# Difficulty making repayments on former home, now an investment



## batman123 (10 Aug 2013)

The building society is taking an eternity to get back to me despite all the phone calls. I have been on interest only for the past two years but I don't think that it is an option anymore and either will the building society. The split option would suit my circumstances although I don't fancy giving up my pension lump sum upon retirement. Provided there will not be interest added on the warehouse portion I think its the only option that the banks will accept as a compromise although biased in their favour

Two questions

1    Just married and was wondering if my wife would be liable for any of my debt after restructuring for a split mortgage. The house is in my name and I bought it in 2004

2    I have had to rent out the property to the council on the RAS scheme and that runs out in 2.5 years time. I lived in it and rented out rooms until then. We would like to make it a family home at some stage. I understand the criteria for the split mortgage is tight so I was wondering if you had any advice when the call comes from the building society discussing options

Many thanks


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## Brendan Burgess (10 Aug 2013)

HI  batman

I have moved your post from the Key Thread on Split mortgages

Please provide all the information in the Case Study format so that you can get a meaningful answer

Standard Format for unsustainable mortgage Case Studies

Brendan


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## batman123 (12 Aug 2013)

*split mortgage nitty gritty*

*Personal and income details
Net *(i.e. after tax) Income self: €2,500 and public servant 
Income history: in permanent employment and I received an additional rental income from council ras scheme of €825. house is in my name and I bought it in 2004. I only got married three months ago. 

*(Will spouse income be relevant if house in my name?)*

*Net *income partner/spouse: €2,000
Income history: in permanent employment
number of children - no kids yet 
Amount of Mortgage Interest Supplement received - n/a 

*Home loan - now rented out 
*Lender: EBS
Amount outstanding: 290,000 
Value of home: 170,000
Interest rate: Variable
Monthly repayment : 1400 and 825 is rent paid by council tenant. I make up the shortfall of 575. i pay rent for where i live
Amount in arrears - 5000

Summary of discussions and agreements with the bank e.g. in Marp since Jun 2011 . Have been on interest only since then. no options being provided by ebs other than interest only despite numerous requests by me.


*Other loans and creditors - *delete those which don't apply to you
Credit Card - 1000
Credit Union e.g. Loan of €22,500 against shares of €5,000. The repayments for this loan have been negotiated down to €240 per month  
Family - Mother and father added €17,000 to their mortgage[to lend to me]  in Jun 2011 and I pay €160 per month into their mortgage account and proof can be provided. This loan from my parents is over a ten year term and at a lower interest rate that the credit union loan

*Other savings and investments 
*Absolutely None

*How important is retaining the family home to you? 
*Which of the following best describes your situation?

I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.

Using the property as a family home after the rental agreement with the council expires is an option but it would not be practical for both of us to continue working and we both have good public service jobs 

I have no problem being in negative equity for a long time because i do believe that eventually things will turn around and by the time the mortgage term is up the value of the property will have increased somewhat. 

*Any other relevant information*

I have become an accidental landlord since Nov 2011 and rented the whole house out to a council tenant for a reduced rent of 825 per month. I had lived in the house since 2004 and didn't want to move out. I rented out rooms for a number of years but the offer of guaranteed rent was advised by ebs as going in my favour with any further negotiations. I am paying rent of 575 per month but this has reduced other costs such as travel, food, petrol etc. Also my new wife's permanent job is too far from my house so not practical to move back now and current rental scheme with council runs out in 2.5 years time


*What is your preferred realistic outcome? 
*I really want to keep the property but the repayments are too much and i cant pay them. I am very lucky to have a job and i know my situation is not as bad as others out there. 

I will be lucky enough in twenty years time to receive a lump sum upon retirement of probably €85,000 and i would be willing to sacrifice that to keep the property and pay the capital and interest repayments on a realistic portion of the total mortgage amount. I do believe that any outcome should take account the historical low interest rates and any future implications of interest rate rises as if that issue is not addressed i will be in the same position when interest rates will undoubtedly rise again 


Many thanks for your time to read this and any advice would be very much appriciated


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## Importer (12 Aug 2013)

Hey Batman

Let's summarise your situation here

Net Income 2500
Rent 825
Total Income 3325

Reasonable living expenses in your case 725 euro estimated
Reasonable rent expenses 575 (not sure if this is total rent or  50%)
Total living expenses 1300

Available to repay your debts 3325 - 1300 = 2025.

It seems to me that you have sufficient income to repay all your debts in full and that's probably how the bank will look at it also.

If I was the bank Id be wondering why you are not paying your mortgage in full.

You say 1400 per month is interest only. 1400 X 12 = 16,800 on an outstanding balance of 290,000 is 5.8%. Is 5.8% really your interest rate ?
Seems very very high. I'd be trying to negotiate this rate downwards.

You have 2025 per month to service your debts and it should be sufficient. Am I missing something ?


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## DebtCert (12 Aug 2013)

Well, the rent being paid on the property he is currently living in isn't included, the amount doesn't seem to be stated. Also, reasonable living expenses as per the ISI guidelines are not €725. 

Total set costs for the household come to €1,473. A 50:50 split is assumed where there are two incomes so total set costs for the OP are €737 a month approximately. To this must be added the rent he pays on the house he is living in (amount not stated) to produce the reasonable living expenses. We cannot count the €575 payment made by the OP to cover the shortfall in the mortgage as this is not a living expense. Rather, it is a payment to a secured creditor and not connected to the RLEs of the OP.


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## Brendan Burgess (13 Aug 2013)

Hi Batman 

Your figures are difficult to understand.

Please provide the interest rate you are being charged on your mortgage. 

The EBS SVR on home loans is 4.58%.  Have they changed your rate to the investment rate? 

It seems to me that you can comfortably afford the interest on your mortgage. 



 Rent received|€825|
Interest paid|€1,100 |290k@4.6%/12
Shortfall|€275There is absolutely no reason why the EBS, i.e. the taxpayer, should subsidise your investment through not charging you interest on a warehoused part of your mortgage. 

You should do the full Reasonable Living Expenses calculation which may well indicate that you can pay your full repayments. 



> Mother and father added €17,000 to their mortgage[to lend to me]  in Jun  2011 and I pay €160 per month into their mortgage account and proof can  be provided. This loan from my parents is over a ten year term and at a  lower interest rate that the credit union loan


Why did you need to borrow in June 2011? 

It seems to me that you are living well beyond your income



> number of children - no kids yet


You should avoid having children until you learn to budget and get your spending under control.

You should contact MABS to get advice on budgeting and finance.


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## batman123 (13 Aug 2013)

Thank you all very much for your honesty and advice

The EBS SVR on home loans is 4.58% and that is what I am being charged

The €1,400 is the full capital and interest repayment and up until June  2013 was nearly €1000 for interest only

The net income figure of €2,500 provided in my original post does not include the payment of the shortfall between the total mortgage repayment and the rent received ie €575. It also does not include my rent of €575, my credit union loan of €240 per month and the repayment of €160 per month to my mother and fathers mortgage account. *When all of these are taken away from the net income I initially provided the actual net figure I have each month is €950 before any other living costs.* 

The reason I borrowed the €17,000 from my parents was that I paid that amount off a larger loan with the credit union. I still owe the credit union €22,000. The monthly amount being repaid on the €17,000 was lower and was over a longer term with a lower interest rate

I really hope that gives a better picture of what I have to spend because when I looked at the replies I thought that there was a huge hole in my pocket I didn't know about. 

I apologise if anyone thought I had lots of money and was looking for sympathy because the topic is a very serious one for a lot of people out there including me

Thanks again and apologies for any confusion. I do really appreciate the advice


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## Importer (14 Aug 2013)

Thats exactly right. You have 950 left before any other living costs and the reasonable living costs guidelines say you are entitled to c725.

Therefore the banks are going to eat you alive when they get around to you. They will tell you in no uncertain terms that you can afford your mortgage in full and you can afford to pay all your other debts as well.

Prepare for battle Batman.......


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## DebtCert (14 Aug 2013)

Um, I put the reasonable living expenses at €1312 being €737 in total set costs plus the €575 he pays in rent.  You might please explain the basis of your calculations by which you arrive at €725 which seems on the low side.  Are you basing them on the ISI guidelines?


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## Brendan Burgess (14 Aug 2013)

> The split option would suit my circumstances although I don't fancy giving up my pension lump sum upon retirement.





> The reason I borrowed the €17,000 from my parents was that I paid that  amount off a larger loan with the credit union. I still owe the credit  union €22,000.


So the taxpayer should give you a split loan so you can pay your unsecured credit union and your unsecured family loan ahead of your secured investment property, which of course you would like to hold onto in case you need it as a family home? 

Pay your secured loan, and tell your family and the credit union that you are insolvent and can't pay them until you get a lump sum on retirement.


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## Importer (14 Aug 2013)

Hi Debt Cert

I have purposely ignored your posts so far because they seem to be all over the place.

Earlier above you were making heavy going that he hadn't given us his rent cost when of course he had.

We dont know if the 575 rent is his 50% share of the rent or if its the total rent for the housing unit. If 575 is the total rent for the house apartment
then he can only claim half for living expenses = 287.

Anyhow it doesnt matter because when you apply the solvency rules as prescribed by the ISI, it appears that the OP is in fact solvent and the banks will be pointing this out at the earliest opportunity


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## Importer (14 Aug 2013)

This is the situation as I understand it

Income 2500
Rent 825
Total Income 3325

Mortgage - 1400
Rent - 575
CU - 240
Parents - 160
Total Outgoings - 2375

Available for other expenses 950

Guidelines for reasonable living expenses ISI - 725 (or 737)

The OP is apparently solvent by the criteria of the Insolvency legislation


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## DebtCert (14 Aug 2013)

batman123 said:


> *Monthly repayment : 1400 and 825 is rent paid by council tenant. I make up the shortfall of 575. i pay rent for where i live*


*

Maybe that makes clear to everyone else that the rent the OP pays is €575 a month but it isn't clear to me.  He states he pays €575 to make up the shortfall on the mortgage, given that the tenant pays €825 against a mortgage repayment of €1400.  He also states he pays rent on where he now lives, but does not state the amount.  

In a subsequent post, the OP tells us his rent comes, coincidentally, to €575 a month.  He doesn't explicitly say whether he alone pays this but that's not essential to the point I am making which is that reasonable living expenses must include the cost of reasonable accommodation.  So that is €737 plus at least half of the €575 and more probably, given that he says 'my rent', the entirety of the €575.  Reasonable living expenses are not the same as total set costs and you seem to be confusing these different concepts.

I regret that you find it difficult to follow my posts.  It does not, however, follow from that that they are 'all over the place'.  I would recommend you have a read the documents available on the ISI website.  They should assist your understanding of these issues and make things easier.*


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## Importer (14 Aug 2013)

Sorry to be so impatient.

Post No 3 above, about eight lines from the bottom quote "I am paying rent of 575 per month" - I think thats fairly clear.

Otherwise you are just referring to semantics of presenting the material. So Lets do it your way to make you happy

Income 2500
Rent 825
Total Income 3325

Reasonable living expenses 725 + 575 = 1300

Available for paying off other debts - 2025 :

Mortgage : 1400
Credit union :240
Parents 160
Total Other debts - 1800

Surplus 225

In my last post I explained that the difference between the set costs (725) and what the OP had remaining (950) after paying everything else was 225

Just a different way of laying out the figures.

The bottom line is the same. The OP is solvent to the tune of around 225 euro per month. The surplus is greater if the rent paid needs to be reduced by 50%)


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## DebtCert (14 Aug 2013)

I understand that the bottom line is the same.  I've never asserted here that the OP is either solvent or insolvent.  I have merely consistently pointed out that the terms 'reasonable living expenses' and 'total set costs' are not interchangeable.  They are distinctly different terms.  You may call this semantics if you wish but the distinction is important.


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## Importer (14 Aug 2013)

Only a Dungarvan man would be so fussy


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## Brendan Burgess (15 Aug 2013)

DebtCert said:


> the terms 'reasonable living expenses' and 'total set costs' are not interchangeable.  They are distinctly different terms.



I have to say that the ISI's terminology and approach is awkward.


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## batman123 (15 Aug 2013)

Many thanks for the replies

Thank you "importer" and "debtcert" for the time you took to analysis my figures. I have a greater understanding of where I am and what I need to look at . Many thanks. 

The figure of 575 is my half of the rent for the house I am living in at present. The fact that the figure of 575 is the difference between the rent from the council tenant for the mortgaged property and the monthly repayment to the building society is a co-incidence. 

And to the preferred advice of others on this thread I wont tell my parents to wait for my retirement in 20 years for the amount of 17,000 they borrowed on their mortgage. They will probably be six feet under or have lost their house trying to pay the extra amount. I'd prefer to lose my house than for them to lose theirs. Thanks for the that advice though !!!!!!!!!! 

To that contributor also, I thought I was being proactive and attempted to address the situation I find my self in. I have made adjustments to my lifestyle, brought my parents into my problem to save money, adjusted my repayments to the credit union and moved out of my home to give the mortgage provider guaranteed rent for four years. This is all to save the house and hopefully move into it again after the situation improves and work etc allows us to move. I understand that there are much worse and very sad situations out there but there are also a number of people like me that are on the tipping point. Where any small adjustment or cost could tip us over the edge and a whole new section of mortgage holders are in the mire. I am dreading to think what will happen when interest rates rise again and am trying to address the issue NOW. I get the impression however that you believe I am some kind of strategic defaulter as discussed in some of your other posts. I guarantee you I am defiantly not and have engaged with the mortgage provider proactively.

Just one more question for "Importer" and "Debtcert". I was under the impression from my research under the guidelines a single adult with no car will be permitted expenditure of €898.96 in set cost over and above any mortgage or rent payments. The set costs will rise to €1,030 if that adult has a car. You have a figure of 725 for these costs. Just wondering which one is right. Thanks, I'm learning a lot.

Thanks again for everyone's advice


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## dereko1969 (15 Aug 2013)

You're not a single adult, you're living (presumably, from what you've posted, and that's all we can go on) with your wife in a 2 person household with no children, Your set costs are therefore half of 1496.26 (no vehicle) or half of 1473.29 (with vehicle).


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## batman123 (15 Aug 2013)

Thanks that explains it


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## dereko1969 (15 Aug 2013)

Did you forget you were married? Hope your wife isn't registered on here!!


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## Brendan Burgess (16 Aug 2013)

Hi batman



> And to the preferred advice of others on this thread I wont tell my  parents to wait for my retirement in 20 years for the amount of 17,000  they borrowed on their mortgage. They will probably be six feet under or  have lost their house trying to pay the extra amount. I'd prefer to  lose my house than for them to lose theirs. Thanks for the that advice  though !!!!!!!!!!



Why do you prefer to pay the Credit Union over your mortgage?  This makes no sense to me.  Strategic default is not a correct description of it, but it's clear that you are not paying what you can afford on your mortgage. 

You have done a lot to keep your home.  Why did you not use the loan from your parents to reduce the balance on your mortgage? 

If you want to keep your home, you should prioritise your payments on it and not on y our unsecured creditors.

I repeat, as a taxpayer, I am not prepared, to pay extra taxes so that you can have a split mortgage from a taxpayer owned bank so that you can pay your unsecured creditors in full.  

Why did you borrow so much from the Credit Union? It seems as if you were at some stage,living well beyond your means. 

Brendan


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## batman123 (16 Aug 2013)

Brendan,

The loan was adjusted prior to entering into MARPs as I thought i could re adjust my debts without going into that system. You don't think i wanted to involve my parents if i didn't have to, do you. 

Yes i did live beyond my means and that initial loan was part of the house deposit but so did an awful lot of others. I am not going to go on about reckless lending because i am the one who entered the agreement and i am the one who has to pay it back. If i didn't ask for the money in the first place i wouldn't be in this this situation. I accept that point.

However, that is the situation i find myself in and i am willing to address the situation through compromise with the mortgage provider rather than putting my head in the sand


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## batman123 (14 Jan 2014)

Batman is back but still hitting his head off the wall with his mortgage provider.

Six months of tormenting staff at the arrears department and I was told by the person assessing my account that they were trying to get me a split mortgage and that my situation was ideal for such a solution. I finally got to speak to someone who actually made a decision!!!!! My financial situation has already been explained but some of my personal circumstances have changed so my expenditure will increase considerably soon.  I was told over the phone by the assessor that they had ordered a valuation on the property. After a number of weeks and that person not returning calls and her phone ringing out I was told that my account had been assessed by someone else now. The split option was now a non runner. Needless to say I was very disappointed. Lucky I had noted all times of calls etc. 

I have since been told that the mortgage provider will not consider parking some of the debt because I have unsecured debt. Has anyone else heard of this criteria being used by any other bank. 

Thanks


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## batman123 (28 Jan 2014)

Has anyone heard of a situation with a mortgage provider will not consider a split mortgage if the mortgage holder has some unsecured debt. Thanks


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## batman123 (4 May 2015)

Batman is just about still here.

Following a number of assessments ebs/aib always used their own reasonable living expenses guidelines when assessing my account. After a data protection application it's clear in their last assessment they ignored their own guidelines and used the isi guidelines. AIB claim that they assess reasonable living expenses 25% above the isi guidelines.

Am I wasting my time pointing this out to them? The difference could allow me to be considered for other options

Thanks


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## Lone Star (5 May 2015)

Batman, you have to play hard. As for putting off having children as one poster suggested! Don't!!!! I'm childless as a result of property and it's heartbreaking. 
Get advice somewhere else also. Try an organisation called The Hub! Regards, Lone Star


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## batman123 (5 May 2015)

Thanks lone star,

Hope everyone can make it to ballsbridge on Thursday


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