Case study Age 60, Positive equity, but can only afford interest

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Marialo

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I am writing to find out if paying interest plus something off the principle of my mortgage will enable me to keep my home.
KBC have insisted I sell my home in order to clear my mortgage. I have a small amount of positive equity and have tried to find another home for myself and my two adult children (who cannot access the rental market.) However this has proved impossible. Since the demand to sell my home last year I have managed to secure work and can pay more off the mortgage. I could also take in a lodger which would allow me to pay 900 euro towards my mortgage.
My question is:
What is the likelihood of KBC extending out my mortgage to a lifetime mortgage (I am 60 years of age)
This would allow me to afford the interest plus something off the capital long term. When I die they can sell the house.

I owe €187,000 (this includes 14,000 arrears)
My house is worth €350,000

KBC have offered me €50,000 trade-down mortgage but even with this, because house prices are going through the roof, I cannot find anywhere suitable.
I am desperate to hang on to my home.
 
Income Details
Net monthly :
Net monthly income from employment - €2049
Income history: I was unemployed for nearly two years prior to current employment (commencing November 2013)
Net monthly:
€400 – Contribution from two adult children at home – one in part-time employment, the other still in college.
Total Net Monthly: €2,449
Personal Circumstances:
I am a 60 year old single parent with two adult children still dependent as they are unable to secure rental accommodation in current climate. Our monthly living expenses, including everything except mortgage debt:
€900 per month
Home Loan
Lender: KBC
Amount outstanding: €187.198 (this includes arrears of €13,655)
Value of home: €355,000
Interest Rate: SVR
Monthly repayment: This has accrued to €2,200
Discussions and agreements with KBC:
Last September KBC deemed my mortgage unsustainable as I had been unemployed for nearly two years, with a history of several restructured agreements. They insisted I sell in order to repay my debt. Reluctantly, and believing I had no choice, I put my home up for sale, it is still for sale, but I cannot source suitable accommodation for myself and my children and I am reluctant to agree to a sale which would leave myself and my children homeless, or in temporary rented accommodation until the small amount of equity runs out.
I am currently in employment which I envisage will last until I am forced to retire in five years time. Based on this, KBC offered me a trade-down mortgage of €50,000 to sell my home and buy something else. This would have been fine twelve months ago, but in the current climate every bid I put on a potential property goes to a higher bidder – I am worn out with it all!
I currently am paying the interest on my property but could take in a lodger and pay far more.
Other Loans and Creditors:
Credit Card:
Amount outstanding: €4,000
Monthly repayment: €117
Term Loan:
Outstanding: €6,000
Monthly repayment: €40 per month (Currently restructured)
Importance of retaining family home:
I desperately want to keep my family home
My Preferred Outcome is:
To be given a lifetime mortgage whereby I continue to pay the interest plus something off the capital - which I could easily do if I take in a lodger. If and when my children (hopefully) move on I could take in two lodgers. When I die the bank can sell my house, and clear my debt.


 
This is a very tough situation to be in at 60 years of age. I agree with your bank that it is an unsustainable loan as you only have half of the 2200 monthly repayment. With a salary of 2200.

What is the term remaining on your mortgage.
How much are you actually paying.
How much would one lodger bring in. Is it double for two?

You state you really want to keep your home, based on that:

Do your children share a bedroom? Could the one in part time employment not move out. He is surely entitled to state help with rent if he is not able to support himself. How many years has your other child left in college. Can he not also get a part time job. Do they work in the summer months.

The next problem is that you are 60 and only have 5 working years left, how can you make the repayments in 5 years time.

Currently you have equity of 170K, lets say 160K, and the bank are willing to give you another 50K. Can you not find something for 210K? Would you not be a lot better off downsizing, I know it's hard, not nice, etc, but financially you're trying to keep your house, keep a roof over two adult children, and contemplate bringing in lodgers to keep going, sounds like an awful struggle at the best of times.
 
Hi Marialo

This is exactly the type of case I have been lobbying the Central Bank, the lenders and the politicians about.

You have a mortgage of €187k
The interest at 5% is €800 per month.

This is a lot less than it would cost you to rent a house in any way comparable.

Are you able to pay the €800 per month.

My argument is that while you can pay €800 per month, your mortgage is sustainable. As it's a SVR mortgage, KBC is not losing anything on it. There is plenty of equity in the house, so they are taking no risk.

Take your house off the mortgage.

Read this post and the links it refers to

Central Bank Governor agrees that long interest-only is a sustainable solution

Write to the Governor of the Central Bank and tell him about your situation.

Contact your politicians and tell them that people in your situation need to be regarded as sustainable.

If you pay the interest in full, I think it unlikely that KBC will initiate formal legal proceedings.

If they do, I think it unlikely that a judge would grant them possession.

The next problem is that you are 60 and only have 5 working years left, how can you make the repayments in 5 years time.
Click to expand...

This will be an issue to deal with in 5 years. Don't worry too much about it now. Lots might happen in the meantime. Your kids may get jobs and be able to contribute more. They may leave the house and you may wish to trade down anyway.

The bizarre thing about the requirement to pay off a loan by age 65 is that when you reach 70, some lenders will actually give you a loan on an interest rollup basis.

Brendan
 
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