The lender wants a new mortgage protection policy before capitalising arrears?

Z

zen

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Brendan Burgess said:
The key to it is to understanding this is that the arrears figure is a notional or memorandum figure.

It does not affect the calculations of interest or the balance outstanding on the mortgage.

Interest is charged every day on the mortgage balance whether you are in arrears or not.

If the bank capitalizes or "writes off" your arrears, the balance due on your mortgage is not reduced or increased.

You will still owe €104,000 in the example above.
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Brendan may I ask you a question. I'm trying to capitalise my arrears, the creditor allowed my account go into a terrible state and wouldn't give me a copy of my mortgage account despite a freedom of information act request and a request by two separate solicitors. I had no vision on what my payments were making whilst in arrears....

Anyway, they want an SFS to see if I qualify to capitalise. I can make the payments. Now, I also have my MPI with them as well. They said I need to take out insurance on the arrears as the arrears are not covered by my MPI policy (which I never got a copy of).

My question is, why would I need a second insurance policy for the arrears that are about to be capitalised (amalgamated into the capital figure). Indeed the repayments are higher but I can manage. They said they wont capitalise if I dont fill out this second insurance. I'm baffelled, my understanding is that after capitalisation, there is NO arrears after capitalising of the arrears?!?! They wont give me any information pack on it or tell me how they came to the new monthly figure, what can you do? Response times is also about a month and delaying reply is in their interest as I incur interest on the arrears.

Is my understanding of capitalisation wrong?
 
Let's say you took out a €100k loan over 20 years 10 years ago.

If you had made all your repayments on schedule, the mortgage balance today would be, say, €60k.

You have a decreasing policy Mortgage Protection policy, so the insured amount today is €60k.

But the balance on your mortgage is €80k (€60k + €20k arrears.))

If you die tomorrow, the life insurance company will pay the lender €60k and there will still be €20k due.

So it's reasonable of them to ask you to take out the additional insurance.

You should agree to it. Get the arrears capitalised. Then shop around for cheaper MPI.

It is not usually a good idea to take out MPI from the lender. Although, in recent years BoI has been competitive.

Brendan
 
If looking for quotes for Mortgage Protection, ask for two quotes.

  1. Mortgage Protection on just the additional sum.
  2. Mortgage Protection for the total amount owed.
To continue Brendan's example above, it might be cheaper to have one policy covering €80,000 than to have the original policy covering the €60,000 and a new one covering the €20,000. Or it might not. But it's worth getting the two quotes so that you can see for yourself.
 
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Hi Zen
Were you not on the affordable housing scheme and recently sold your home? You purchased for €150k, sold for €170k and the council got the €20k "profit".
Did the council allow the sale to through?

"Incorrect, I wouldn't have paid 200k as I couldn't afford that. DCC are not taking any hit, they are getting the full loan amount redeemed 10 YEARS BEFORE THE TERM DATE."



Apr 5, 2017 Report
 
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Thanks folks. Its with the council, its an AH unit. They in their own words told me that after capitalisation there would be no arrears, which made sense until they asked me to take out the insurance to cover the arrears. (also I've told them so many times they'd forgotten to attach the insurance form and details...)

As I said, they didn't give me any information about it or how they would calculate the new monthly figure or any change of T&C's. I surmised that the arrears would be incorporated into the capital by means of higher payments. However, from you example this does not seem to be the case, the arrears still exist (somewhere) but my mortgage a/c balance would be zero for the purpose of not accumulating interest on the arrears.

A simple and official information pack would clear this up but they won't give it.

And yes, I've come to the harsh realisation that lenders have a different dictionary.
 
Hello Renter45

Without deviating from the thread topic I'll give you a quick reply, the sale fell through due to structural issues with the balcony. The buyer was about to sign and his Building Survey Report found concerns with the balcony which is, as you know, part of the "common areas" which comes under the remit of the management company who also got an independent BSR done to downplay the buyer's BSR in an attempt to devoid responsibility of repairing it. Its coming up 9 months ago that this should be rectified. The OMC are saying for this length of time that they need access to the unit below me to fix it. Absolutely no works have been done to fix it and I cannot put it back on the market until its fixed so I have temporarily leased it to buy time for the OMC to fix it and put it back on the market. But they're not doing anything. I've told the Creditor this.

So now I'm battling the lender and the management company. I hoped to sell it and walk away with nothing but couldn't even do that. If there was no such thing as bad luck I'd have no luck.
 
zen said:
They in their own words told me that after capitalisation there would be no arrears, which made sense until they asked me to take out the insurance to cover the arrears.
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Hi Zen

You owe €100k.

It does not matter if this is €100k and no arrears or €80 + 20k arrears.

On €100k, the normal repayment would be €1,000 per month

On 80k, the repayment would be €800 per month

By capitalising they are saying, instead of you paying €800 a month and the full arrears, just pay us €1,000 per month.

If you clear the €20k arrears, you won't need to change your mortgage protection.

If you don't clear it, your loan will be higher than it would otherwise have been, so you will have to get more cover.

To be fair to the council, people find it very difficult to understand the concept of captialisation.

Brendan
 
zen said:
Hello Renter45

Without deviating from the thread topic I'll give you a quick reply, the sale fell through due to structural issues with the balcony. The buyer was about to sign and his Building Survey Report found concerns with the balcony which is, as you know, part of the "common areas" which comes under the remit of the management company who also got an independent BSR done to downplay the buyer's BSR in an attempt to devoid responsibility of repairing it. Its coming up 9 months ago that this should be rectified. The OMC are saying for this length of time that they need access to the unit below me to fix it. Absolutely no works have been done to fix it and I cannot put it back on the market until its fixed so I have temporarily leased it to buy time for the OMC to fix it and put it back on the market. But they're not doing anything. I've told the Creditor this.

So now I'm battling the lender and the management company. I hoped to sell it and walk away with nothing but couldn't even do that. If there was no such thing as bad luck I'd have no luck.
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Sorry to hear that Zen, amazing how the council were able to sell these on affordable housing, slap on a clawback, yet pass the buck when something goes wrong. Hope it all works our for you.
 
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