Should I make an offer to BOSI?

T

TRS30

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Following on from Creamegg's post my situation is.

Combined Income of €110K

No loans/CC debt.

Savings €50K- saving 2K a month.

Pension pot (100% equities) 150K adding circa €1K a month

PPR
Value: €230K
Loan: €190K- BOSI tracker ECB +0.7%- I&C 24 years left

RIP
Value: €180K
Loan: €230K- BOSI tracker ECB +1.5%- IO 24 years left
Repayment: €386
Rent: €900

My wife is due our first child is about 6 months and we are considering moving closer to family.

Both properties are in good renting locations and PPR should get about €1K a month.

On one hand I am reluctant to sell either due to cheap trackers and should be profitable, however I don't want to take on anymore property debt and increase my exposure to one asset class.

The options are I see it are;

-Stay in current property and have family further away
-Rent RRP and rent in location closer to family (rent would be higher than current mortgage so reduced ability to save)
-Sell RRP and buy closer to family
-Look to make any offer to BOSI on one or both properties to reduce borrowing and then do either of options 1,2, or 3.

I guess for the last option I would need to crush the short and long term numbers to see what would be a good offer to make.

Would appreciate people's thoughts.
 
Loan: €230K- BOSI tracker ECB +1.5%- IO 24 years left
Repayment: €386

This cannot be correct? Repayment would be much more than 386 per month.
 
Let's look at your home first.

You will be paying €160 a month for the next 24 years - that is the equivalent of a mortgage of €27,000 @5% repayment.

You also have to pay €190,000 in 24 years. That is the equivalent of around €60,000 @ 5% compound interest.

So the real value of your mortgage today is about €90,000.

They would have to agree to write off around €100,000 for you to be indifferent.

If they ever try to sell your mortgage to a vulture fund, they would be very lucky to get €100,000 for it.

That should be your initial offer. Make the offer and submit your calculations with it.


Investment property
Because you get tax relief on 75% of the interest paid, the figures will be something similar. They will have to offer you a discount of around 50% to make it worthwhile.

I don't want to take on anymore property debt and increase my exposure to one asset class.
Click to expand...
Your true level of debt is around €200k backed by property worth €500k.
You have €200k of savings and an income well in excess of your expenditure.

I have often recommended to people that they should sell their property as they are overexposed to loans and property, but the particular facts of your case means that you should not be worried by this.

If you were to spend €300k on a home with €250k of borrowing, I would see no problem at all with that. I would probably agree that it was not a good idea to buy an investment property with that level of borrowings.

An outside the box suggestion
I doubt if BoSI will go for this, but why not put this proposal to them.

1) Pay €50k cash off the tracker mortgage
2) Transfer the remainder - €140k - to a new property

That would leave you with €230k to buy a new property closer to your wife's family.

Maybe introduce it gently to them. "If I give you €50k today, what will you write my mortgage down by?" They will probably offer you €55k, but you should hold out for around €75k. They might be more interested in seeing the RIP mortgage reduced as it's in Negative Equity.
 
Thanks Brendan for the comprehensive reply.

Just one point; my PPR loan is capital & interest so not sure how that affects your figures.
 
ok, I missed that.

Your repayments on €[email protected]% are €738 per month.

Your repayments on €130k@ 4.5% SVR would be €738 per month

So assuming you are going to stay in the house for the next 24 years, the mortgage would be "worth" €60k to you. This assumes you had to borrow.

If, for example, you had savings of €738 per month, you could not earn 4.5% on them.

As you want to move, it would be benefiical to you to be free of this mortgage as it would increase your borrowing capacity. But then again, BoSI wants to move on as well.

I would have thought that a discount of around €30k would be fair to both sides.

I think you should offer €130k to start with, but be prepared for rejection.

Brendan
 
Thanks again Brendan.

I will look over the figures in detail over the next few days.
 
TRS. I suggest that the first thing you need to do is decide which of the options 1,2,3, outlined above you actually want.

Then decide if you can afford it.
 
Cream, you are right however I think we need to talk to a mortgage broker to see what our options are. This would obviously be influenced by our current borrowings.

The more I think about it I think we need to get a final position with BOSI and take it from there.

I will go through Brendan's figures in detail and come with my proposed approach.
 
I am in the process of drafting my letter to BOSI. I am only going to address the RIP as this is the only loan that is Interest Only.

Investment Property
Loan: €230K- ECB tracker +1.5%- Interest Only 24 years left
Repayment: €386

I will be paying €289 (386 x 75%) a month for the next 24 years - equivalent of a mortgage of €48,000 @5% repayment.

I have to pay €230,000 in 24 years. That is the equivalent of around €75,000 @ 5% compound interest.

So the value of my loan is €123,000.

Should I propose this figure as my starting point or go in lower and raise to this as my 'final offer'?

I am going to leave out the rent and value amounts or should these be included?
 
Hi TRS

I think it's extremely unlikely that they will knock €107,000 off your loan. The problem with offering that is that they may not take you seriously.

If the offer was a bit closer to what they would be prepared to take, they might engage.

Brendan
 
Thanks Brendan.

How do I come up with a figure they are likely to accept? I don't want to offer too much or just pluck a figure out of thin air.
 
TRS30 said:
How do I come up with a figure they are likely to accept? I don't want to offer too much or just pluck a figure out of thin air.
Click to expand...

After months of thought I have failed to come up with a credible answer to this question.

However I think that the BSOI are now looking more seriously at performing loans.

At the moment, they are at the "you make us an offer" stage, perhaps in a few months they will put a proposal of their own on the table.

I think the best course of action now is to wait.

They will be trying to redeem these mortgages at the best price (for the bank). When they pluck the low hanging fruit they may then make a better offer.
 
Thanks Cream.

I am in no immediate rush to sort this out and can play the waiting game.

I have discussed some more with my wife and I think we will go for option 2 of renting out our PPR and renting closer to family for at least a year and then reassess the situation.

With the lack of economic growth in the EU there is a good chance of another interest rate cut so I think that this could help push things along from BOSI side and they may, as you say, put some kind of offer on the table.
 
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