ZedMcGlunk
New Member
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- 2
Hi all.
I'm struggling to understand / get my head around this and would be grateful for others thoughts.
Background:
Mortgage originally with PTSB, and in a split mortgage due to historical (and indeed current repayment difficulty)
Mortgage was sold to Vulture fund managed by Pepper Finance.
Interest rates rising recently have jumped the mortage payment up 400 plus per month and we've found ourselves struggling / unable to make full repayment.
Other loans include car hp and personal loan with AIB with a payment of approx 400 per month. This will be finished in 13 months.
We've engaged with Peppers arrears support unit who proposed a temporary 12 month reduction in payment, But their credit committee have refused it so far. (Logic was that other loan would be finishing then and overall payments would be manageable then)
Basically the credit committee have said they want the mortgage payment prioritised at the expense of the AIB loan. The agent on the phone to me who communicated this back said multiple times that this actually made better financial sense in the long run because even though the interest rate on the AIB loan was higher, the capital balance on the mortgage was higher and therefore more interest would be accrued on mortgage and ultimately it would cost us more. Pepper are saying that the AIB loan should be defaulted on or rearranged / extended and seem adamant that this would be better for us. The agent also said that we would be financially better off paying the recent arrears on the mortgage rather than continuing to service the higher interest rate AIB loan.
This I can't fully understand in my head,
If the AIB loan is suddenly not being paid off in full or at all, that loans amount is sitting there accruing interest at a higher rate until such time as it is paid off or if AIB ultimately wrote it off or something. To be clear here this is something I don't want to happen. The loan would need repaying and that would be my intention. So surely any delay / extra interest accrued on arrears on the mortgage is lower than what would have been accrued on the AIB loan.
The only place that is confusing me is for example if the current arrears on the mortage were to stay in place for the remaining 20 years then yes the interest on that would ultimately be a big issue. But assuming we were able to catch up on those arrears in 12 months time (once the AIB loan was finished) then that to me is the more financially viable solution.
I am confused as to what would happen if the mortgage was restructured to have less payments for 12 months and then have those 12 months shortfall added into the remaining 19 years. In that situation would the interest paid on the principle shortfall dwarf the interest "savings" by not allowing the AIB loan to go into arrears at a higher interest rate level.
In fact as I write this now, I am starting to wonder if actually the simple sums add up to the fact we would be better off being in mortgage arrears for a couple of years rather than agreeing to a full restructure which would cost more in the long run (or have a restructure that allowed for capital payment to catch back up)
Other than the impact on credit rating which is already in the toilet have I misunderstood or missed something?
Many thanks in advance for any thoughts you have
I'm struggling to understand / get my head around this and would be grateful for others thoughts.
Background:
Mortgage originally with PTSB, and in a split mortgage due to historical (and indeed current repayment difficulty)
Mortgage was sold to Vulture fund managed by Pepper Finance.
Interest rates rising recently have jumped the mortage payment up 400 plus per month and we've found ourselves struggling / unable to make full repayment.
Other loans include car hp and personal loan with AIB with a payment of approx 400 per month. This will be finished in 13 months.
We've engaged with Peppers arrears support unit who proposed a temporary 12 month reduction in payment, But their credit committee have refused it so far. (Logic was that other loan would be finishing then and overall payments would be manageable then)
Basically the credit committee have said they want the mortgage payment prioritised at the expense of the AIB loan. The agent on the phone to me who communicated this back said multiple times that this actually made better financial sense in the long run because even though the interest rate on the AIB loan was higher, the capital balance on the mortgage was higher and therefore more interest would be accrued on mortgage and ultimately it would cost us more. Pepper are saying that the AIB loan should be defaulted on or rearranged / extended and seem adamant that this would be better for us. The agent also said that we would be financially better off paying the recent arrears on the mortgage rather than continuing to service the higher interest rate AIB loan.
This I can't fully understand in my head,
If the AIB loan is suddenly not being paid off in full or at all, that loans amount is sitting there accruing interest at a higher rate until such time as it is paid off or if AIB ultimately wrote it off or something. To be clear here this is something I don't want to happen. The loan would need repaying and that would be my intention. So surely any delay / extra interest accrued on arrears on the mortgage is lower than what would have been accrued on the AIB loan.
The only place that is confusing me is for example if the current arrears on the mortage were to stay in place for the remaining 20 years then yes the interest on that would ultimately be a big issue. But assuming we were able to catch up on those arrears in 12 months time (once the AIB loan was finished) then that to me is the more financially viable solution.
I am confused as to what would happen if the mortgage was restructured to have less payments for 12 months and then have those 12 months shortfall added into the remaining 19 years. In that situation would the interest paid on the principle shortfall dwarf the interest "savings" by not allowing the AIB loan to go into arrears at a higher interest rate level.
In fact as I write this now, I am starting to wonder if actually the simple sums add up to the fact we would be better off being in mortgage arrears for a couple of years rather than agreeing to a full restructure which would cost more in the long run (or have a restructure that allowed for capital payment to catch back up)
Other than the impact on credit rating which is already in the toilet have I misunderstood or missed something?
Many thanks in advance for any thoughts you have
then they will have a record of it should they wish to dispute it.