Case study Negative equity of 130,000, pre arrears and renting

[maggie22]

Personal and income details
Income self: PAYE worker - approx. 2,300 net per month
Income history: Working in sales. Salary has dropped by at least 10,000 over past few years due to downturn in sales
Single with no dependants

Have two properties but not possible for me to live in either due to locations/work. Have been renting a property at 400 per month since 2009.

Home loan (currently rented out)
Lender: AIB
Taken out: 2007
Amount outstanding: 166,000
Value of home: 64,000 approx
Interest rate: Fixed 1.5% tracker
Monthly repayment: 700
Monthly rent received: 300
Type of loan: 100%
Life of mortgage: 30 years
Amount in arrears: Have just gone into arrears this month

Summary of discussions and agreements with the bank:
Am in the process of entering into the marp with AIB


Investment Property
Lender: PTSB
Taken out: 2001 with a top up in 2007 to help fund above Home loan
Amount outstanding: 122,000
Value of home: 90,000 approx
Interest rate: Fixed 4.5%
Monthly repayment: 850
Monthly Rent received: 500
Life of mortgage: 15 years
Amount in arrears: none but very likely to happen next month

Other loans and creditors
NPPR unpaid on both properties: 6,500 (have only just discovered that both properties are liable, was completely ignorant of this and the massive interest accumulating)
Overdraft: 5,000
Family loan: 12,000
Credit Card: 1000


What is your preferred realistic outcome?
Sell both houses and do a deal with the banks on the balance for as short a timeframe as possible (ideally 5 or 6 years). My life is on hold and I want to get out of this mess as soon as possible.

Other Information:

I am due to meet AIB next week to discuss my options (if I have any) in relation to the home loan. How should I approach the meeting given my preferred realistic outcome set out above? What is the best outcome I can reasonably expect in terms of a deal?

Any advice would be greatly appreciated.

 

[Dr.Debt]

Unfortunately, I don't think the bank will be willing to enter any deal with you apart from a full repayment plan for the shortfall.

Going by the information given :
You are probably not "insolvent" as defined by the Personal Insolvency Act
You have been able to meet repayments up to now.

I don't believe your situation will improve much financially by selling both of the properties. You will still have a loan of 130,000 to pay back and that will prove to be as much a burden to your lifestyle (possibly more) than repaying the mortgages.

The home loan has a very cheap tracker. The mortgage interest @ 1.5% is only around 200 per month and you are actually repaying the capital to the tune of 500 per month.

My advice to you would be to retain the 1st property,sell the 2nd property and enter into negotiations with the unsecured debts with the remaining money available.

After implementing this solution your situation would look something like this :

Income 2300

Less :

Rent 400
Shortfall on mortgage 1 :400
Reasonable living costs : 1000
Other loans : 500*

The 500 euro "other" would be used to payback the 32000, shortfall after sale of second property, credit cards, family loan and NPPR.

It's tight but its do-able.

 

[maggie22]

Many thanks for your reply.

I currently have less than 1000 living expenses left over after paying all expenses associated with both properties (maintenance, income tax, prtb, life assurance, house insurance, property tax - it seems endless). Income is largely commission based so some months I make as low as 2000. I am up to date on payments only because I have borrowed from family during lean months and avoided missing payments at all costs.

I work 6 days per week but I would have a better standard of living if I was unemployed and debt free! I know I signed up to it and there are many worse off but the future looks pretty bleak to me right now.