That doesn't exist in the scenarious, but Case 5 Seamus, single, was interesting. ( Attached ) Seamus has an income about about 2.5K but a mortgage of 1.5K on a house whose value was equal to the mortgage. They ISI advised an extension of the term and reduction of interest rate (for a few years) but I would have thought selling the property, and going renting would have left Seamus a lot more money to pay back creditors.
Why on earth should a single guy require a home worth €200k?5. POTENTIAL PIA SOLUTION FOR SEAMUS PROPOSED BY PIP
The PIP assesses whether a change to the term of the mortgage or interest rate will make the mortgage sustainable. The PIP recommends a term extension on the PPR mortgage for an additional 11 years, bringing the mortgage term to 26 years to expire when Seamus reaches 65 years of age. The PIP also recommends that Seamus pays interest only for the term of the PIA. In addition the PIP recommends that the interest rate be reduced from 4% to 3% for the term of the PIA in order to enable Seamus to address some of his unsecured debts.
Why on earth should a single guy require a home worth €200k?
Why on earth should the lender give him debt forgivness via a reduction in the interest rate?
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The outstanding mortgage is €200,000
Mortgage payment: €1,481
Extended [from 15 years] by 11 years to 26 years
Interest only for the term of the PIA [6 years?]
Interest rate reduced from 4% to 3%
The reduction in mortgage payments frees up €852 per month
The new payment is €503
Anyone who is good on mortgages able to see that adding 11 years plus interest reduction would result in these figures.
After 6 years, there will be 20 years left and the capital will be the sameWhat happens after the 6 years interest only, I guess Seamus who will now be debt free and so will be able to afford the increased mortgage rate. But what happens to the mortgage is he is not paying down the capital for 6 years, I really like to see the ISI's workings on this.
All this saving on morgage is a loss to the bank, why would the bank go for it. This 'saved' money goes to the unsecured creditors. Would a bank really agree with this. If I were the banks I would not accept this solution, I'd rather take the house and be done with the whole thing.
I don't know where the €852 comes from
Will the bank really try to repossess for €2,000 a year for 6 years? Probably not. They will grudgingly accept this.
If the figures were larger, they would probably veto the PIA.
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Maybe the ISI doesn't have your calculator. Presumable someone on there will here about this thread and re do it.
I wonder are the other scenarios calculated correctly.
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