Case study PTSB offer a split mortgage on my 2 buy to lets

Discussion in 'Mortgage arrears & negative equity case studies' started by Maz24, Aug 27, 2013.

  1. Maz24

    Maz24 Frequent Poster

    Personal and income details
    Net 736pm
    employed: part time,
    Net income partner/spouse: 3293.30pm full time employment:
    number of children: No dependents

    Home loan
    Lender: PTSB
    Amount outstanding: 126,703.44 on 1Plan & 83,420.03 Home Loan: Total (210,123.47)
    Value of home: 18000
    Interest rate: 4.34% on 1Plan & 1.75% Tracker on Home Loan
    Monthly repayment: 1453.90 inc Mortgage protection & House Ins,
    Amount in arrears : was 1462, but now cleared

    Made full payments until April 2013, contacted arrears support unit before going into arrears, they weren't interested, have struggled for years, using credit cards, bank loans etc to maintain payments and upkeep of three properties, was only able to work around 6-8 days in total between late February and middle of May as I was taking care of my terminally ill Mother.

    Investment property - x 2
    Lender: PTSB
    Amount outstanding: 160000 & 165000 (TOTAL 325000)
    Value of homes: 70-80000 & 120-125000 (TOTAL 205000max)
    Interest rate: Tracker IO RIP @ 1.6% & IO RIP @ 5.64%
    Monthly repayment 1214.32 inc Mort protection & House Ins.
    Amount in arrears: 5120
    Monthly rent received: 951, should be 1018 but one tenant often has a reason not to pay rent so I have averaged payments out over past year.

    Other loans and creditors - delete those which don't apply to you
    x 2 = 8300 Total Owed
    Credit Card 1. AIB 132pm: arrears 164.
    Credit Card 2. Avant 103pm: arrears 246.
    Bank Loan: 352pm, 7640 outstanding. No arrears.

    Living Expenses
    1880pm, Includes, general Repairs & Maintenance & Household charge on 3 Houses, PRTB on 2 Houses. Running 2 cars because we work different shifts, I start work at 8am and finish at 4 he starts at 12.30 and finishes at 11.30pm, no public transport to service either shift but we are trying to work out a way of making one car do, does not cover major repairs which we have had many of over the past 6 years.
    Other savings and investments
    600 credit union, Deposits for Rental properties.

    How important is retaining the family home to you?
    Want to keep the family home, it's on a site given by My husband's parents in their garden with shared access road past there home, they will be devastated if we have to sell.

    Any other relevant information
    PTSB who hold all mortgages have today offered a split mortgage on the two rental properties, see below.
    Aib offered to refinance credit card and outstanding loan, but refused as we would only be saving about 60euros pm while extending loan by 20 months, don't know if this was wrong or right decision, but I can't bare agreeing to anymore debt at the moment.

    What is your preferred realistic outcome?
    We will never be in a position to pay off all mortgages but want to keep our family home. We desperately need advice at this stage as we know given our ages both 50 on next birthdays, that our income capacity will not improve and the offer below is going to take us well past retirement age with huge mortgage debt unless property prices increase by at least 50% within the next 16 years.
  2. Maz24

    Maz24 Frequent Poster

    Offer is temporary 6 month moratorium at prevailing mortgage rate, payments set on property 1 at 211euro. If all payments are met during the six months mortgages will be split, main mortgage on property 1 will be 100,694.04 and a warehouse account of approx. 60,403euro, interest rate on main mortgage will be 1.6%, payments of interest only on warehouse account at 1.5%, subject to rate changes, total combined monthly repayment on main mortgage account and the warehouse account will not exceed the monthly repayment under the moratorium arrangement. payment is over 222 months. It goes on to say! assuming your repayment ability does not change throughout the term of your loan, at the end of the term there will be an outstanding balance of approx. 100,303. on your main mortgage together with a balance of approx. 60.403 on your warehouse account. In total and amount of 160,706.

    payments set at 577euro on property 2. 106,997.09 in main account interest rate @5.6% and warehouse account of approx. 63,405. interest rate @1.5%, term extended from 224 months to 234 months to recapitalise arrears, at end of term outstanding balance of 105,322 on main account and 63405 on warehouse account, total outstanding approx. 168,727.

    I have worked out that the offer of 577 + 211 + 230.51 that I pay to PTSB in mortgage protection and household insurance on the two properties, comes to 1018.50euro, which is the amount I told them I should receive in rent if tenant 2 was paying rent at agreed rate.

    outcome of this proposal will obviously mean paying down our home mortgage for the rest of our working lives knowing we are taking a huge risk that we are going to lose it to the bank.

    We obviously made a massive mistake in 2007, we were naïve and badly advised but I had my rant about that before on another post, now I just want to find a resolution, I have proposals prepared that would involve selling both properties and paying down approx. 50% of the shortfall over the term of the existing mortgage, but they would have to allow us to do this at 0%. Would that be an acceptable offer.

    We would be happy to pay for some good financial advice right now, who can you guys recommend, I had thought about New Beginnings, but I would prefer someone local, I live in Donegal.
  3. Luternau

    Luternau Frequent Poster

    I can't see the PTSB agreeing to your alternative offer-this would leave you with unsecured debt. I think both PTSB an AIB are being very generous here ad recognising that a long term solution is what is required to get the beat outcome for both them and you. There is no painless speedy solution to the place you are in at present.

    If you want shot of this debt (including family home if debts are joint held) the new arrangements under the insolvency law would be the natural option, or a trip north or to the UK to declare bankruptcy. The debt will go, but you will have to have your finances controlled by others for a time.

    With the options on the table from banks, at least you have a say!
  4. Maz24

    Maz24 Frequent Poster

    Buy to lets are not secured on Family home, but I am very worried that if there is no significant increase in property values in 10 or 15 years time, we would then be near retirement age PTSB may then decide that debt on buy to lets are unsustainable and as mortgage on family home would be nearly paid up they may decide to come after that, as it would be our only equitable asset. I am also aware that interest rates are likely to start increasing in the near future and offer above is no longer sustainable when interest rates rise. I forgot to mention, in letter of offer it states, "All borrowers to the mortgage must complete a 3 year review for which you will be required to complete a new Financial Assessment". A trip to the North would be acceptable to us as our only Child and Grandchildren live there and we have strong work connections but if at all possible we would rather find a workable solution with the Bank.
  5. Luternau

    Luternau Frequent Poster

    The bank can at any stage register a judgement against the family home-whether the BTL are secured on it or not. Currently any equity in your home or potential equity is as good as the banks.

    I think you are thinking way to far ahead, if you can service this debt for 3yrs, that's 3yrs relative peace of mind. That's a long time. Things may improve, they may not. You can still review things then.

    The bank are in this with you as they have a big interest in it working out too. I am sure you will get lots of good advice here. Personally, you are lucky to be getting the offer of a split mortgage on BTL-other banks are just moving to repossessing, judgements etc.
  6. Brendan Burgess

    Brendan Burgess Founder

    This is very complicated, so I will look at the Buy to Lets first. Please confirm that I have understood you correctly.

    |total|property 1|Property 2
    Interest rate||1.6%|5.64%
    Interest per months|€950|€200|€750
    This investment is washing its face.
    You say that they are on Interest Only. While they are on Interest Only, then you should continue this investment. The rent is paying the mortgage.

    I doubt if they will go for this, but is it a good deal for you. The rental income should pay the mortgage repayments and while interest rates may rise, so also may rental income. I would prefer to hope that house prices will rise eventually by 50% rather than face a shortfall now of €60k. But if they gave me an interest-free shortfall, I might go for it.

    It sounds as if you are paying these to ptsb. Shop around.

    You probably should not be paying mortgage protection on an investment property.

    Their proposal on Investment property 2
    (Note you say that you have €160k outstanding on Property 2, but the split adds to €170k. It won't change the result materially)

    Effectively, ptsb is reducing the interest rate on the mortgage to 4.1% and leaving it on interst only.

    This is a very good deal. You should now be in rental profit.

    Property 2
    They are also offering you a deal on Investment Property 1. I don't really understand it.

    Splitting a mortgage and charging interest at the same rate on the warehouse is a meaningless exercise, arithmetically. You will be paying the same amount.
  7. Brendan Burgess

    Brendan Burgess Founder

    Now let's look at your home mortgage

    Mortgage|€210k |127k|83k
    Combined Rate| 3.2%
    Monthly interest|€600
    Monthly repayment|c.€1,200
    Now let's look at your affordability

    Monthly net income| €4,200
    Reasonable Living Expenses for a couple with one car|€1,400
    Exceptional costs - extra car|€500
    Available to pay mortgage|€2,300
    You should be able to meet the full monthly repayment comfortably out of your net income. I presume I am missing something here as you are well able to pay your home mortgage in full according to my calculations. You can also pay any shortfall in your investment properties from your income.
  8. Maz24

    Maz24 Frequent Poster

    Hi Brendan, thank you for response, property 2 is the mortgage on the 5.6%, outstanding approx. 170000 including arrears, sorry for putting them in the wrong order initially, I have now edited. Thought the offer of warehouse on the 160000 mortgage on the ecb rate of 1.6% was silly myself when I first looked at it, but realise now that if interest rates rise the warehoused portion will stay at 1.5% at least I assume that's how it works.

    I agree it is a very generous offer under the circumstances, and it is an affordable solution. My concern is our ages we realise that we are on a good income but we are at the top of our earning capabilities and have approx. 15-16 years max left at that level of income.
    Purchase price of rental properties totalled 455000, so we have already taken a massive financial loss no matter what happens in the future, all we want is to know we don't have to lose our home as well. I suppose I was hoping that an offer to clear a 160000 ecb rate mortgage and offer to pay down at least 60000 of the negative equity debt would be an option they might consider, but I can see it is an unlikely scenario given that they are going to receive much more than this in interest payments alone if we keep all properties.
  9. Brendan Burgess

    Brendan Burgess Founder

    Hi Maz

    Are my income and expenditure figures correct?

    If so, you can pay all three mortgages in full, so I don't see why they are doing any deal.
  10. Brendan Burgess

    Brendan Burgess Founder


    I have not seen a split mortgage for an investment property and so I would be very interested in seeing the documentation. If you are happy for me to have a look at it please email a copy to brendan at this website.
  11. Maz24

    Maz24 Frequent Poster

    Hi Brendan, Monthly net income is 4029 in normal circumstances, you missed the 587 in credit card payments and loan to AIB, the loans originated from a tenant causing thousands of euros worth of damage to one of the houses, and several periods of both houses being vacant, hence not wanting to evict present tenant who does not pay all the rent, but keeps house immaculate.

    I will be happy to e'mail a copy of offer, will scan it on at work tomorrow. arrears are down to missing so much work this year and many other unexpected costs,
  12. Brendan Burgess

    Brendan Burgess Founder

    You owe around €16,000 in total unsecured debt?

    You can pay this off within 8 or 9 months from your income.

    Not sure why you are paying off your unsecured creditors ahead of your secured creditors?

  13. Maz24

    Maz24 Frequent Poster

    Sorry Brendan, living expenses was a typo, it was 1880, but that was only a 100 euro error, not sure what your missing,
    before split offer.
    Income: 4029.30
    + Rent: 951
    Total income: 4980.30
    Home Mortgage: 1453.90
    B.T.L Mortgages:1214.32
    Loans & CC: 587
    Living expenses: 1880
    Negative income: -154.92

    I'm not sure why i'm paying off unsecured creditors either, probably not the right decision but unsecured debt was a direct result of not being able to meet secured debt, when there was no rental income I would use Credit Cards to allow me to meet mortgage payments, when I had substantial repairs and refurbishment costs I took out a loan to cover the repairs, and meet mortgage payments. several years ago when interest rates where much higher and income was often much lower I was using unsecured credit to allow me to meet mortgage payments at all costs, I was offered a consolidation on Aib Credit Card and loan in June, this would be the second time in three years, adding more time and more interest, but I just couldn't sign the agreement. I can't keep adding more debt to pay for mortgage debt that I can never pay off.
  14. Brendan Burgess

    Brendan Burgess Founder


    |My figures|Your figures
    Monthly net income| €4,200 |4,029
    Reasonable Living Expenses for a couple with one car|€1,400 |€1,880
    Exceptional costs - extra car|€500
    Available to pay creditors |€2,300|€2,149

    home mortgage||€1,453
    Shortfall on buy to let||€300
    Available for unsecured creditors||€ 396
    So there was no need for ptsb to do any deal with you. You should repay your secured debt in full and reduce your payments to your unsecured creditors.

    Fair play to them. Grab this deal quickly.
  15. Luternau

    Luternau Frequent Poster

    Agreed. Many with worse finances have got offered less favourable deals.
  16. Maz24

    Maz24 Frequent Poster

    Unable to scan docs on at work as office is too busy, will do it from home tonight.

    I think we all agree that PTSB are being very fair with offer. My reason for posting was in the hope that someone could recommend a financial consultant that is now specialising in mortgage debt and personal finance who would look at all the facts and finances involved in our situation long term and advise us of all options based on all the facts. We know there are several available including the offer PTSB have made. The offer I proposed above, (which I agree is not really a runner), but there are three properties involved, maybe keeping two and selling one, I don't want to make any more financial blunders, so good financial advice would be worth paying for right now, just need to know who could offer the advice.

    Brendan I may be wrong but you seem intent to use the guidelines for minimum reasonable living expenses in this case. I'm not in a personal insolvency situation, I am also not currently looking for a Debt Settlement Arrangement which if I am correct are the situations the guidelines would apply to.

    The reason I contacted PTSB in March was because I knew my income was going to be reducing for a period of time and I had taken the decision that I would no longer under any circumstances, purchase anymore unsecured debt for the sole purpose of paying for secured debt.

    I didn't ask for a Split mortgage and was in fact surprised to be offered one, I thought a good old fashioned extension of mortgage term may be offered, to enable me to make payments within means. Surprisingly they refused to extend any mortgages and offered this split a few weeks later.
  17. Maz24

    Maz24 Frequent Poster

    A little update on decisions and developments over past few weeks. We have been offered some great if not always welcome advice on AAM especially from Brendan who spent a lot of time going through Split mortgage offer. We also sought independent financial advice from a financial Solutions company but they seemed more interested in negotiating with creditors we owe unsecured debt to and showed very little interest in Mortgage debt, in fact they didn't even look at Split Mortgage offer, defeating the purpose of meeting with them.

    We finally realised we cannot wish this debt away and as our Home Mortgage was the most expensive we decided that if we could achieve very close to the 209000 now owing we would sell and move in to one of the buy to lets, which are both good houses.

    We had assumed our home was worth a similar amount to other houses for sale in our area, approx. 180000 but finally called in a local estate agent who gave us a much higher valuation based on the site we own.

    If price I have been assured is achievable is agreed on sale of home and either of the other houses sells at current valuation, we can clear home mortgage and negative equity remaining on sale of either one of the investment properties.

    This puts us in a new dilemma.

    Investment property one, we owe 170000 it is on an SVR investment rate @5.64% and has been valued based on similar size houses on same development at 130000 sale of our home along with sale of this property will clear both those mortgages.

    Investment property two, we owe 160000 it is on a cheap tracker @1.6%. it has been valued at 90-100000. If we receive the highest end of the estimated value on our home and could scrape enough together to take care of selling costs of two properties we could probably clear most if not all of the negative equity on this property.

    Investment property one is a much better property than investment property two, original purchase price was 228000 and we spent a further 18k refurbishing it at time of purchase, mortgage 165k plus 5k arrears, this house would be our first choice as new home. Problem is Mortgage interest on this house is @5.64%. Property two is 160k mortgage on 1.60% tracker. Original cost of that property was 185k and although a good house we would need to spend around 15k+ on refurbishment.

    Question is: Is it possible that PTSB would consider allowing us to move the tracker mortgage on property two to property one so we could chose that property as our future PPR. On initial enquiry they have said it is not likely as the property is not our PPR. We have obviously not disclosed that we are planning on selling our PPR at this stage as we are unsure if it will sell or how to negotiate moving the 1.60tracker rate. If we do manage to sell our home and one of the investment properties we will be repaying approx. 370000-380000 of the 540000 we owe in Mortgages. Leaving us with the one remaining mortgage of 160-170k, Is there any way of using this to our advantage when requesting tracker mortgage be moved to the property we want to live in.

    82k of our home Mortgage is on a 1.75% tracker, and initial enquiries with PTSB lead us to believe we could probably take that with us but we would still be paying 88k @5.65% or 4.34% if they reduce investment rate to svr home mortgage rate.

    If we cannot move the Tracker Mortgage we will move in to the property we have that tracker mortgage on and will hold on to it for dear life.

    Any suggestions on how to approach PTSB.
  18. Brendan Burgess

    Brendan Burgess Founder

    Hi Maz

    Is the following summary correct for the names you are now using ( which seem to be different from the names you were using in your original posts)

    |Home| Investment 1|Investment 2
    Loan| €210k|170|160
    Value| €270k|130|120
    Interest rate|3%|5.6%|1.6%
    Interest cost| €6,000|€9,500|€2,500
    Selling your home and Investment 1 and moving in to investment 2 would be the cheapest option. You would have a very cheap tracker and would be paying down the negative equity very quickly.

    But, do you need to do this?

    What is the order of preference for living in your houses?
    I assume it is
    1) Home
    2) Investment 1
    3) Investment 2

    Investment 2 is a profitable investment because it is a cheap tracker. The rent should be exceeding the interest easily and the additional repayment goes to paying down the negative equity. You should try to retain this.

    I don't think that selling your home reduces your outgoings as you have such a cheap tracker on it. I can't imagine that they will allow you to move the tracker to replace the investment 1 mortgage, which would then be your home.

    You should propose to ptsb that you will sell Investment 1 and transfer the shortfall to your home. If you have a professional valuation that shows you have the equity in your home, they may well go for this. They might reduce the interest rate on the shortfall to the home loan rate of 4.5%.

    You might also consider asking them to allow you to sell the investment property and write off the shortfall as you will have paid off a cheap tracker early. I doubt if they would do it, but it might be worth asking given the complex nature of your arrangements.

    Or you could offer to sell your home and investment 2, if they write off some of the shortfall and give you a favourable rate on Investment 2 which would then be your home.

  19. Maz24

    Maz24 Frequent Poster

    Sorry for confusion Brendan, you are right changed names from property 1&2 to investment property 1&2, I have everything in table format, which would make it more understandable but cannot figure out how to attach tables in a post.

    Home has been valued at between 270000-280000, estate agent is pretty confident 209000 owing.

    If we sold Investment 1 and moved shortfall of 40000 to our home mortgage and they where to agree to reduce interest rate on the shortfall to 4.34% it would add a further 265pm to our existing home mortgage payments of 1320, total 1585pm.

    This Monthly mortgage payment is very uncomfortable for us as I have been unable to work for the past 5 weeks and will not be returning to work for at least 2-3 more weeks, due to a respiratory condition that my GP tells me is likely to recur on a regular basis, loss of income, future loss of earnings, recurring costs of GP visits and medication, on top of adding shortfall of investment 1 to our existing mortgage would push us over the edge, for that reason we feel only option is sell home and reduce our mortgage repayments.

    Investment property 2 is on a great tracker rate 1.60% but it is in negative equity of 60000-70000, negative equity would not necessarily concern us if this were to be our home for life, but we can't see this being our forever home. Repayments on this mortgage would be 840pm very affordable on my Husbands wage only if I was not able to work at any time in the future, however we would also need to spend a further 18000 in refurbishment costs if we were to make this property our home, the refurbishment would easily be covered by the remaining 31000approx equity from sale of Home and Investment Property 1.

    I have asked PTSB if they would write off any of the mortgage debt on the three properties in return for surrendering 243000 (83000 of home mortgage + 160000 investment mortgage), of Tracker mortgages, and I have been told it is very unlikely but they would consider moving tracker on home mortgage to a new home.

    How do I get around this, Investment property 2 will be my reluctant home as I am determined to hold on to that tracker rate.

    Should I just lay my cards on the table and tell PTSB that we would agree to sell and repay in full both home and investment mortgage 2 clearing approx. 370000 of existing 539000 mortgage debt, if they agree to allow us to move existing 1.6% tracker mortgage of 160000 from investment property 2 that we will have for the next eighteen years anyway if we move in to that property, to a home we would chose to live in instead.

    PTSB have already agreed to warehouse a substantial portion of investment mortgages based on SFS so surely they would see this as a good solution.

    Problem is it is impossible to talk to anyone from PTSB over the phone who can give definitive answers and I have requested a face to face meeting at a local branch to discuss options but have been told quote "that's not how it's done".

    After Brendan's analysis of Split Mortgage offer I phoned PTSB and requested an extension of time on the offer so we could seek further independent advice as PTSB had advised us to do on letter of offer, PTSB said that would not be a problem, after seeking further advice I wrote to PTSB requesting further information, as there was no address given on warehouse offer I phoned PTSB and was given a correspondence address to write to.

    I phoned PTSB a few days later and they confirmed they had received my correspondence letter and it was logged on system and I was told I would receive a reply within the next couple of weeks, letter I wrote was dated 30th September. No reply arrived so I phoned again was told there was probably a back log and I should have a reply soon.

    Still no reply on 23rd October so I phoned again, was told this time that they had no record of my correspondence letter dated 30th Sep, but as I kept insisting that previous calls had already confirmed they had received my letter I was then informed they do have it on the system but it had been sent to the wrong address, and that I should have sent letter to Cork not Dublin.

    I explained I sent it to address I was given by that department and asked why it hadn't been passed on to be told it did not matter that it had not been passed on as I would not be receiving a response anyway as it was not appealing the split mortgage offer and they only have to reply to appeals.

    This is my concern, how do I approach a financial institution that seem to be unapproachable.
  20. Brendan Burgess

    Brendan Burgess Founder

    It's very hard to follow all the figures.

    If you can't get to see them, put a proposal in writing to them. Or better still, a series of proposals.

    It seems to me that if you move the shortfall to your home, you will have a mortgage of €310k. If you can afford the interest on this, around €1,000 a month, then you should aim for this as a solution.

    Sell Investment 1 and add the shortfall to the home. Warehouse the shortfall at 0%.

    Sell investment 2 and write off shortfall in exchange for surrender of cheap tracker.

    You will now have one property and one mortgage. Ask if they will switch the mortgage to interest only.

    I think that they will reject this proposal, but may come back with a variant on it which is acceptable to you.