Arrears on tracker mortgage

Poc-ar-buille

Registered User
Messages
18
After being returned to tracker by one of the big banks. I received some redress which I put into savings for rainy day.

I also got a write down on the balance.

The resulting balance however was in arrears and now after 18 months I'm still 20k in arrears.

I have 20k in savings which I could immediately pay down.

I'm keeping this for children's education however.

My credit rating is not good and it's because of the arrears.

And I can't get any credit as result.

I'm currently overpaying the mortgage by €800 per month

And so in 24 months I will be ahead of the arrears.

Does it make sense this approach?

I certainly don't want to leave myself short.
 

Brendan Burgess

Founder
Messages
44,659
No, it makes no sense unless you kids are going to college in the next year and then there might be an argument for it.

You should clear your arrears. It's the correct thing to do financially. And it's the correct thing to do morally.

It is not the role of your mortgage provider to fund your children's education.

Brendan
 

Poc-ar-buille

Registered User
Messages
18
Kids hopefully starting college in 2 years.

It never occurred to me that there was a moral duty to pay this arrears to a bank that has put me through the mill from 2010 until 2018.

Thing is it could be easily be restructured
And the term pushed out for say 12 months.

Even when I was getting the redress my advice was to hang on to it in case I needed it.
I agree at that time I should have put it off the arrears.

It's interesting you see it so black and white. I've been thinking about it for a while and I agree it's best to clear the loan which I'm doing. But it's against a moving target. And the target drops by 1,250 each month so it's difficult to reach. In the past 18 months I have reduced the arrears by 16k.

Another option is to send them an SFS and get the loan term extended. Funny thing is I don't need the extra time. With the additional €800
per month I'm on course to clear the loan 2 years early.
 

Brendan Burgess

Founder
Messages
44,659
But it's against a moving target. And the target drops by 1,250 each month so it's difficult to reach. In the past 18 months I have reduced the arrears by 16k.

It's probably best to give all the information. Value of property. amount of mortgage . Amount of arrears. Interest rate. Lender etc.

But, you are overpaying your mortgage by €800 per month.
If you clear your arrears, you will not need to do that anymore.
When you need your kids education fund, you will have €20k of savings.

But the key thing is that the sooner you clear the arrears, the sooner your credit rating starts to improve.

You might not need that credit rating now, but you might need it in 5 years. And by then, your rating will be clean.

It's also possible that after a few years of education, you might hit trouble again. If you have acted responsibly in the past, it's more likely that you will get a restructure at that stage.

So it's very clear. Clear the arrears and reduce your repayment.

Brendan
 

Brendan Burgess

Founder
Messages
44,659
The alternative approach which you could consider. I am not recommending this, but you could consider it.

Say to your lender:

"I have been paying the arrears for two years. Could you please capitalise the remaining balance? I will pay the loan off over the original term. But just clear the arrears and increase the monthly repayment."

If they ask for an SFS, then you will have to send one in.

If they agree, you hold on to your €20k savings.

If they don't agree, just clear the arrears and reduce your monthly repayment to the correct amount to pay it off over the original term.

Brendan
 
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