CarrotStick
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Scenario.
Background.
Landlord bought a PTSB variable rate interest only Residential Investment Property (RIP) near the top of the market. Mortgage was subsequently restructured by PTSB with a term extension in 2013. Interest rate 3.5%, borrower paying 1000 euro to the Bank monthly. The monthly rent for his investment property, a 2 bedroom apartment, is 1500 euro.
Property transferred to Pepper. Pepper ups the variable interest rate incrementally to 7%. Now interest only mortgage payments are 2000 euro monthly. Landlord has to subsidise 500 euro monthly (6000 net annually, 12000 euro before tax approximately)) to keep up with the mortgage payments on the RIP. However, he cannot, as his home is on a ECB tracker rate mortgage loan, the mortgage payments of which have recently been increasing monthly and he must prioritise his family home. This is eating up any excess cash he has.
The Government has introduced the 2% Rent Pressure Zone (RPZ) in the area where his BTL property is located (most urban areas at this stage), so he cannot increase the rent significantly to try and cover the increased mortgage interest rates being applied by Pepper. He is getting into financial difficulties.
Options, sell the RIP (if Pepper allow him to) and take a loss and try and do a deal with Pepper regarding the residual balance, or try and restructure RIP with Pepper, or run the gauntlet of Pepper appointing a receiver over the BTL.
Probable outcome, loss of investment property, due to no repayment capacity, in part due to the Irish Government’s introduction of Rent Pressure Zones (RPZ’s), but not forgetting Pepper’s increase in its variable rate mortgages.
Background.
Landlord bought a PTSB variable rate interest only Residential Investment Property (RIP) near the top of the market. Mortgage was subsequently restructured by PTSB with a term extension in 2013. Interest rate 3.5%, borrower paying 1000 euro to the Bank monthly. The monthly rent for his investment property, a 2 bedroom apartment, is 1500 euro.
Property transferred to Pepper. Pepper ups the variable interest rate incrementally to 7%. Now interest only mortgage payments are 2000 euro monthly. Landlord has to subsidise 500 euro monthly (6000 net annually, 12000 euro before tax approximately)) to keep up with the mortgage payments on the RIP. However, he cannot, as his home is on a ECB tracker rate mortgage loan, the mortgage payments of which have recently been increasing monthly and he must prioritise his family home. This is eating up any excess cash he has.
The Government has introduced the 2% Rent Pressure Zone (RPZ) in the area where his BTL property is located (most urban areas at this stage), so he cannot increase the rent significantly to try and cover the increased mortgage interest rates being applied by Pepper. He is getting into financial difficulties.
Options, sell the RIP (if Pepper allow him to) and take a loss and try and do a deal with Pepper regarding the residual balance, or try and restructure RIP with Pepper, or run the gauntlet of Pepper appointing a receiver over the BTL.
Probable outcome, loss of investment property, due to no repayment capacity, in part due to the Irish Government’s introduction of Rent Pressure Zones (RPZ’s), but not forgetting Pepper’s increase in its variable rate mortgages.
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