Case study Could I be offered a Split Mortgage on a rip?

[Mr Deeds]

Income details
Net (after tax) Income Husband: 3,022 per month, PAYE employee.

Net income Wife: 2,000 per month, PAYE Worker
Child benefit received : 665 (4 children)

Personal circumstances so we can calculate your reasonable living expenses
The Insolvency Service has published Guidlines ...based on the family size, whether or not you need a car for work, childcare costs and other exceptional circumstances. By filling in this information, we (or you ) can calculate what your reasonable monthly living expenses should be.
2 adult family
My wife needs the car for work.
Number of 4 - 11 years old: 4
Guideline for reasonable living expenses, I calculated at: 2287
Monthly childcare costs: 600

Home loan
Lender: BOS
Amount outstanding: 430,000
Value of home: 360,000
Tracker 1.35% (Tracker)
Monthly repayment : 1,206,00
Amount in arrears : None
Interest and capital payments.
32 years left of a 40 year mortgage.

Investment property #1
Lender: Ulster Bank
Amount outstanding: 209,000
Value of home: 100,000
Interest rate: 1.35%
Monthly repayment :235 interest only
Amount in arrears :None
Monthly rent received :591
27 years left on 35 year mortgage.

Investment property RIP
Lender: PTSB
Amount outstanding: 252,000
Value of home 100,000
Interest rate: 5.85% RIP
Monthly repayment: 1257 interest only
Amount in arrears :2700
Monthly rent received :561
I am open to options but I think I should try and split this with PTSB.

Credit Union Husband
Amount of shares: 6600
Amount of loan outstanding :7000
Monthly repayment 200 per month.
Term left : I’m thinking of paying this off when my shares equal the loan amount in two months time.

Husband
Other loans and creditors -

Term loan #1 AIB Amount outstanding : 6500
Term loan term left : 4.5 years
Term loan - monthly repayment: 153 per month
Term loan - interest rate 12.9%

Term Loan #2 Ulster Bank amount outstanding : 12,000
Term loan term left : 3.3 years
Term loan - monthly repayment: 270

Credit Card outstanding : 13,000
This is now a loan and not a credit card facility.
Credit Card monthly loan repayment : 210 (interest free, I did a deal with MBNA now Advent Card)
Credit card loan term remaining 4.7 years


Wife/Spouse

Credit Union
Amount of shares :4000
Amount of loan outstanding :15500
Monthly repayment : 500
Term left : completed Nov 2016

Credit Card
Amount outstanding :3800
Amount paid each month 160


Other savings and investments :
None


How important is retaining the family home to you?

I want to keep the family home.
I don’t mind losing the other 2 houses.


Any other relevant information

What is your preferred realistic outcome?

Option 1
I’d like to get the PTSB investment rip restructured its very high at 5.85% fixed for another 3 years and I’m only paying interest, rent is less than half of the mortgage.
I was thinking of approaching PTSB with the following Split mortgage deal.
Outstanding amount 252,000, I will suggest PTSB warehouse 100,000 and I pay capital and interest on the remaining 152,000 @ 4% fixed over 17 years (remainder of the loan term) = 1028 Per Month. This would save me 229 a month and in 17 years time or earlier I could either pay off the 100,000 with the sale of the house.
I have a meeting with PTSB next week and I’ll put this to them unless anybody has any ideas? Maybe they won’t entertain me as it’s a RIP.

Option 2
I’d be willing to take any deal via PIA as both houses (PTSB and UB) are deep in negative equity and I’m not paying any principle although the UB mortgage is a low tracker at 1.35%
We currently have no money left at the end of the month for birthdays/swimming lessons/holidays living in general.
Do we meet the criteria to enter insolvency?

Positives On the other hand

I can pay off the credit Union loan with my shares and this can free up 200 Euro a month – is this wise right now?
I’ll be coming out of an Ulster bank loan in 3.3 years time and this will save 270 per month.
Rents are on the increase I can maybe expect an extra 50 Euro a month from next year on rents, although trackers will also rise eventually.
I could receive a pay increase early next year.
My Wife has the ability to work extra shifts but this in turn incurs extra childcare.

I’m confused and appreciate any advise I know people are in a worse situation than me but I'd like to know what my options are.

 

[Brendan Burgess]

User Input|
Type of household|Couple
Type of transport|Private Vehicle
No. of primary schoolers|4

Reasonable Living Expenses|€
Total Before Deductions|2,754.98
Third/Fourth Child Adjustment|21.62
| 2,776.60
Less Child Benefits|(520.00)
Total Set Costs | 2,256.60
Childcare|600.00
Housing|0.00
Special Circumstances|0.00
Total Costs | 2,856.60

|€
Net Income|3,022.00
Net Income - Partner|2,000.00
Total Net Income | €5,022.00
Reasonable Living Expenses|2,856.60
Available For Creditors | €2,165.40

So

Available for creditors| €2,165
+profit on Investment 1|€ 356
+ rent on ptsb|€561
Total|€3,082
- Home loan| €1,206
- ptsb repayment| €1,257
=available for other creditors| €619

Unsecured loans

AIB |€153
UB|€270
CC|€210
Credit Union|€500
Credit card|€160
Total| €1,293

 

[Brendan Burgess]

|Value|Mortgage
Home|360|430
UB|100|209
ptsb|100|252
AIB term loan||6
UB||12
CC||13
CU||12
CC||4
Total|560|938

Net deficit: 378

 

[Brendan Burgess]

This is very complicated, and so these are just initial comments.

1) Your net income is €5,000
Your reasonable living expenses are €2,856
You have a good surplus available...

But you have run up almost €50k of unsecured debts. This strongly suggests that you have been way overspending. You probably need to address this first. How did these debts arise? Have you been to MABS to get help with budgeting.

Don't look for some sort of financial eningeering solution, until you have addressed your spending problem first.

2) You have a great mortgage on your home. Although theoretically in negative equity, you are getting a home worth €360k for €1,200 a month. The repayments on a €360k home if you were to buy it now would be a lot higher. Likewise, the rent on a similar property would be a lot more than €1,200 a months. So you have to keep your home and cheap tracker.

3) Your UB investment property is profitable. Is it interest only by contract or by agreement?

4) It is not clear to me why ptsb should cut their 5.85% interest rate, when you don't appear to be asking AIB to cut their 12.9% interest rate or Credit Union interest rates which are much higher.

5) You have €7,000 on your CU loan on which you are probably paying €700 a year interest. Against that you have €6,600 of shares on which you are probably getting €60 interest. So you are paying over €600 interest on a net loan of €600. In other words, you are currently paying over 100% apr to the Credit Union.

So, of course you should pay this off.

Likewise, you should insist that you pay the €4,000 in shares against the €15,500 loan.

Back to your question about ptsb

Outstanding amount 252,000, I will suggest PTSB warehouse 100,000 and I pay capital and interest on the remaining 152,000 @ 4% fixed over 17 years (remainder of the loan term) = 1028 Per Month.

The banks don't publish their criteria for restructuring. I don't see why they should go for this, but why not ask them?

It makes no sense to me that ptsb should give a reduction on the interest rate so that you should pay off your capital. But I have seen borrowers being given nonsensically generous solutions, so you might get it.

Can you opt for a PIA?
I very much doubt it.
Bank of Scotland would probably veto anything which did not involve the sale of your home as they would like to see the tracker paid off early.

Again, you could try it, but I doubt it.

Could you move into one of the investment properties?
I would say that BoS would probably do a deal with you on the shortfall if you sold your family home. They might not do an informal deal, but if you put forward a formal PIA which involved selling the family home, I doubt if they would veto it. If either UB or ptsb agreed with the deal, then the other would not have enough votes to veto it.

 

[cremeegg]

Like many people when you find that you have no money left for things you used to take for granted, your thinking becomes a little clouded, emotion gets in the way of clear thinking.

Your position is stronger than you think.

You have a huge advantage in that your loans are all with different institutions.

First you must deal with the unsecured debtors. I absolutely agree with Brendan's point 5 about the credit union loans.

By the way I also agree with his point 1. You need to have a serious conversation with yourself about this. How did this happen and how are you going to make sure it stops happening. You don't have to tell us but be sure you know yourself.

You got a good solution with MBNA, push the others for something similar. Tell them all about the problems you are having with the PTSB investment property and that PTSB are suggesting that you pay unsecured creditors nothing. At the end of the day offer them minimal monthly payments, they will not take you to court so long as something is coming in.

PTSB. This is your big issue. RULE 1 in negotiating, do not go to them with proposed solutions, go to them with problems.

You are in hopeless NE, the rent doesn't cover the mortgage, the tenants are a nightmare, your wife is not sleeping, you are very distressed, is there anything they can do for you.

Look on it as theatre, give a good performance. Then go home and forget all about it until next time.

In the meantime pay them less each month. At the moment they have €2,700 arrears, that is a tiny problem for them, if you paid them the rent only the arrears would increase by almost €700 per month, in a year or two the problem might be big enough for them to take seriously.

At the moment they only see a nice profitable loan with small arrears. Why would they make any compromise.

Dont expect the PTSB to respond at the meeting, or even in the short term. Whatever they propose, say that it is too much you couldn't possibly manage it, that way you get to see their second offer.

Rule 2 in negotiating, don't rush to a conclusion. It would be nice to resolve matters and have some certainty, but slower is better for you.

Rule 3. Don't show the other side your hand. Don't let PTSB see how strong your income is. They will give you SFS forms to fill in, don't. Delay, drag out, forget, return half completed and unsigned, do not let them see that you have over €2k a month in free cash flow before debtors. Remind them at every opportunity that you have 4 children and how expensive they are. Emphasise that as the children grow they are only going to get more expensive, things are bad now and getting worse.

Then wait for them to come up with solutions. They have very few choices, they cannot force you to sell your home or RIP 1 because of the NE. Make them sweat.

What would a good solution look like. In the end selling the property and writing off part (all?) of the resulting loss, and making it repayable at low interest over a very long term, would be good.

Next steps.

1. You need to have a serious meeting between yourself and your wife to address the overspending issues. No recriminations just understanding that there is a problem, painting a picture of what sensible spending would look like, committing to that, agreeing to meet and review regularly. If you don't sort this everything else is a waste of time.

2. Write to PTSB, outlining in general terms that you are having difficulties and want a meeting to discuss. Make the point clearly that you are having problems and will have to make reduced payments on the mortgage, after that keep it vague.

3. Reduce payments to PTSB to rent only.

Then wait

 

[Brendan Burgess]

Hi cremeegg

Some good advice, but I am surprised that you are suggesting that they mislead ptsb.

This is a very stressful position for borrowers, and I believe that they should be open and honest with their lenders. They should fill in the SFS fully and correctly and not be messing the lender, i.e. the taxpayer, around.

This is a form of strategic default, which so many people are denying exists.

 

[cremeegg]

Brendan,

I think that this poster owes his primary duty to himself and his family, and it is from that perspective that I made my comments.

I have had a very enjoyable too and fro on the whole area of responsibility to the tax payer on another current thread so won't repeat that here.

There is a vast difference between being open, and being honest. I can think of very few business negotiations were the parties are open with each other. If you are selling a car, you ask for the price you would like to get you don't start off by telling potential purchasers what your bottom line is. If you tell someone " I need €5,00 for the car", where the reality is that you would like €5,000. Is that dishonest. I don't think so. This is normal business practice, I don't think anyone would expect anything else.

I do not suggest that the OP tell PTSB anything untrue, and if I gave that impression I would like to correct it.

There is a vast area in the middle.

It is easy for an uninvolved poster like me to make cavalier suggestions without thinking through the implications, and I would not like to prompt the OP into anything rash. Nevertheless I do not believe that he owes PTSB any duty to be open with them, and I certainly don't think that it is in his interest to be so.

I reviewed my post and made one change. Other than that,

"Tell them (the unsecured creditors) ... that PTSB are suggesting that you pay unsecured creditors nothing" I have no problem with saying this even if PTSB have not actually said this.

"You are in hopeless NE" This is true.

"the rent doesn't cover the mortgage." This is true

"the tenants are a nightmare" whatever the tenants are actually like, I think it is an acceptable thing to say.

"your wife is not sleeping, you are very distressed," These things are totally subjective and in any case no one else's business. I would be happy to say them.

The fact that the poster has a very strong income position makes a target for the PTSB, and don't think that they will not seek to strike that target. The OP is perfectly entitled to try to draw attention away from this fact and try to focus the discussion on the NE and shortfall in rent on the PTSB investment property.

Finally I would recommend that nothing untrue is put in writing to PTSB. Hence my comments about the SFS

 

[Bronte]

I like your negotiation tactics Cremeeg. Otherwise the bank will walk all over you.

 

[Mr Deeds]

Thank you for all the advice I really appreciate and cannot thank you both enough.
I was close to paying 350 Euros to get advice from a PIA.

Our lending seemed to have gotten out of control over a number of factors some listed below.

We had four kids within 5 years (Twins included).
My wife had to reduce her hours in work to mind the babies.
We borrowed to pay for the wedding (No honeymoon).
We borrowed to fix house up when moved in – (new windows, doors, floors heating etc).
We borrowed for new kitchen Interest free first year blah blah.
I was made redundant, but lucky enough returned to work but on 60% of previous wage,
Rents halved on both properties.
PTSB variable rate increased multiple times.
Our car got stolen and we took out a loan to get a more economical diesel 7 seater.
I was greedy and thought I could be a property tycoon and remortgaged to pay for deposit and stamp for Rip 2
I over spent on credit cards (cc’s all gone now of course).

To answer your question Brendan, my Ulster Bank interest free mortgage is by agreement not contract.
I was originally paying capital and interest and in 2006 I called UB and asked to move to interest only.
Nobody has been in touch to convert back to capital and interest so I’m saying nothing right now.

Going forward
I’m arranging to clear my Credit Union loan today 520 Euro left to pay.
I know this was a no brainer but just wanted to see what route was best to take.

I’ve arranged a meeting with the Credit Union along with my wife to chat about her Credit Union shares for next week.
I’m going to insist to use most of her shares against her loan,
(I’ve read the lengthy detailed thread on that on this website)

I’m booking a meeting today with MABS to go over our budgeting.
I’m guessing I will not get a slot for a while.
I sold my car 2 years ago to help buy a bigger family bus so I now cycle and run everywhere (Its actually great, the fittest I’ve ever been) – Marathon in 3 weeks!!!
We alter our phone plans/gas/electricity and don’t drink or smoke and shop in Lidl so I’ll look forward to some more advice from Mabs
I know straight away that we could cut on our shopping bill by removing sweets/cola/crisps/bars etc non essentials.
I’m going to get my wife to record all spending for 1 month and we can analyse and cut from there.

My wife and I are going to address her credit card.
We have some recurring charges that come out of that each week (Milkman, I know crazy) so we will alter that to her current
Account and try and clear that balance, it’s a Tesco credit card on 14%.
I might talk to AIB and tell them what we are doing to see if they can offer her a better rate. Their current rates are 12.65% I believe.
I don’t know if it would be worth while moving to AIB but I’ll see what they can do.

I’ve a meeting with PTSB tomorrow so I’ll put my position to them (Low rent, NE, Tenants, Stress) I’ll paint a picture of my situation and leave out the details of my income for now.
I’ll inform them that they will only get the rent that I’m getting and take it slowly from there.

My wife will take on another 2 shifts a month so this should help.