C
clochnaron
Guest
Ex home|€310|€170|€15,000|€12,000
Investment|€175k|€150k|€8,400|€9,000
Dad's home| €105k|?
Case study negative equity - parent guarantor - emigrated losing job soon
Ex home|€310|€170|€15,000|€12,000
Investment|€175k|€150k|€8,400|€9,000
Dad's home| €105k|?
C
clochnaron
Guest
Personal and income details
Income self: working abroad in non-eu country – net salary 1.5k/month (after rent)
Income history: I was made redundant 3 years ago and emigrated immediately
Income partner/spouse: N/A
Income history: have had steady job but it is coming to an end as company is closing. Not much opportunity here to find alternative.
number of children: 0
Home loan
Lender: BOI
Amount outstanding: 310k ( property price at time of purchase 345k)
Value of home: 170k
Interest rate: Fixed 4.8%
Monthly repayment: circa 1600/month
Amount in arrears : 0
Monthly rent received: 1000/month
No discussions with bank on any options but have not missed any repayments yet.
My father is guarantor on this.
Investment property -
Lender: BOI
Amount outstanding: 120k + 35k top up + 20 top up ( both used to purchase other house)
Value of home: 150k
Interest rate: Fixed 4.5%
Monthly repayment: circa 600/month
Amount in arrears : 0
Monthly rent received: 750/month
My father is guarantor on this.
Other loans and creditors
Overdraft - 0
Credit Card – circa 200 / month always paid off.
Car loan - 0
Family – 105k (loan my father has in BOI secured against his own home) Was done to get us out of a family investment that went very wrong and we were paying a very high interest on it. Was the only thing we could agree with AIB to get out of the loan. It is currently on interest only. Which I am paying of 300/month however I try to pay off lumps of it over the last 2 years to try to get them to keep it on interest only but that is changing to fixed in August.
Other savings and investments
0
Any other relevant information
My problem is that while I have been very lucky to have been in a position to make repayments the writing is on the wall as it looks like I will be let go. It is very expensive here and I don’t have the savings to manage without a job so will have to go home if I don’t get one. Also my father has to retire this year – does not have the option of staying on. He has a pension which will keep him covered but if he has to make payments to my loans it will leave him with nothing. So if I can’t meet my payments I’m worried they will come after him for the money.
What is your preferred realistic outcome?
If I could somehow get my father out of the mess by getting him off the 2 secured loans then at least it is only myself to worry about and look after. While my situation does not look anyway near as bad as some of the people on here I feel it could get pretty bad pretty quickly. If/when I lose my job and/or if one of the renters moves out then I’m done.
Could do with a bit of advice as to how to protect my Dad?
Income self: working abroad in non-eu country – net salary 1.5k/month (after rent)
Income history: I was made redundant 3 years ago and emigrated immediately
Income partner/spouse: N/A
Income history: have had steady job but it is coming to an end as company is closing. Not much opportunity here to find alternative.
number of children: 0
Home loan
Lender: BOI
Amount outstanding: 310k ( property price at time of purchase 345k)
Value of home: 170k
Interest rate: Fixed 4.8%
Monthly repayment: circa 1600/month
Amount in arrears : 0
Monthly rent received: 1000/month
No discussions with bank on any options but have not missed any repayments yet.
My father is guarantor on this.
Investment property -
Lender: BOI
Amount outstanding: 120k + 35k top up + 20 top up ( both used to purchase other house)
Value of home: 150k
Interest rate: Fixed 4.5%
Monthly repayment: circa 600/month
Amount in arrears : 0
Monthly rent received: 750/month
My father is guarantor on this.
Other loans and creditors
Overdraft - 0
Credit Card – circa 200 / month always paid off.
Car loan - 0
Family – 105k (loan my father has in BOI secured against his own home) Was done to get us out of a family investment that went very wrong and we were paying a very high interest on it. Was the only thing we could agree with AIB to get out of the loan. It is currently on interest only. Which I am paying of 300/month however I try to pay off lumps of it over the last 2 years to try to get them to keep it on interest only but that is changing to fixed in August.
Other savings and investments
0
Any other relevant information
My problem is that while I have been very lucky to have been in a position to make repayments the writing is on the wall as it looks like I will be let go. It is very expensive here and I don’t have the savings to manage without a job so will have to go home if I don’t get one. Also my father has to retire this year – does not have the option of staying on. He has a pension which will keep him covered but if he has to make payments to my loans it will leave him with nothing. So if I can’t meet my payments I’m worried they will come after him for the money.
What is your preferred realistic outcome?
If I could somehow get my father out of the mess by getting him off the 2 secured loans then at least it is only myself to worry about and look after. While my situation does not look anyway near as bad as some of the people on here I feel it could get pretty bad pretty quickly. If/when I lose my job and/or if one of the renters moves out then I’m done.
Could do with a bit of advice as to how to protect my Dad?
Brendan Burgess
Founder
- Messages
- 52,144
Hi Cloch
While I have sympathy for you, the bank lent you money based on your father's income and your father's assets and your father's name. In a sense, this was a partnership between you and him. This was not a hollow guarantee. If you can't repay your loans, then the bank will probably seek to enforce it against your father.
What is the value of your father's home? Between you, it seems that you have too much exposure to property and your lending is too high.
I think you should try to sell one of the investment properties to reduce your exposure to property and to interest rates. If your father has equity in his home, they will probably allow you to do this and transfer the shortfall on sale to his property.
Will your father be getting a lump-sum on retirement? He could use this to reduce the borrowing.
On a P&L basis, the rent is almost covering the interest on both loans. So the situation is not too bad, as you acknowledge. You need to ask Bank of Ireland immediately to restructure you to interest only. They might or might not agree to this.
I don't know what Bank of Ireland's attitude to guarantees is. I assume that they do enforce them. Against that, most lenders do try to work with their borrowers who are in trouble and they don't like to evict people from their homes.
You could try putting a proposal to them along the lines of your father opting to take the maxium available lump-sum on retirement and putting that against the loans in return from being released from the guarantees. I think that this is as good as you could hope for.
Some side issues
Did you ever have a tracker mortgage with Bank of Ireland? Some customers of Bank of Ireland were entitled to trackers on expiry of their fixed rates, but were not offered them. See this post for more details.
You can set 75% of the interest on your investment properties against your rental income. You are probably not getting any tax relief on the interest paid on your father's mortgage. So, if you can, you should pay capital off your father's loan before you pay capital off your own loans - assuming interest rates were the same. The bank might not agree to this as your father's mortgage is probably not in negative equity.
Check if you should be getting tax relief on the interest you pay on the interest paid on your father's loan to you. Not sure what a "family investment" is. If the original loan qualified for tax relief, then a loan taken out to refinance that loan, should also get tax relief. If you are working abroad, this might not be of any relevance.
While I have sympathy for you, the bank lent you money based on your father's income and your father's assets and your father's name. In a sense, this was a partnership between you and him. This was not a hollow guarantee. If you can't repay your loans, then the bank will probably seek to enforce it against your father.
What is the value of your father's home? Between you, it seems that you have too much exposure to property and your lending is too high.
I think you should try to sell one of the investment properties to reduce your exposure to property and to interest rates. If your father has equity in his home, they will probably allow you to do this and transfer the shortfall on sale to his property.
Will your father be getting a lump-sum on retirement? He could use this to reduce the borrowing.
On a P&L basis, the rent is almost covering the interest on both loans. So the situation is not too bad, as you acknowledge. You need to ask Bank of Ireland immediately to restructure you to interest only. They might or might not agree to this.
I don't know what Bank of Ireland's attitude to guarantees is. I assume that they do enforce them. Against that, most lenders do try to work with their borrowers who are in trouble and they don't like to evict people from their homes.
You could try putting a proposal to them along the lines of your father opting to take the maxium available lump-sum on retirement and putting that against the loans in return from being released from the guarantees. I think that this is as good as you could hope for.
Some side issues
Did you ever have a tracker mortgage with Bank of Ireland? Some customers of Bank of Ireland were entitled to trackers on expiry of their fixed rates, but were not offered them. See this post for more details.
You can set 75% of the interest on your investment properties against your rental income. You are probably not getting any tax relief on the interest paid on your father's mortgage. So, if you can, you should pay capital off your father's loan before you pay capital off your own loans - assuming interest rates were the same. The bank might not agree to this as your father's mortgage is probably not in negative equity.
Check if you should be getting tax relief on the interest you pay on the interest paid on your father's loan to you. Not sure what a "family investment" is. If the original loan qualified for tax relief, then a loan taken out to refinance that loan, should also get tax relief. If you are working abroad, this might not be of any relevance.
Brendan Burgess
Founder
- Messages
- 52,144
How might the Personal Insolvency Bill affect you?
I don't think it has any implications for you. Bank of Ireland won't agree to any deal while you are able to pay the interest on the loan and while your father is the guarantor.
You can't threaten to go bankrupt, as they will simply pursue your father.
It won't have any formal implications for you, but it's possible that the Bill might engender a practice of doing deals which might help you.
I don't think it has any implications for you. Bank of Ireland won't agree to any deal while you are able to pay the interest on the loan and while your father is the guarantor.
You can't threaten to go bankrupt, as they will simply pursue your father.
It won't have any formal implications for you, but it's possible that the Bill might engender a practice of doing deals which might help you.