Wrong time or least worst for non standard mortgage switcher application

[Futurelookin]

Inspired partly by this thread:https://www.askaboutmoney.com/threa...to-central-bank-rules-due-to-covid-19.216706/ , suggesting rules are tightening:

I would like to switch my mortgage to AIB from EBS but would be a non-standard applicant. Mortgage was split in 2016. Amount outstanding around €300k, house value approx €700k now. Circumstances have improved hugely since then. Household income now at €160k. Would like to start paying off both active and warehoused parts but EBS rate is considerably higher. Perfect payment history on mortgage since split.

Did an accelerated PIA to deal with residual debt (CC and Term loan to cover OD on failed biz) which will show two items on ICB / CCR, last of which will not be removed til 2022. Both will show settled, nothing owing since 2017.

Both of us have main bank accounts with AIB, spotless history going back at least 3 years. Living very frugally. No bounced DDs. Both jobs are pretty safe.

I had planned to book an appt with an AIB mortgage advisor and share all documents showing all debts dealt with, good payment history and hope the direct approach to our own bank might encourage them to look at us as a safe switch. However, face to face not now possible and I don't know if the current clampdown may make this switch application less likely or whether it's only going to get tighter in terms of underwriting. So apply now or wait?

Should also mention that have both built up positive credit rating with CU over past 30 months with savings initially and then small into larger loans (€500 up to €3000). So credit history in last 3 years is positive with loans paid in full / closed ahead of time.

Any suggestions? Any recommendations for a broker who would be useful in presenting the case to AIB?

Thanks

 

[Brendan Burgess]

Do I understand you correctly?

You have a salary of €160k and a mortgage of €300k

Despite this you have stayed on the split mortgage although you can well afford to pay it in full?

You have an impaired credit record.

I would say that AIB would be delighted to get such customers.

Brendan

 

[Futurelookin]

Do I understand you correctly?

You have a salary of €160k and a mortgage of €300k

Despite this you have stayed on the split mortgage although you can well afford to pay it in full?

You have an impaired credit record.

I would say that AIB would be delighted to get such customers.

Brendan

Hi Brendan,
Yes, you do understand it. Our income is light years away from where we were when the business failed and we had to restructure the mortgage and deal with the debts. Over the intervening 6 years, we have rebuilt our lives and are working in PAYE jobs and have hugely improved circumstances with our incomes increasing in the last 18 months to the current joint figure.

With the EBS split, there is a review every 5 years. There is no requirement to take on the repayments for the warehoused part before the end of the term. It attracts no interest. With that in mind we've been getting our house in order (including repaying family members who helped us out, who weren't covered by the PIA),to reach the point that we could begin to pay both parts - the active and the warehoused. In doing so, we'd obviously like to get the best rate for the full amount. That's not available from EBS, as you know.

Yes, we do have an impaired credit rating which we've worked hard to repair. To my mind we've been responsible and engaged with the banks and the various creditors at all times and made use of the entirely legal avenues to address debt for people who find themselves in the situation we were in.

I'm not sure if the 'AIB would be delighted to get such customers' quote was intended to be sarcastic or just judgmental but either way, I don't know whether they would. Certainly other people on AAM have been successful in getting a mortgage or credit cards etc after bankruptcy. In our case we have decent incomes, a positive credit history with AIB, a history of dealing responsibly and in a timely manner with our debt issues through the IMHO and the insolvency service, and a more recent positive borrowing history via the CU.

Having lived on fresh air for almost a decade; from trying to keep a business going (longer than we should have) and living the most frugal lifestyle to meet the terms of our PIA and restructured mortgage, we'd now like to make the most financially sensible choices with our new situation and that includes getting the best deal to start getting our mortgage debt sorted. The kind of decision, I thought you and AAM might encourage.

 

[skrooge]

we'd now like to make the most financially sensible choices with our new situation and that includes getting the best deal to start getting our mortgage debt sorted. The kind of decision, I thought you and AAM might encourage.

Given your current conditions might you be better off staying where you are? If I've read your post right you've a guaranteed 0% on a portion of your mortgage for at least the rest of this year. How much of your mortgage is currently warehoused? If it is attracting 0% your effective rate on all your mortgage might be lower than can be offered elsewhere.

Have you thought about other providers? Ulster and KBC offer very competitive rates not too mention incentives for switching. AIB will offer €2K for switching whereas KBC will give you €3K.

 

[Futurelookin]

Given your current conditions might you be better off staying where you are? If I've read your post right you've a guaranteed 0% on a portion of your mortgage for at least the rest of this year. How much of your mortgage is currently warehoused? If it is attracting 0% your effective rate on all your mortgage might be lower than can be offered elsewhere.

Have you thought about other providers? Ulster and KBC offer very competitive rates not too mention incentives for switching. AIB will offer €2K for switching whereas KBC will give you €3K.

Hi Skrooge,

Thanks for your reply. Yes, actually 0% until the end of the term so there's definitely an argument for staying put. However, we've been systematic in terms of repaying debt and are now the mortgage is the only outstanding issue. The whole experience has made us really risk and debt averse and the recent Covid situation has demonstrated how nothing is guaranteed to remain a given. So we'd like to get the mortgage paid down as much as possible and identified AIB as the most likely to consider us given the circumstances as we have our current accounts with them and only positive history. We don't have accounts or any relationship with Ulster or KBC and that would, I imagine rule us out in light of an impaired credit history. We could obviously always wait until 2022 to apply when the two remaining items on the CCR are removed, but I expect a PIA would have to be declared either way so I had hoped AIB might look at the bigger (more recent) picture. Also we'd like to start tackling it now rather than in two years time.

Thanks

 

[Brendan Burgess]

How much is in your warehouse?
How much is left on your main loan?

What is the remaining term of the loan?

With the EBS split, there is a review every 5 years. There is no requirement to take on the repayments for the warehoused part before the end of the term. It attracts no interest.

Why is there a review every 5 years if there is no requirement for you to repay the warehoused amount if you can afford it?

A loan which is interest-free and repayment-free is very valuable, so unless it's a tiny proportion of the total loan, it's unlikely that you will do better by switching.

Brendan

 

[Futurelookin]

How much is in your warehouse?
How much is left on your main loan?

What is the remaining term of the loan?



Why is there a review every 5 years if there is no requirement for you to repay the warehoused amount if you can afford it?

A loan which is interest-free and repayment-free is very valuable, so unless it's a tiny proportion of the total loan, it's unlikely that you will do better by switching.

Brendan

Warehoused is €110k, Active €190k, Term remaining 16 years.
I'm not unaware of the value, however, I'd like to start paying down the full amount aggressively and I'd like to be on the best rate while doing so. In light of my circumstances, the most likely (in my assessment) to consider me given my history is my current bank, AIB who have a much better rate than EBS.

Which is why I asked about the impact of a tightening in borrowing criteria / underwriting in the current Covid environment and whether I should get a broker to present my case in the absence of the possibility of a sit down meeting with my bank which is no longer possible. My instinct is that an over the phone application by myself will not be as effective as a personal meeting to present the history and make the case.

 

[Brendan Burgess]

190/ 300 @ 2.9% = 1.83% average interest rate

You have a fantastic deal. Why would you clear this loan to borrow at 2.5%?

And it will get better for you. When your active mortgage is down to €110k, the effective rate will be

€110/€220 @ 2.9% = 1.45%

Check the terms of the split mortgage.

There used to be a scheme whereby you got a 5% or 10% bonus for paying down the warehouse. I don't think it's worth it, but check it out.

Is there any possibility that they would allow you to clear the active part first?

If you want to aggressively pay down your mortgage, and this means paying down the warehouse, then do so. But don't switch to another lender until the warehouse is much lower.

Brendan

 

[Brendan Burgess]

The only reason you might want to get rid of your warehouse would be if you thought you might be trading up in the next few years.

But this would be a long term play. You would need to get rid of the entire warehouse now so the split comes off your mortgage.

With a PIA and other issues on your credit record, I don't think that you will get a mortgage for some time. So enjoy the split while you have it.

Brendan