Case study Interest only ending and offer of split mortgage

L

lizannecasey

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Messages
24
Income details
Net monthly €2786.63
Net monthly
Income history
Divorced. Ex pays €70 per week for maintenance
Amount of child benefit received = €260
Part-time fitness instructor = € 50

Personal circumstances so we can calculate your reasonable living expenses
The Insolvency Service has published Guidelines for reasonable living expenses based on the family size, whether or not you need a car for work, childcare costs and other exceptional circumstances. By filling in this information, we (or you ) can calculate what your reasonable monthly living expenses should be.
One adult family or two adult family - 1 adult family
Do you need a car for work or do you use public transport? I need a car for travelling to work and for carrying out my day job and part-time job.
Number of children 0- 2 years old:
Number of 3 years old children:
Number of 4 - 11 years old: 1
Number of 12 - 18 years old: 1
Monthly childcare costs: €20
Montly spend on special circumstances: e.g. exceptional healthcare costs



Home loan
Lender: EBS
Amount outstanding: 252,000
Value of home: 100,000
Interest rate: variable @4.3%
Monthly repayment 1234.00
Amount in arrears 8,500

Have been on Interest only for the past year but it's ending this month.



Credit Union
Amount of shares = €4250
Amount of loan outstanding = €19,120
Monthly repayment = €400
Term left = 4 years


Other loans and creditors : none

Other savings and investments : none

Do you expect any lump sums in the medium term future?
no

How important is retaining the family home to you?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


What is your preferred realistic outcome?
I would like to keep my home but get the mortgage at a more manageable rate. I've been offered a split mortgage but I don't know what to do or if it's a good move. I've read through the Mortgage arears section on here and read about the capitalising and the split but I'm still not sure. Just looking for advice on what to do.
 
Hi lizanne

Have they offered you the split in writing?

If so, please give us the details.

Your mortgage as it is is probably unsustainable, so a split would be your only option if you want to keep the house.

Voluntary surrender and/or bankruptcy might be a better option. But it depends on the terms of the split.

Has the Credit Union offered you any deal? What arrears have you with the Credit Union?
 
Hi Brendna,
Yes they have offered it in writing. They are parking €50,000 of the mortgage and capitalising my arrears. My term also is extended so I'll be 70 before I pay off my mortgage! It will end up that I'm paying €1010 per month back. I pay €1000 at the moment (€800 approx interest only +€200 to clear arrears). I don't have the full details with me right now but I can get them and post up.
I'm not in arrears on my credit union loan as that comes out from my payroll so they always get paid first. I had looked into trying to reduce it but they extend the term and I just want to get it paid so that money is freed up for the mortage. I'm probably thinking about it all wrong but.
 
Have you read this?

How to analyse an offer of a split mortgage

In summary, they are reducing your main loan to €200k on a house worth €100k

You will be paying €710 interest a month. (the €300 extra goes to pay down the capital)

How much would it cost you to rent a similar home?

If you surrender the property and do a deal on the shortfall, you could be mortgage free within a few years. If they don't do a deal on the shortfall, go bankrupt and you could be debt free, including the credit union, in three years.

Brendan
 
Not a good deal for the OP in my opinion. If the house price is actually 100K, I would be reluctant to accept this as being a "fair deal". You also have a faairly sizeable CU loan to pay over the next 4 years. You need some good independent financial advice. The bankruptcy option is not painless, but given your circumstances it is a far more attractive one than accepting this deal. look up on some other split mortgage posts and you will see far better options been given than this!!
 
Hi,

Not what you want to hear, but if the bank realise you pay that amount to the credit union, and have no arrears there, they might not be too happy.
Your home should be your priority. Maybe a Personal Insolvency Agreement (PIA) might suit you better or bankruptcy as already stated.
The warehoused/parked amount on the mortgage seems a little low, but don't forget once the term of the loan is up, you owe them this amount immediately, and in my case, they said "your home is at risk" etc. if you cannot pay that amount. Will they offer you a loan for that amount at the end of the term? Depends if you are in positive equity then or not and what your financial situation looks like then.
Anyway, it is a temporary relief to receive a split. I would maybe suggest seeking professional advice somewhere.
A lot of people do not want to 'let the credit union down' as this is the only option for loans in the future etc. But in reality, if your mortgage is in trouble, you should address this big time as you need to be solvent again in the future.
Hope things work out for you.
 
Hi all. Thanks for the replies. I've read through the posts and the other documentation about the split mortgage and it doesn't sound like a good deal. I will seek independent financial advice on it though. I have called the lender to see if I can extend my interest only period by 6 months. I will go to credit union and see if they will re-structure my loan repayments to free up some money.
 
lizanne;
Extending interest only by 6 more months and re-structure credit union looks like you are putting off the evil day !

Brendans advice of getting a deal on mortgage or else you go Bankrupt makes sense.
As things seem , you are insolvent and EBS surely know that the offer as given to you just strectches out the pain.

Do not be afraid of going the Insolvency/Bankrupt route.
Wish you luck.
 
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