Case study AIB says my tracker is unsustainable, although I am not in arrears

struggler

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Income details
Net (i.e. after tax) Income self: Self-employed- €1500/month (extremely variable here- no money in during Jan,Feb,March. So 2013 average is €1490, last 6 months is 1980/mo.) plus €440/month Jobseekers top-up
Income history: Lost job in 2007, self-employed contractor since 2010
Net income partner/spouse: Disability Allowance €440/month
Income history: Unable to work due to disability
Amount of child benefit received €260/month


Two adult family
Occasional car use- 1 business trip per week, otherwise work from home
Number of 4 - 11 years old: 2
Monthly spend on special circumstances: None right now, but may loose Med card soon, then prescription costs would be high.
So, Insolvency Service needs are €1738 if I need a car and €1798 if I don't



Home loan
Lender: AIB
Amount outstanding: €226,000
Value of home: €115,000
Interest rate: Tracker
Monthly repayment: Currently €400- interest plus capital portion
Amount in arrears: Made every agreed payment, define arrears...

Bought current house in 2006 with proceeds from previous house (we relocated cross-country for a new job), then I lost that new job 3 weeks after moving in. We continued full payments for a year or so, then used a mix of payment moratoriums, interest only, and full payments. The last 2.5 years were all interest only. Recently my self-employment has picked up, so I contacted the bank and requested that my payments be increased slightly so that we could pay off some of the capital. 3 months into that agreement, which ends in December. A couple weeks ago we were contacted by AIB and told that after December they would no longer offer us any deals, it was full payment or nothing, and that we should sell our house as we were in positive equity by €22,000 according to their figures. We disputed their figures (according the CSO, our house is worth €268,000, which it is not.) and they have since got a valuation of €115,000.






Credit Card - €400 (chipping away at this...)

Other savings and investments: none


How important is retaining the family home to you?
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


Business for me is very periodic and project-based, so I can go months without work and then be busy as hell. Hard to judge an average monthly income. My business does seem to be growing, and I would hope that it would continue at the current good levels.

What is your preferred realistic outcome?
I would like to continue with a similar deal to what I have now- paying more than interest only, as much as we can afford safely, and increase that as time goes on so that eventually the mortgage is paid in full.


A few extras:
I believe that AIB are running some scare tactics at us, trying to get us to pay more. We are told they will not deal, but it really does make sense for them not to- the house is definitely in negative equity, and in an unfinished estate, so will not sell well anyway.
A family member suggested that a bank might agree to a lump-sum payment of a fraction of the value as full payment- i.e. if we find a rich uncle to borrow €50k from and offer it all to AIB at once, they may take that as full payment and be done with us completely. Have you heard of that?

AIB has said that we are not suitable for a split mortgage, as it has to be at least 80% of the market value, but would not explain when questioned. I can't get much more info about values being used in split mortgages, they seem to be all over the place right now, can anybody enlighten me as to what 80% she is talking about?

I mentioned in the initial phone conversation that my business was performing better than shown in my last SFS, so they have requested a new one to be filled out. I can bias my numbers depending on how far back I go for averages, so should I lean towards showing that I make more, and get in trouble if business drops again, or lean towards making less, and possibly not get a deal?

Lots there, but thanks for reading. All advice is appreciated.
 
Income self|€1,500
Jobseekers self|€440
Income partner|€440
Total income|€1,940
Reasonable living expenses|€1,820
Available for creditors|€560

Interest on mortgage: €300 per month ( €226,000 @1.5% ( assuming ecb + 1% tracker) )

Based on your figures and the RLEs, you are well able to pay the very low tracker rate of interest on your mortgage.

Although you have an agreement to pay only €400, you should pay the full €560.

What would the full monthly repayment be?
€226,000 @ 1.5% for 20 years would be around €1,000 per month, so you are a long way from making that level of repayment.


after December they would no longer offer us any deals, it was full payment or nothing, and that we should sell our house

OK, so you have 4 months to develop a plan.
If your agreed repayments are €400 a month, you don't need their agreement to pay more.
So pay an additional amount directly when you can. This shows good intent.

I think you should write to them now and set out your case.

"I Refer to the phone call with John X on such a date

  • I have always engaged with you.
  • I have never been in arrears
  • I have paid at least the interest only no matter how difficult
  • Although my agreed payment is currently €400, I am able to pay more, so am paying more.
  • My business is taking time to establish, but it is looking up.
While things have been difficult and will be difficult, I believe that my mortgage is sustainable and I will not be voluntarily surrendering the house.

There would be a shortfall of €110,000 if I sold it now so it's not in your interest or mine to sell it.

It is my full intention to repay my mortgage in full. "

Enclose the SFS and show your monthly income for the last 12 months, month by month. Don't bias it. Be straight up.

That is all you can do at this stage. If they issue you a formal letter in January suggesting you sell your house or be repossessed , you can appeal it.

It's a tough one. This mortgage is sustainable from your point of view. Because it's a cheap tracker, and you are paying a very small portion of the correct repayment, it is not sustainable from the bank's point of view.

Having said that, I think you will be given some form of deal, if not directly, then on appeal.

The bank will have much higher priorities for repossessing houses. Even if they do try to repossess your house, the judge will make it very difficult for them.

Brendan
 
A family member suggested that a bank might agree to a lump-sum payment of a fraction of the value as full payment- i.e. if we find a rich uncle to borrow €50k from and offer it all to AIB at once, they may take that as full payment and be done with us completely. Have you heard of that?

That is nonsense. Why would they do that when they can repossess it and sell it for €115,000?

If you have a rich uncle who is prepared to lend you money, then you could and should borrow around €500 a month from him from January to make the full repayments and keep the cheap tracker.

It would make good commercial sense if they agreed to take the €50,000 now and write down your mortgage by €100,000 and leave you on your tracker. But they won't do that either.
 
Other options

Agree to surrender the house if they agree to write off the shortfall.

If they don't agree to write off the shortfall in advance of the sale, agree to sell the house and hope they will agree to write off the shortfall after the sale.

Check out the mortgage to rent scheme. As a family with two young children and an adult with a disability, you may well qualify.

Go for a Personal Insolvency Arrangement. I think that AIB would probably veto it.
 
That is nonsense. Why would they do that when they can repossess it and sell it for €115,000?

First, there is no rich uncle unfortunately. :(
I do have a relative (in another country, where rules may be different) who owed 60k on credit cards, but could not pay it. He said to the bank " I have 25k here, but no more coming" so they took the 25k as full and final payment.
I was just curious if anyone had heard of this happening with mortgages here.
The taking of the house and selling it would cost the bank time and money- and might not ever happen, there is a house in our estate that has been for sale for over 4 years now...
 
We must be living below the "Reasonable" amount, as we are able to afford the €400/month for now.
I would think that offering to go from interest only to €400 shows good intent, and that was only a couple months ago (started in June).

Going to complete the SFS and had already planned on a similar letter as you suggested, so we'll see how it goes.

Thanks again.
 
I do have a relative (in another country, where rules may be different) who owed 60k on credit cards, but could not pay it. He said to the bank " I have 25k here, but no more coming" so they took the 25k as full and final payment.
.

That is completely different as it's unsecured lending. If you owed AIB €60k on a credit card, they might well do a deal if they thought you were otherwise bankrupt.

They will not do a deal on your mortgage.
 
I have updated the original post to reflect the revised figures.

Your case is not as unsustainable for the bank as I had thought.

You should pay as much as possible and it will reflect well on you and dissuade the bank from taking action.

It's also possible that the bank thinks that you are earning much more and just not declaring it.
 
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