Key Post Analysing an EBS Split Mortgage offer

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Coys84

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I have copied this Case Study Format from another thread so that the offer of the split mortgage can be assessed in full - Brendan

Personal and income details
Income self: Jobseekers Allowance €248 Weekly

Income history: I was made Redundant in March 2009 and have had no work since other than small jobs for friends.

Income partner/spouse: 3 days a week as a Hairdresser,works on commission can range from €250-€330 weekly

Income history: Worked as a Hairdresser since leaving school 13 years ago

number of children:2 Children aged 5 and 2

Amount of Mortgage Interest Supplement received:€64.70

Home loan:€220,000
Lender: Ebs
Amount outstanding: €210,000
Value of home: €100,000 roughly
Interest rate: specify whether tracker or SVR or fixed rate:SVR
Monthly repayment €1140
Amount in arrears €5,200

Summary of discussions and agreements with the banke.g. in Marp since Jan 2011 . Have been on interest only since then. MARP for 12 months interest only for 18 months.


Other loans and creditors - delete those which don't apply to you
Credit Card -€1200
Credit Union- €8000 shares of €1340
Bank of Ireland loan-€7980


Other savings and investments


How important is retaining the family home to you?
Which of the following best describes your situation?
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


Any other relevant information

What is your preferred realistic outcome?
Just don't want to lose the home ,hoping we could pay what we could until circumstances changed.

Hi all was recommended to come here and ask for advice.
We Have been on interest only with Ebs now for 18 months or so and we filled out the latest sfs form and now have been told my our mortgage company that we can no longer have interest only and have to look at other option.
The options given were,
Surrender the house,
Sell it,
Apply for mortgage to rent scheme,
Extend the mortgage,
or a split mortgage.

We Have been paying €600 a month which at that is crippling us but the correct monthly payment is €1140 but now there saying that the €600 is no good and want more.
Were in panic mode now as we are not very good with all this and are worried about losing our home.
Any advice would be greatly received and can give any details needed to help.
 
Bronte said:
Why are you saying this is the only option when the bank has given you 5 options. Can you please clarify your income and expenditure. You must have these details from the SFS you filled out?
Click to expand...

1 we don't want to surrender our home.
2 we don't want to sell our home
3 we can't afford to extend mortgage term
4 we don't want split mortgage as they said will mean defaulting on other loans
5 is Mortgage to rent.
Will do up income and expenditure shortly when kids are at school,cheers :)
 
EBS split Mortgage

Just got a phone call from Ebs to say we have been approved for a split mortgage and told us the figures of:
162,273 Main
47641 Parked spread out over 32 years.This brings our mortgage down from €1140 to €806-trs.
If we agree to this what happens to the parked bit.
 
Got our documents ready to sign all very confusing seems they are going to review us every 6 months.
 
Coys sent me the documents which I have summarised below.

Summary of EBS Split mortgage

Loan offer document
Your two existing loans will be merged into a Base Loan Account

The portion referred to below will be transferred into a new account: Split Loan Account

Together the Base Loan Account and the Split Loan Account will make up the Split Loan Facility

|Existing|Base Loan Account| Split loan account
Balance|€209k|€162k|€48k
Rate|4.58%|4.58%|0%
Period|23 years|32 years|32 years
Repayment|€1,200|€806|€0

BB comment: 23% of the loan is being split. The effect is to reduce the overall interest rate to 3.5%

This modification will be reported to the ICB

In the event that the Base Loan and Split Loan have not been repaid in full by the end of the Loan Term, the outstanding amounts will be immediately repayable to EBS. Your home will be at risk should you fail to make immediate repayment following request by EBS

Notwithstanding EBS’s right to demand immediate payment, EBS’s intention is to agree with you at that time a suitable repayment plan, which may include a requirement for the disposal of your home.

Ultimately, any amounts outstanding to EBS are repayable by you or your estate.
BB comment; The split loan is still owed at the end of 32 years, and you may be obliged to sell your house then. So what? In 32 years, €48k will be a lot less in real terms.

Separate document entitled Split Loan Conditions
2) Any arrears will be capitalised
BB comment: Good. This means that you are no longer in arrears. The balance outstanding remains the same.

6) You may contact EBS at any time to request an amendment – however it remains at the sole discretion of EBS as to whether or not to agree to such a request.

7) If you make a partial early redemption of the Facility, the proceeds will be applied to the Split Loan Account only ( and not to the Base Loan Account)

BB comment: This is sensible. If you get a lump-sum, you should pay off the split loan account.

8) During the Loan Term you are not permitted to incur new borrowings or liabilities over €5,000 in aggregate from any institution or person without the prior consent of EBS

BB: Again this is sensible.

9) You must notify EBS immediately if there is any change in your financial circumstances which may affect your ability to make the total monthly repayment

EBS periodic review of the Split Loan Facility
10) The Split Loan Facility will be reviewed by EBS on a 6 monthly basis

BB: This is more often than I would expect. I doubt if it will involve much more than asking you how things are going.

11) The outcome of this review may result, at the sole discretion of EBS, in a transfer of all or part of the amount outstanding from the Base Loan Account to the Split Loan Account or vice versa which may increase or decrease the amount payable.

12) EBS may from time to time request you to provide up to date financial information and such other documentation as EBS considers necessary.

Maturity of the Split Loan Facility
13) At the end of the loan term, the outstanding amounts under the base loan account and the split loan account will be immediately repayable by you to EBS.
 
Should you accept this?

You are currently paying €9,600 interest a year
Under the split mortgage, this will reduce to €7,700 a year.

They are extending the term as well, so your repayments go down significantly.

So, on the face of it, this is a good deal, in that it is better than what you are on at the moment.



Is it sustainable?

We have been paying €600 a month which at that is crippling us
Click to expand...
Has your income improved since you first posted? If €600 was crippling you, then €800 will be worse.

You are still left with €16,000 of unsecured debt which add to the unsustainability

Alternative 1 - A Personal Insolvency Arrangement

As you are in such heavy negative equity and as you can't afford the €800 a PIA may be a better alternative. If I was a PIP, I would suggest the following:

Reduce the mortgage to €120,000 - 20% above the market value of €100,000.
Repayments reduced to €600.
After 6 years, the shortfall would be written off.

EBS may well veto this arrangement. So their offer could be the Split Mortgage or nothing.

The other big advantage of a PIA is that your unsecured creditors would be settled as well.

Alternative 2 - Mortgage to rent scheme
It's not clear if you applied for this.

Alternative 3 - A voluntary sale of your home

You have stressed that you want to keep your home, but all the factors are pointing towards a voluntary sale of it.

Sell your home.
You will have a shortfall of €100k.
Ask EBS to write off the shortfall in return for your cooperation in selling the home and maximising the sales proceeds.
If they refuse, apply for a Debt Settlement Arrangement with a one year period.
If they veto that, apply for bankruptcy in Ireland or the UK.

You will not spend the next 32 years paying off negative equity.

You tick most of the factors in favour of the voluntary sale:
You can probably rent a similar home for less than €800 a month, so you will have more money in your pocket.
You have high negative equity
You are currently on very low income, so there is no point in EBS vetoing a DSA or insisting that it lasts for 5 years.
The alternative of a split mortgage is probably unsustainable anyway.
You are unemployed, so you might need to move for work

Other advantages in selling now
If your income improves, you keep it instead of giving it to the EBS.
If you get a lump-sum, you keep it instead of giving it to the EBS.

If you are dead set on keeping the family home ...
Then you should accept the Split Mortgage subject to the following amendment.
"The borrower has the right to sell the property at any time after July 2018. In the event the proceeds do not clear the Base Loan and the Split Loan, the shortfall would be written off. Any arrears on normal repayments would still be due"
 
We can make these new repayments but it might mean we have to maybe default on bank loan to raise the extra funds and hope nothing else financially changes for the worse. Thanks for your help Brendan.
 
Thanks Brendan,so it might be best to find a PIP where is best to find one? Is there any in Laois
 
Did you not say that someone helped you to negotiate the current deal?

Would they not act on your behalf in the first instance?
 
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