what I am doing and if it were all down to me I would sell up tomorrow. We are deemed able to pay but we are simply struggling and if interest rates increase tomorrow it would be curtains for us. I brought our plight to the attention of the bank some time ago and they said we could afford to pay interest + principal. Yes, we could in theory but the reality on the ground is highly different. We are not armored if problems strike e.g one of us falls ill, interest rates rise etc. We don't believe the bank took all this into account but simply saw a figure. Honestly we though we were being proactive by bringing this to the attention of the lender. We met with a PIP yesterday and they said the mortgage is unsustainable as it stands.
 
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Also regarding the interest rate - we asked to fix the mortgage but where offered a fixed rate well in excess of 5% plus.
 
It seems bizarre that Kerrigan has to strategically default on his mortgage and ruin his credit rating simply to negotiate a term extension to his home loan.
 
Hi Brendan, regarding the split mortgage (maximum 2 years) they informed me that the overall repayments would increase when the two years ceased but by how much I do not know. With your experience do you think splitting for two years is more beneficial than elongating the mortgage term? We would be grateful for any input. Also we had never heard of splitting a mortgage for only two years either. It feels so temporary and another can kicking exercise???

Hi Sarenco, yes a lot of form filling to request the term extension; SFS statement, bank statements etc. All of which where handed over merely a few weeks ago. If we were to pay the missed mortgage payment on Monday we would be back to square one. However, we are aware that if the SFS is not completed again we will be classified as not cooperating.
 
Some sums:
Monthly
Income After Tax: €3800
Mortgage: €2300.00
Loan repayment:€600.00
Electricity: €50.00
Heat:€50.00
Food: €400.00

Surplus €400.00
 
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