BTL property is now worth 100k more than the mortgage balance. There has never been any arrears and the loan is on a low tracker rate. The loan was recently sold to Promontoria and is now managed by Pepper. On the basis that the vulture is stuck with a performing loan for another 15 years on a low rate, (so they will probably want to sell it on after 5 years), I'm wondering if they might settle for less than the €300k loan balance to get rid of me? I could refinance elsewhere at a higher rate and then happily sell the property if a decent settlement discount is available. Has anyone had any experience in this area? Any rule of thumb for how much I should offer in settlement?
I appreciate that in negative equity cases I might typically be looking at the current market value plus a contribution towards the residual debt to settle, but thankfully I am in a much more fortunate position now. I am not in any financial difficulty and could hang on in there, but if there was a deal to be done, I'd be happy to get out. Any suggestions would be gratefully received.
Thanks for the comment Brendan. I will let you know what, if anything happens.Very unlikely. Lenders are not giving discounts for the early repayment of trackers.
There is no harm in asking though.
Brendan
Thanks EmmDee. I see your point of course. Going one step further, the vulture fund will want to get rid of the loan asset typically within 5 years. In the meantime they have to pay Pepper on an ongoing basis to service the loan, so that is reducing their annual income return. The tracker rate is currently 0.8%, so in your example they are getting a gross annual income return of €800, which represents a 1% return on €80,000. My understanding is that the vulture fund's cost of funds currently exceeds 2% p.a., so they are losing money (the income part) when we use your example figures. On that basis, ceteris paribus, nobody would buy the loan from the vulture now at €80,000, so it would have to be sold on at a further discount in my view.It is likely that the portfolio (including your loan) was bought at a discount. So while you are paying x% over ECB (i.e. a low tracker rate), the new owners of your loan are getting a higher rate of return
For example - if the original loan was 1% on a €100,000 loan (i.e. €1,000 per annum), if the loan was purchased at 80% of nominal the new "owner" is getting €1,000 on €80,000 i.e. 1.25% pa. Obviously the return they are now getting depends on rate of original loan and level of haircut on the purchase.
So if you rock up suggesting you are doing them a favour, they may not see it the same way
The tracker rate is currently 0.8%, so in your example they are getting a gross annual income return of €800, which represents a 1% return on €80,000. My understanding is that the vulture fund's cost of funds currently exceeds 2% p.a., so they are losing money (the income part) when we use your example figures.
Someone was listening!I have heard of funds buying mortgage books, where the funds have a negative cost of funds.
For example, Goldman Sachs buying Danske mortgages, it was discussed here that GS could borrow at 0% or even less.
Brendan I am really surprised at your answer. Promontoria (Pluto) have just sold my mortgage to pepper, (messy divorce etc..) but they have told me they would have been very open to try and do a deal and I have a ultra low tracker a parked part of my mortgage and a non performing loan. MY problem is the sale is going through with Pepper in the next two weeks I can not stop itVery unlikely. Lenders are not giving discounts for the early repayment of trackers.
There is no harm in asking though.
Brendan
Walos please let me know how you are getting on. I believe they will do a deal with you if you make a decent offer. The question is what is decent ?BTL property is now worth 100k more than the mortgage balance. There has never been any arrears and the loan is on a low tracker rate. The loan was recently sold to Promontoria and is now managed by Pepper. On the basis that the vulture is stuck with a performing loan for another 15 years on a low rate, (so they will probably want to sell it on after 5 years), I'm wondering if they might settle for less than the €300k loan balance to get rid of me? I could refinance elsewhere at a higher rate and then happily sell the property if a decent settlement discount is available. Has anyone had any experience in this area? Any rule of thumb for how much I should offer in settlement?
I appreciate that in negative equity cases I might typically be looking at the current market value plus a contribution towards the residual debt to settle, but thankfully I am in a much more fortunate position now. I am not in any financial difficulty and could hang on in there, but if there was a deal to be done, I'd be happy to get out. Any suggestions would be gratefully received.
You do realise this sentence makes your circumstances completely different to everything else here? The OP is in positive equity, and never been in arrears.parked part of my mortgage and a non performing loan
Ok I am in positive equity not by much. I have never in arrears too, but my income has been battered. So my ability to repay is limited, but my mum wants to assist me with funding to hopefully clear my mortgage if I can negotiate a decent deal. Funny enough I was told I was performing on the agreed dealYou do realise this sentence makes your circumstances completely different to everything else here? The OP is in positive equity, and never been in arrears.
They're willing to do a deal with you because your mortgage is non-performing. Not because it's a tracker.
They're not. The beneficial fund bought your loan for a little over 90c in the euro. The portfolio is securitised and currently funded at a negative rate. So between their margin over funding, and the unwind of discount at which they bought, they're earning over 1% on your loan. They've less capital tied up than a bank would have, so they're happy to keep your loan, probably earning them 10% return on their capital.Factoring in the admin costs they have to be losing money
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