Case study Help me analyse our Split Mortgage offer

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I have posted previously about our situation but we have now been formally offered a split mortgage. We are unsure of how to proceed and would love some advice. Our details are as follows.

Personal and income details
Net (i.e. after tax) Income self: €1613 pm part time employment, private sector
Income history: Have been working a 3 day week but have recently secured an extra day's work a week.

Net income partner/spouse: c. €1573 pm, full time employment, private sector
Income history: Lost job about 5 years ago, has been in and out of low paying jobs since. This one is secure enough but the pay is low.

Number of children 1

Amount of Mortgage Interest Supplement received N/A

Home loan
Lender: PTSB
Amount outstanding: €257,453.99
Value of home: c. €120,000
Interest rate: Variable 4.34%
Monthly repayment: Should be €1,279 after TRS, currently paying €930 (interest €797 + capital 133)
Amount in arrears None

Summary of discussions and agreements with the bank
We have been making reduced payments as agreed with the bank for the past couple of years, usually interest only and lately interest only plus capital. The bank have now offered us a split mortgage as detailed below.

Mortage Balance €257,453.99
Split offer;
Main mortgage account €174,876.85 @ 4.34%
Warehouse account €82,577.14 @ 0%
Monthly repayment amount €820.59
Term to be increased by 112 months.
Current remaining term 295 months.

Other loans and creditors
Overdraft – AIB €1,000
PTSB €500
Credit Card €1500
Credit Union e.g. Loan of €6,500 against €150 shares. Currently paying €225 per month off loan and €10 to shares. 2.5 years left.
Family Loan from family member balance €8,510 – try to pay at least €150 pm back. Interest free, no formal arrangement in place.

Other savings and investments
None. Try to put away €10 a week to cover Christmas, birthdays etc.

Any other relevant information
Childcare €260 pm (starting this month, we haven't had this cost up to now).

The offer to pay less per month is instantly appealing but we don't want to accept until we are fully sure we are making the right decision.

Our thoughts are that we accept the offer and pay the lesser amount for a few years while we are clearing our short term debt and therefore leaving us with more disposable income each month. We would then ask the bank to transfer the money back from the warehouse account to the main mortgage account. We really want to pay it off over the years rather than retire owning thousands.

All/any advice appreciated. Thanks in advance.
 
It looks a fair enough deal in that Bank have moved towards you.
The warehoused amount @ 0% in 295 months will not even be the price of a new car! So DO NOT worry about it.God Bless Inflation !!

Ifyou can manage the new payments and get rid of other (annoying) debt= happy days.

Since the warehoused is @0% , I would not be in a rush to start paying that off . Save a few Bob, you have family and ALWAYS need to have a reserve.
 
will.im.not said:
Term to be increased by 112 months.
Current remaining term 295 months.

.
Click to expand...

Have you got those figures correct? 2 year extension to a mortgage that is currently ending in 5 and 1/2 years?

Your split morgage looks good as the other poster stated. Helps you to pay down expensive debt. You should start with the credit card which will be the most expensive and then move on to the credit union. When you've paid off the credit card, might be an idea to move to one of the pre paid types. But that's only necessary if you will not be good at managing the card going forward. I would increase your savings as well. Might be an idea to put money aside to pay a lump sum off the mortgage in the future, keeping the split at 0% which is free money, so that when the bank come back to you, you can lob lump sum off the capital.
 
Thanks for your input. We would certainly start putting more money aside now as we would hope to have another baby in the next year or two.


Bronte said:
Have you got those figures correct? 2 year extension to a mortgage that is currently ending in 5 and 1/2 years?
Click to expand...

112 months = 9.33 years
295 months = 24.58 years.

Once the credit card is paid off we'll be getting rid of it. There's no need for it and the temptation would always be there to use it.
 
Sorry Will, I typed in weeks instead of months. Sounds like you're going to be able to get back on track. That must be a relief.
 
Just a note on the term extension side of things.

If a bank extends the term of a loan, they are increasing the time in which you HAVE to repay the loan.

You can always if you WANT, repay the loan earlier assuming it's on a variable rate.

Term extensions are win-win for the borrower in my opinion, they give the borrower greater discretion.
 
Bronte said:
Sorry Will, I typed in weeks instead of months. Sounds like you're going to be able to get back on track. That must be a relief.
Click to expand...

No probs. It's a relief that we have this option, but I'm still getting my head around the idea.

When we were first offered the split mortgage I was against it. It's such a permanent thing. I know that's the idea but in my head we just needed short term assistance and then we'd be fine. Taking this offer is like an admission that we are really struggling financially.

I suppose that's why I want to set out a plan to clear our short term debt and get back on track with the mortgage. So essentially in my head the split mortgage is still just short/medium term assistance.

Plan is to put away some money as savings and chip away at the smaller debt.
 
will.im.not
Looks from the few Splits I have seen ,that Banks ARE being fair with those who are being genuine.
If so it augurs well and will flush out chanchers.
 
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