Low salary with large mortgage. What will bank manager say?

After two years of unemployment I've finally managed to find work. Since I lost my job Ive been on reduced mortgage repayments which have been paid from a small amount of savings I had. My savings have now fully gone but thankfully I know I'll have a salary at the end of the month to meet some of my financial commitments.

I contacted my mortgage provider and updated them with my new position and told them that my new salary is very low and has no prospect in the foreseeable of a pay increase. This seemed to worry the bank and now I have been called in for a meeting with the manager on Friday.

I'm quite concerned as I do not know what to expect. Will they try and advise me to hand back my home? The property is 100k of negative equity.

Hi Wishes

No, they won't ask you to surrender your home.

Who is the lender?
What size is your mortgage?
What rate of interest are you paying?

What agreement did you come to about reduced payments? Did you pay the full interest or just part of it?

They should be reasonable with you. If you have made best efforts, they may write off the accumulated arrears, if there are any and extend the mortgage so that you can meet your repayments.

Brendan

Thanks for your response Brendan.

The mortgage is for 320k on a 4.5% interest rate.

They came to an agreement that I pay full interest only for the two years that I was unemployed. The two years are now up and they are looking to go back to normal payments again. If this happens I will not be able to meet payments as my salary does not stand up to the requirements.

I am approximately 1,500 in arrears which they have demanded. A family member has kindly offered to pay this for me. This will now bring my account right up to date.

That seems wrong to me it sounds like you have done everything the best way you possible could and to take a lower paid job is a very strong move on your part... well done.. surely this is exactly the situation that the 100k should be written down to bring wishes to a level he can afford to carry on at... you should have to borrow/gift money to pay it off.

Surely the 100 K negative equity is irrelevant to the situation. The amount borrowed is still 320K. Neg Eq doesn't affect one's ability to pay the mortgage. Even if the house doubled in value the amount owed and the ability to pay remains the same.

theod said:

Surely the 100 K negative equity is irrelevant to the situation. The amount borrowed is still 320K. Neg Eq doesn't affect one's ability to pay the mortgage. Even if the house doubled in value the amount owed and the ability to pay remains the same.

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Yes, but if the house doubled in value, the bank would be more interested in repossessing it, as it would recoup its money easily. While the house is in negative equity, it is much more to the bank's advantage to be getting at least interest payments from OP, as it won't get its money back if the house is repossessed and sold.

Hi Wishes

I don't think you should take the money from your relative. You might need it some other time for something more crucial.

You have been unemployed for two years and managed to keep paying the interest on the loan. That is some achievement.

I think you should insist that you can't afford to go more than interest only. And you should insist that the arrears be capitalized. That means that your account will no longer be treated as being in arrears.

In fact, I don't think it would be unreasonable for you to say that you would like to replenish the savings you used to keep up your repayments to have a rainy day fund.

You should follow up the meeting with a letter to them outlining your case.

They should give you time to get recover.

Brendan

Brendan Burgess said:

In fact, I don't think it would be unreasonable for you to say that you would like to replenish the savings you used to keep up your repayments to have a rainy day fund.

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I agree with Brendan. Thats a good attitude to go in to the meeting with.

Anyway it's about time the banks started paying a bit more respect to Joe Citizen. After all they wouldn't be there if we didn't throw billions of our childrens money at them.

That rant asside, you have to be commended for keeping the interest paid. Well done for not giving up. I'd definately take Brendan's point on board for the meeting.

I was to meet with the manager this morning but they rang and canceled.

I was told over the phone that they could not capitalize the arrears as it was not their policy to do so (non Irish bank) and the reasons for meeting me were merely for the payment of arrears and a deeper understanding of my situation.

I've been told by friends not to meet with them anyway as they will rail road me into a corner but to keep all contact with them in writing only. Is this wise?

Brendan Burgess said:

I don't think you should take the money from your relative. You might need it some other time for something more crucial.

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I agree 100% with this. Don't give family/friend borrowings to the bank.

Also, on the subject of the meeting, this is a tricky one. One could play hardball and ask THEM to visit you or enter only into correspondence.

On the other hand, if you are strong-willed, a face to face meeting might benefit you - if you hold your line. If you turn up to them, they will see that you are making an effort and they might be more likely to trust and build a relationship with you. If they find it difficult to communicate with you, they just might get their back up and start playing hardball even more. Of course, a lot depends on the personality on the other side of the table - but remember it will be a negotiation session and internally they will have a negotiation goal.

Tough call, but if you can hold your line, consider meeting them.

Hi Wishes

I think you should meet them but do not agree to anything at the meeting. Use it for exchanging information and discussing options.

Given that they cancelled the meeting today, i would follow up with a letter to them setting out your case and what you want them to do. Although they told you over the phone that they would not write off arrears, ask them to do so anyway. Let them refuse you in writing.

A lot of banks refuse to capitalize arrears, but they might not chase them either.

Brendan

Again all your advise has been invaluable. Following Brendan's great advise I followed up with a letter and hand delivered it to the bank on Friday afternoon; clearly stating step by step my situation.

Just to make it clear, I've come from a very good salary to working at a fast food restaurant. I'm not saying there's anything wrong with what I'm doing but am very concerned that the bank will feel it is more in their interest for me to hand back the keys rather than receive a couple of hundred Euro from me each month in a job that has no prospects; after all I signed up for a mortgage when I was on a six figure salary.

Do you think it would be out of line for me to make an offer of what I can afford each month and stick to it but have a written clause to say that if I ever earn more money that I will immediately inform the bank. Is this a complete no-no?

I got in fairly serious hock a good few yrs back and couldn't meet the repayments on loans. I was worried sick and not mentally in a very good place to negotiate because I was so worried. When I contacted the bank they told me they couldn't do anything, and I must repay the agreed amounts. I struggled with that for a few months, and then having got lots of support, I wrote them a letter and told them what I could afford and I clearly set out my budget. I got a reply a few days later accepting the offer - despite their previous insistence that they COULDN'T budge. Needless to say, I was delighted and very relieved. I was also very glad that I pushed it and didn't accept their 1st( and 2nd!) answer. We, (the bank and I), both came to an arrangement where all the debt was paid off, and I wasn't totally stressed out with nothing to live on. As I earned more money, I put more off the debt. Strangely enough the bank didn't insist on this, but I did it anyway.It sounds like your doing your utmost to resolve the situation and that must count for something. You are also being pro-active and engaging with the problem, and this must stand to you too. I hope this outline of my past experience helps. Mine wasn't mortgage related, and so you probably face different issues, but I think once the bank were happy (ish) with my overall plan, they agreed to it. So negotiation is possible. I know it's very difficult situation,I wish you well and I hope it all works for you.

If your house is in negative equity, the bank will lose money if they repossess it. So so long as you are paying them at least the interest, and a tiny bit more, it should be in their interest not to try to repossess, as at least there is a hope that your situation will improve and you'll pay off your mortgage or that house prices will rise in the future and they can THEN repossess.

I hope your financial situation will improve before the house prices do

Thanks horusd and Greta.

I met with the manager on Wednesday. I put it to him again about capitalizing the arrears; I was declined and he said he would follow up his decline with a letter. He has given me seven days to repay the arrears or my interest only reschedule plan will not be passed onto the credit control department for a decision.

I bought an investment apartment some years ago in the UK and have a relatively small mortgage on it. The property is in full rental and pays for itself. I explained to the manager I do not make any profit from this as the rental amount I receive pays the mortgage and no more. The manager was displeased with this as he said he knew this area in the UK very well and believed that rentals were receiving double the amount that I was declaring to him. I explained that I had the property with an auctioneer for months on end and they hadn't much success; that is until the rent asked for was halved. His response to this was - I want to see a full copy of your rental agreement with your tenants signatures. He also asked me had I approached the bank I have the investment property with and asked them for interest only payments. I said I had but they declined as they felt the apartment was paying for itself. He told me to ring them back and ask them to put this in writing and immediately furnish him with a copy of the said letter.

I explained that I have been in contact with mabs and am in the process of rescheduling personal debt. He also wants to see a letter that mabs are helping me with this.

That pretty much summed up the meeting.

I'm presuming you have equity in your investment property. Is there any chance you could sell? As regards the managers comments re higher rental payments I find this amazing. I know its all easier said then done but it seems all very one sided

Hi Wishes

You hadn't mentioned the investment property before! I had assumed that you had no other assets or income. You are in a position to discharge the arrears and meet the full repayments on your home if you sell the investment.

In any event, it's a good idea to sell it as you can't afford the exposure to two properties. Under the circumstances, the lender is right not to capitalize the arrears.

The bank has been decent in giving you a two year interest only period. You should have tried to sell the investment during that period so that you could return to meeting your original schedule.

Under the circumstances, I think you should
1) Inform the bank that you are going to put the UK property on the market.
2) Take the loan from your relative and pay off the arrears.
3) Ask the bank to leave you on interest only until the property is sold.

Brendan

Hi Brendan,

Apologies for not making that clear in my opening post. I have been trying to sell the property for two years now but have not found any buyers. I have always being open to the bank about this property. Any income that is taking in from the rental goes straight to paying that mortgage. I am not making any profit.

The banks grip is that I should be making more money than I presently am on the apartment and then pay the profit to them. That is just not possible. When I asked for a higher rate nobody was interested.

I take your points fully on board and will pay the arrears immediately.

OP, why would you issue your rental agreement to them?? Is that legal?

HI wishes,

well I didnt loose my job but huge paycut, my bank has agreed for a lower payment so just an extra 100 ontop of interest only, which is just doable, you may be offered something like that, best of luck hope it goes ok