Case study Investment property, interest only, but given a split with capital and interest

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roberto

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The aim of the TSB redress programme is "to return your mortgage accounts to the position they would have been in had the failure not occurred…” .

The split mortgage would not have been put in place if it were not for the failure.
The Split agreement is also in breach of the original loan conditions re. tracker rates.

Why would the adjustment be applied to the Split agreement ?

See my example below;

Fixed rate ended_______________________________31-Jul-09
Remaining Term_______________________________23 Years Interest only
Opening balance at Jul-09_______________________€ 450,000
Balance Jul 2015 if payments met_________________€ 450,000
Interest should have been @ 2.4% € 64,800

Account was overcharged at variable rates during the period

Account went into serious arrears of______________€ 60,000

Split agreement signed in Apr 2014
Main Balance_________________________________€ 265,000 @ 5.80%
Warehouse___________________________________€ 245,000 @ 0.50%
Total________________________________________€ 510,000

Lender admits overcharges of, say €70,000

Redress Offer by Lender
Man Balance_________________________________€ 265,000 @ 2.40%
Warehouse___________________________________€ 175,000 @ 0.50%
Total________________________________________€ 440,000
Monthly payment______________________________€ 1,600

Redress if applied to original agreement
Main Balance_________________________________€ 450,000
Arrears______________________________________€ 60,000
Overcharge__________________________________-€ 70,000
New Loan balance at original conditions____________€ 440,000
Monthly payment @ 2.4% interest only____________€ 880

Other than the difference in monthly payments, the borrower would be removed from the split agreement and all of the reviews etc... associated with the split agreement, and be free to decide on the level of capital repayments as they please.
 
roberto said:
Opening balance at Jul-09_______________________€ 450,000
Balance Jul 2015 if payments met_________________€ 450,000
Click to expand...

Hi roberto

There are some unusual features to your mortgage. Is it with Stepstone or permanent tsb?

Are you saying that your mortgage was interest only for 6 years from July 2009 to July 2014?


Is it an investment property?

ptsb don't charge interest on the split.

If you are contractually entitled to an interest only mortgage, then you will get that.

Brendan
 
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The interest on the redress offer is €3,300 less than the pre-split mortgage!

Redress Offer by Lender
Man Balance_________________________________€ 265,000 @ 2.40%
Warehouse___________________________________€ 175,000 @ 0.50%
Total________________________________________€ 440,000
Monthly payment______________________________€ 1,600

Redress if applied to original agreement
Main Balance_________________________________€ 450,000
Arrears______________________________________€ 60,000
Overcharge__________________________________-€ 70,000
New Loan balance at original conditions____________€ 440,000
Monthly payment @ 2.4% interest only____________€ 880

Interest saved €3,300 (175k @ 2.4% -.05%)
 
There are some unusual features to your mortgage. Is it with Stepstone or permanent tsb?
- Permanent TSB

Are you saying that your mortgage was interest only for 6 years from July 2009 to July 2014?
- Yes

Is it an investment property?
- Yes

ptsb don't charge interest on the split.
- Yes they do - I can forward documents if you wish
 
Yes, the repayment on the Warehouse portion will be less under the split (€3.3K per annum), but the Main Account is capital repayment, not interest only.

It is unlikely that TSB will allow the split to continue, and will seek to move all of the warehouse back into the Main loan.
This will increase the monthly payment to approx. €2500 on capital repayment over the remaining term, approx. 18 years.

If the redress returned the loan to its original conditions, the interest only payments would be €880 per month, and I could decide when to pay off capital, for example, depending on the level of rental income.
 
Hi roberto

Thanks for the clarifications. They don't charge interest on home loan warehouses, but they obviously do on RIPs.

Why is your mortgage interest only? Is that part of your contract or is that as part of a rescheduling? They can't just switch it to repayment as part of the redress. If your contract specifies interest only, I would think that the redress computer systems just overlooked it. Should be easy to sort out.

Brendan
 
Computer says No....I doubt it...nothing is easy to sort out with these guys.
The switch to repayment happened during the split - my argument is the split would never have happened without the "failure"
 
Roberto - a simple question - what does your contract say about interest only?

The original behaviour by ptsb in granting you a split while you were on interest only is very odd. It would have been better for them to just leave you on interest only.

Brendan
 
Simple answer - interest only for 25 years.

The interest rate being charged before split was 6.7%, so the split reduced the monthly cost while incorporating some capital repayment and capitalising arrears.
 
OK.

If you have interest only in your contract and a rate of 2.4%, then you are fully entitled to have this restored to you to put you in the position you would have been in had they charged you the right interest and had you made the full repayments.

When they were charging you 6.7%, they were entitled to make capital repayments part of the split. You were of course within your rights to decline the offer of a split.

Now you need to compare both options to see which is best. It seems to me that the split would still suit you if you can meet the capital repayments.

Brendan
 
Thanks Brendan - I agree with your concise analysis.

If the split ratio was to remain as per the redress, I think I would accept offer, but when considering the options, I must consider the onerous conditions of the split, that is, personal financial reviews, changes in ability to pay, and bank decisions on split ratios.

Do you believe that the appeals committee is equipped do deal fairly with my issues?
 
roberto said:
Do you believe that the appeals committee is equipped do deal fairly with my issues?
Click to expand...

I would guess so. This seems fairly simple to me. They will look at it, and see that they have made a mistake, and correct it.

That is all based on the assumption that you are correct in your reading of the contract. I had not known that ptsb gave out 25 year interest only contracts. They were usually interest only for 5 years followed by capital and interest.

Brendan
 
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