I have a few rented properties all on interest only (ECB + 1.25%) which is ending

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Rad

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Hi,

I have a few rented properties all on interest only (ECB + 1.25%) which is ending this summer, they are rented and covering the mortgage at todays value with excess of 20%.

I also have a jumbo mortgage (excess 750K) in my principal residence (0 equity but not neg) which is also on interest only (ECB + .75%). This period of interest only ends in two years.

Today all is well and I haven't missed a mortgage payment in 20 years.

Problem is I lost my job late last year and my new job is currently paying 40% less. I am on a three day week however later this year / next year I will be moved to a 5 day week taking my earnings to more or less what they were.

Today I do not have the funds to repay a interest + capital mortgage on the rental when the IO period ends.

Has anyone had any experience of negotiating this situation with the banks, i.e. extending the interest only period?

I know there are a few here will say wtf was i doing getting into this situation but when I did this deal on these properties in 2004/2005 I had 50% LTV. All made sense at the time

Thanks,

R.
 
Re: Interest Only Ending

Rad said:
Has anyone had any experience of negotiating this situation with the banks, i.e. extending the interest only period?
Click to expand...


Last year I rolled off IO on a number of mortgages,I had factored in from day one that I would have to at some stage pay down the capital so always borrowed accordingly ie I wasnt ever going to borrow purely on IO over 20 years,which would be pure madness in my opinion,out of curiosity I sent a letter in to ICS asking that these loans be extended on an IO basis,got a letter back a week later informing me that this would definitely not be happening.Rolled on to cap and int repayments,glad to be paying them down if I am honest.
 
Re: Interest Only Ending

Rad said:
Saving most of it. Its a drop in the ocean in the overall scheme!
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Could you use it to pay back some capital to make you repayments less?

When you mention 20% do you mean that the rent received is 20% more than the interest only mortgage?

Can you extend the terms of the mortgages to make repaying them easier?

Are the properties in negative equity or close to mortgage amount. If yes it means you have less options of moving to another lender.
 
Re: Interest Only Ending

All the rental properties are in negative equity. The rental income is currently 20% more than the mortgage, no doubt this will be obliterated by an ECB rate increase.

Its looking like a bad situation. Are interest only mortgages still available?
 
Re: Interest Only Ending

So what happens next, I get a letter to notify me of my new repayment amount.
I say I can't afford to pay, but I will continue to pay the interest. They say NO and begin legal proceedings.

Is this it?

I would have thought in the current climate with wholesale defaulters this situation would be preferable?
 
Re: Interest Only Ending

If you show that you can't afford to pay they may extend you interest only but on new terms, in other words take the tracker off you and put you on a variable of a lot more then the % you are on now. A lot more.
 
Re: Interest Only Ending

Rad said:
I know there are a few here will say wtf was i doing getting into this situation but when I did this deal on these properties in 2004/2005 I had 50% LTV. .
Click to expand...

How are they now in negative equity if you bought at 50% LTV. Your property has to have come down by more than 50% and you must never have made any capital repayments.

Have you figured out how much a capital plus interest repayment would be, you say you have an excess 20% rent, would this not cover that? If not would extending the term to make the repayments less work?

As a previous poster satated the bank may penalise you by changing your rate if they continue the interest only for you. Do you think the figures make sense from the bank's point of view. If you are only a little in negative equity and unable to repay the bank may want to get your loans off their books, but if you are a lot in negative equity but can make interest only repayments they may be willing to pay ball. Only the bankers out there can give you the mood on that.

As your PPR is not in negative equity could you sell that and move into one of the rental properties, the fact you are able to pay down a mortgage of 750K should free up your situation?
 
Re: Interest Only Ending

I bought my first house in 1997 for 100K punts, 60k mortgage, sold for 375K in 2002, bought two investments (110k &160K) and a PPR (400k) in between 2000 and 2002.

I sold the PPR in 2005 for 800K and did an equity release on IO on all the investments. Then I bought a PPR for 1.4M in 2005 which is now 850K worth on a good day.

It stacks up like this

2010
PPR Worth 850K Mortgage 750K
Rental 1 Worth 225, Mortgage 250K
Rental 2 Worth 270, Mortgage 280

Basically I ploughed savings + equity of 1M into this mess and now have nothing to at all to show, I'll be lucky to get out with the shirt on my back.

Looks like now I'm going to have some bank troubles forced to sell and therefore cementing the losses due to the unavailability of IO deals.

The banks are making lots of margin even at 1% over ECB.
 
Re: Interest Only Ending

Thanks for your honesty, interesting history.

We now have figures from which one can work and suggest options.

Firstly you must forget about what you have lost (1M) just forget about it. You sell the PPR, releasing if lucky and figures are accurate about 70 to 80K. You then either rent for now, you are currently able to service a 750K mortgage, that rents you a very nice rental property, you put the remainder of the money into the investment mortgages to bring down the mortgages to a manageable level. You'd have to figure out what the repayments are, and combined with your excess income saved from renting rather than paying a large mortgage you should be able to service the investment property.

Anther option is to sell everything and start again. You seem to have good earning power so you should not fear this. You will have gained a lot of experience from your property experiences.

What you must not do is wait for the bank letter, prethink the bank, empower yourself if you can, there is nothing worse than being at the mercy of a bank.

You presumable are married and have kids, it's hard to sell the PPR, but if one has to one should and one should clearly explain everything to one's spouse. We are not allowed discuss property prices but certainly for now and with a good salary a nice house at a respectable price should be available to you once you have some savings built up.

In relation to the rental properties, I would only hold them if it makes sense, good location, no problem ever renting and the yield is good.
 
Re: Interest Only Ending

Hi Bronte,

Its tough for you i know, my experience not like yours but the banks wouldnt extend my interest only either, although my monthly salary down nearly 500 and i had lodger but he lost his job so down around 850per month, and bascially i was told if i get into trouble then go to them instead of trying to stop the problem before, I asked if that happen how bad my credit rating ?? its all very irish!
best of luck though
 
Re: Interest Only Ending

hi i didnt get to read all the post so not sure if this has come up . i know boi will look at io options or even moratoriums . i dont know who ur lender is but if they are in the gov guarantee i think its part of the deal that they have to be more flexable
 
Contact your lender now with your concern that your mortgages will most probably go into arrears if the interest only does not continue ( in writing only )

I have seen cases where this was done with one lender in particular and they neglected to take the tracker from them but allowed them to continue on Interest Only. ( they want to keep their arrears cases down )

See if they offer it to you first and if they say you must lose your tracker, Then make your call.

Otherwise ...HOW WILL YOU KNOW UNLESS YOU ASK !
 
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