If you have a ptsb split mortgage, which you no longer need...

Discussion in 'Mortgage arrears & negative equity case studies' started by Brendan Burgess, Apr 9, 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

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    Last edited: Apr 9, 2018
    I was talking to someone today who has had a split mortgage from ptsb for the past 5 years.
    They have about €200k warehoused.
    It is a tracker at ECB + 0.6%

    They have fully recovered financially and are building up savings with a view to trading up in a few years.

    I suggested to them that ptsb is not going to allow them to trade up while they have a split mortgage.

    Furthermore, there is a real likelihood that their mortgage will be sold to a vulture fund, who will have no interest in allowing them to port their tracker to a new home.

    So I suggested that they should immediately contact ptsb and resume full repayments.

    Their mortgage will not be sold on.
    The sooner they do this, the sooner ptsb will allow them to trade up.

    While their repayments will rise by around € 900 a month, most of this will be capital and so would "get it back" when they sell the house to trade up.

    They are only saving around €1,200 a year in interest which is not material in terms of the total size of the mortgage they would need when they trade up. Although this saving will probably rise when ECB rates rise.

    I was a bit surprised that I had not heard this before. Many people who got split mortgages could now meet their full repayments. Where they have trackers, they should definitely do so.
     
    Last edited: Apr 9, 2018
  2. Brendan Burgess

    Brendan Burgess Founder

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    If their mortgage is sold to a vulture fund, the vulture fund is likely to review the split anyway and it will be clear than they can afford the full repayments.

    The only downside I see to scrapping the split now is that it's possible that a vulture fund may well offer them a discount to switch their mortgage to another lender. However, if they have a split mortgage, no other lender will give them a mortgage.

    Of course, it's also possible that AIB or BoI might buy the split mortgages from ptsb. In that case, paying it off now would also be the right thing to do, as the ICB record begins to cure immediately.

    Brendan
     
    Last edited: Apr 9, 2018
  3. Brendan Burgess

    Brendan Burgess Founder

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    The decision is a lot less clear for someone with a non-tracker mortgage.

    With ptsb charging at least 3.5% interest, they would be saving €7,000 a year interest by warehousing €200k. If they move the warehouse into the main mortgage, their repayments would rise by around €1,200 a month.

    This would be a very difficult decision. They might well struggle with the additional interest and there would be no guarantee that they could get a trade-up mortgage anyway.

    But there might be some chance of getting a trade-up from ptsb, whereas there would be no chance of getting it from a vulture fund.

    Brendan
     
  4. capslock

    capslock Registered User

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    This is interesting, thanks for posting Brendan. We too have a split mortgage since 2013 with PTSB. While I wouldn't say we've fully recovered financially, we are well on our way.

    We don't intend trading up in the near future, rather extending. We are on a variable rate of 4.3% and are in negative equity of approx €50k/€60k. We were happy enough to leave things as they are and save separately towards paying off the warehoused part of the mortgage (€82k). I wonder now if we should have it moved back to avoid the mortgage possibly being sold to a vulture fund. What's the worst that can happen if it is bought by a vulture fund?

    As I said we don't intend moving. We would love to get out of negative equity though and be in a position to change lenders for a more favourable rate.
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    With a lot of negative equity and a high rate mortgage, I don't think it's worth exiting your split mortgage.

    How much is your total mortgage and how much is in the warehouse?

    What happened when they did a review in 2016?

    Brendan
     
  6. capslock

    capslock Registered User

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    We didn't have a review. They wrote to us saying something along the lines of 'it should be reviewed' but neither they nor we did anything further.

    Balance on mortgage we're currently paying is c. €160k and the warehoused amount is €82k.
     
  7. Brendan Burgess

    Brendan Burgess Founder

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    €82k @4.3% is €3,500 a year in interest saved.

    The effective rate on your mortgage is
    €160k @4.3% = €6,900
    €82k @0%

    Average rate is €6,900/€242,000 or 2.8%

    You will not be able to get a lower rate than that anywhere.

    So save up the spare cash to pay for the extension.

    Brendan
     
  8. Brendan Burgess

    Brendan Burgess Founder

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    A few things might happen:

    1) Nothing much - they leave the split in place
    2) They review the split after a year or two and you end up paying 4.3% on the full balance
    3) The full mortgage is subject to interest and they up the interest rate
    4) They buy the loan at a discount and offer you a discount to pay it off early.

    The main advantage of staying with ptsb is that they might at some stage in the future give you a top-up to fund the extension. A vulture fund is very unlikely to do that.

    But what is the chance of ptsb giving you more money? I would have thought very unlikely as you are in negative equity and you have a split mortgage. Moving the split to the active mortgage would not change the negative equity, so it won't increase your chances that much of getting a top-up.

    The interest saved of €3,500 a year is real cash.

    Brendan
     
  9. Duff123

    Duff123 Registered User

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    Hi Brendan.
    I too have a Split Mortgage with PTSB. We never had any arrears but due to high interest rates I think at one stage it went up to 5.94% we could only pay interest only for a few years during crisis with 3 small children we struggled but kept ourselves out of arrears(Interest only was about 1300 a month there abouts!) we were offered a split of 200k main and 142k warehoused. Over the last few years we have worked hard to transfer money out of warehouse account to main mortgage and it now looks like this...232k main and 89k warehouse, (24years left) & house just out of negative equity.. Now as you can imagine we thought we had these years to sort out the warehouse account however we now have the threat of vulture funds looming. Public are led to believe its people that are in arrears and not engaging that are been sold. This split mortgage shows its honest hard working families been tossed into sale too....This loan will be paid given that the restructure agreed arrangement remains in place. I have recently received 20k cash and am not sure should I pay this off warehouse account or hang onto it just in case I need it to transfer to another lender if its sold to a fund. I also read with interest the above calculation . can you apply that here as a matter of interest please. Our interest rate is 4.2% fixed . Can I add we are worried that if it is sold to a fund that their only interested in repossessing our home by any means. Any advice on this matter would be appreciated. Many Thanks
     
  10. Brendan Burgess

    Brendan Burgess Founder

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    ptsb and politicians and commentators have made it very clear that performing split mortgages are being sold. People might not understand that, but they are not being led to believe something else.

    Again you are being misled. There is no chance that a vulture fund will try to repossess your home. If you are making your repayments, they can't do anything about it. And it's quite possible that your loan would be bought by Bank of Ireland. And they would not want you to repay it early.

    Look at it this way - you have an interest free and repayment free loan of €89k for 24 years

    If you choose to make that an active loan, then your repayments will increase by €500 per month. The interest element of which will be €300 per month.

    Unless you are planning to move in the medium term, I don't think you should voluntarily give this up lightly.

    The dilemma is that the sooner you give it up, the sooner your ICB record will begin to improve. Although in your case, as you were never in arrears, a lender might look at it more flexibly.

    Brendan
     
  11. Duff123

    Duff123 Registered User

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    Thank you Brendan. You have put my mind at rest around vulture funds and I have a better understanding around my split mortgage and interest. Can you offer advice on the 20k i have received. Should I pay it off the warehouse account or wait and see what happens with sale? ( or hold onto it for security) .....This site has given me so much information and advice and for that I'm grateful.
     
  12. Brendan Burgess

    Brendan Burgess Founder

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    I don't see any reason to pay off an interest-free loan.

    There is another consideration.

    Let's say a greedy vulture fund buys your split mortgage. They might want a quick buck and so might offer you a discount for paying it off early.

    The bigger the warehouse, the more likely they are to offer you a discount.

    There is no incentive to a vulture to offer you a discount for repaying a loan at 4.2%

    Brendan
     
  13. Duff123

    Duff123 Registered User

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    Thank you Brendan. I will keep it safe so.
     
  14. Nick roo

    Nick roo Registered User

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    Hi Brendan

    I was on a split mortgage with PTSB but from this month we are back to our full mortgage repayments, I have asked PTSB if my loan would still be sold to the vulture funds, they said they cant give me answer as they do not know who will be included in the sale. Should I still be worried it will be sold?
     
  15. capslock

    capslock Registered User

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    Thank you Brendan. This makes sense now seeing it all written down like that. We will leave things stand as they are.

    Our biggest fear at the mention of vulture funds is that they would seek to repossess the house. It is a relief to hear that they can't. We weren't ever in arrears with our mortgage like the other poster here. Rather the interest rate went unmanageably high and we were interest only for quite some time. We've never missed a payment since the split.
     
  16. Brendan Burgess

    Brendan Burgess Founder

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    I think it's very unlikely that your mortgage will be sold. I don't see why they would sell a performing mortgage which is not split. But the Central Bank's behaviour is weird, so anything is possible.

    You don't need to worry too much if you are not in arrears. The only downside to having your mortgage sold is that you will probably not be able to get a top-up from the buyer. However, if your credit record has been repaired, you would be able to switch to another lender.

    Brendan
     
  17. Nick roo

    Nick roo Registered User

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    Thanks Brendan
     
  18. meepman

    meepman Frequent Poster

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    Out of interest, how long does it take for the credit rating to be repaired?