# Interest only period almost up..advice on proposal to bank



## Jizzy (22 Feb 2014)

*Income details
Net monthly: *3000 private sector
*Net monthly *income partner/spouse: 4000 private sector
Amount of child benefit received 260 

*Personal circumstances so we can calculate your reasonable living expenses 
*Two adult family
Do you need a car for work or do you use public transport? Yes two cars tax & Insurance 1480pa
Number of 4 - 11 years old: 2 KIDS
Monthly childcare costs: 800
Montly spend on special circumstances: e.g. exceptional healthcare costs: 200



*Home loan
*Lender: BOI
Amount outstanding: 500K
Value of home: 380K
Interest rate: tracker 
Monthly repayment 2200 cap + int
Property tax & house Insurance 1000 euro

Amount in arrears Not yet 

Summary of discussions and agreements with the banks: Interest only on Investment properties expires April 2014. Trying to prepare proposal


*Investment property One – *
Lender: BOI
Amount outstanding: 460K
Value of home: 320K
Interest rate: tracker 
Monthly repayment 770 int only on most, a little capital.
Amount in arrears NOT YET..int only expires April 2014
Monthly rent received 1400
Property tax & house Insurance 800 euro
Case V tax 3000 approx.
Mgt fee 1400 pa

*Investment property Two – *
Lender: BOI
Amount outstanding: 200K
Value of home: 150K
Interest rate: tracker 
Monthly repayment 170 int only at present
Amount in arrears NOT YET
Monthly rent received 950
Property tax & house Insurance 500 euro
Case V tax 3000 approx



*Credit Union 
*Amount of shares N/A
Amount of loan outstanding N/A
Monthly repayment N/A
Term left N/A


*Other loans and creditors - *
Credit Card - monthly amount you are paying 3000 approx

*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? 
*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.


*Any other relevant information

What is your preferred realistic outcome? 
*We really want to keep our tracker……if that goes we can never repay our debts
If we start to hit capital on our BTLs then in ten years we might be able to sell and breakeven but this would mean we can’t pay cap + int on our home. Would bank entertain this? What's best course of action?


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## vandriver (22 Feb 2014)

What would be the full int+cap on the two investment properties?


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## Joe_90 (22 Feb 2014)

Have you been spending the surplus rent on day to day expenses?


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## Jizzy (22 Feb 2014)

10 years is up on the 25 year term so 15 years left to pay all capital. Assuming existing tracker rate then that would be 4400pm & also 2200 on home


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## Jizzy (22 Feb 2014)

what percentage of one's total net income do the banks expect you to pay over on a monthly basis? We have to pay the property tax and case V income tax too ...Tax man takes priority.


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## vandriver (22 Feb 2014)

So,if you sold both investment properties,and repaid the 190k shortfall at your tracker rates over 15 years,(approx 1200 a month),you'd have about €3800 per month after your own mortgage is paid.


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## Jizzy (22 Feb 2014)

Don't think the banks will let us stay on tracker though. That's the problem. If we are put on variable then god knows how the repayments grow as int rates increase. Also we would then be using our home as security for that extra 190k too.


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## vandriver (22 Feb 2014)

It might be the least bad option for the bank.(BTW is it the same bank for all 3 ?)


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## niceoneted (22 Feb 2014)

From what I can see you have circa 5k left from income per month after all outgoings that you have listed. 
Where is this money going? 
Surely if you were paying the difference of the rent received and interest only (minus expenses eg house ins, property tax, tax etc) you would be making a dent in the capital of the investment properties. 
Have you any savings?


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## Jizzy (22 Feb 2014)

No savings as it goes on case v tax & prop tax & repairs & maintenance.But yes u are right we could cut back & come up with an extra 500 or 600 a month. We don't spend much.. No car loans etc. just goes on kids, utilities etc. We just wondering best approach to take. Everything with BOI


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## vandriver (22 Feb 2014)

From your figures,there is 5k left after paying all the expenses and tax you mention.


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## Jizzy (23 Feb 2014)

no where near 5k if you amortize out our annual fixed costs over the 12mths
 I'm not arguing the fact we can and will definitely have to pay off more on a monthly basis but going back to my original question which loans should we concentrate on hitting cap & Int repayments and which will the banks want us to pay?


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## Brendan Burgess (23 Feb 2014)

You have €7,000 of net income

The Reasonable Living Expenses for a family of 4 with one car are €1,800 per month.

This leaves you with €5,000 to pay your creditors. 

Knock off €2,000 for your home loan and you have around €3,000 a month to contribute to your investment properties as well as the rent of €2,400 

You say that the full capital and interest repayments would be €4,400 - is that for both investment mortgages? 

So you would still have around €1,000 a month, but that will go to paying the costs and tax on your rental profits. 

Given the income you are on and the profits you have been making from the investment properties to date, it's would be tough for you to cut back to the Reasonable Living Expenses.  You would have to get rid of a car.  

But you have very profitable investment properties and a very cheap tracker on your home, so it's worth cutting right back to retain these. 

Bank of Ireland will extend the interest only period but only if you change to SVR. That will destroy you. 

*So what are your options? 
*1) Try to do a deal with Bank of Ireland - but refuse any deal which involves surrendering the tracker.
2) If they refuse a deal, cut right back and try to pay as much as possible. You will go into arrears but they probably won't take any action, as they have more urgent priorities.  But it's hard to tell. 
3) Bankruptcy or a Personal Insolvency Arrangment. I don't think that this would be a good idea for you as your trackers make your home cheap and your investment properties profitable. 

The best way for you to recover is if house prices rise significantly. I am not forecasting this, but it's the only way out for you. So you need to stretch this out as long as possible.  If house prices increase and if you make capital payments, you could get out of the negative equity. 

*What to propose to Bank of Ireland
*
Bank of Ireland will do what they can to get rid of three cheap trackers, so it will be hard to do a deal with them.

Ask for the home loan to be rescheduled to interest only under MARP. 

Offer to sell the smaller investment property and ask them to write off the shortfall in exchange for early repayment of the tracker. They will refuse but might allow you to add the deficit to your home loan and warehouse it.  Interest would continue to apply but you would not have to make any payments on it.  That would ease the pressure a bit. 

Maybe agree to sell the other investment property after 5 years and hope that capital repayments and price increases eliminate the negative equity.


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## Jizzy (23 Feb 2014)

So if we go interest only on our home we can keep tracker ( under MARP) & pay capital & Interest on the two Investment properties so we don't break the loan agreement so they can't take the tracker from us. Is this the case? Can we do this with or without bank agreement?
Realistically we can't survive on 1800. I'm not willing to either. I'd rather default & take my chances


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## Brendan Burgess (23 Feb 2014)

Jizzy said:


> So if we go interest only on our home we can keep tracker ( under MARP) & pay capital & Interest on the two Investment properties so we don't break the loan agreement so they can't take the tracker from us. Is this the case? Can we do this with or without bank agreement?



Hi Jizzy

Under MARP, the bank must consider all aspects of your case. But they have no obligation to offer you interest only. I only suggest it as they are more likely to facilitate you on your home than on a buy to let.  It's worth asking for, although I expect them to reject that as well. 

Depending on the mortgage agreement, they can probably appoint receivers to your investment properties without even going to the court. (They are unlikely to do this if you are genuinely engaging and paying the full rent to them.)  You could default on your home loan and pay your investment properties instead. It would take them a long time to repossess your home. I am _not _recommending this. I am just saying that you have more rights on your home than on your investment property.


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## niceoneted (24 Feb 2014)

Jizzy said:


> Realistically we can't survive on 1800. I'm not willing to either. I'd rather default & take my chances



There are a lot of people surviving on a lot less. This is a very reasonable figure. You borrowed the money, you can afford to pay it back so you should.


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## Gerry Canning (24 Feb 2014)

jizzy; 

Please do not fall into {i,d rather default & take my chances} .
If you do that you will certainly draw fire onto yourself. Boi have a lot more harder cases than yours and I think if you play hard ball they will hang you !

You still have 2 months.
For the next 2 months cut back on everything, itemize all expenditure.Offload things like Sky packages etc. 
Given your income you may be surprised at the savings.

You will then have  real handle on income in V income out.You can then really make a proper poposal to boi armed with real knowledge of your lifestyle and what you can or will or must do.
Fom reading the thread you are close to being ok.

Hang in and negotiate.  

Wish you luck.


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## Jizzy (24 Feb 2014)

Thanks Gerry & Brendan...really appreciate the constructive advice. 
Don't appreciate the judgemental comments made by others.


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## QED (24 Feb 2014)

Jizzy said:


> Don't appreciate the judgemental comments made by others.


 
It does read like you have the Cash Inflows to sort this out but it wouldn't leave enough to sustain your current lifestyle.

I can completely understand your reluctance to commit to this because yourself and Spouse must have successful Careers to earn the salaries you do, and there is a certain expectation and entitlement from working hard to get to this point.

However, you made the same mistake that many did, and you have borrowed at least €1.2M to purchase 3 Properties. This is an huge amount of money to repay and you are relying on 'goodwill' of banks to facilitate you.


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## Jizzy (24 Feb 2014)

We do aim to pay back the loans but we can't if they put us on variable. If we stay on tracker we can chip away at the capital & eventually hit break even so we can sell the BTLs. We are not anticipating any favours from the bank and don't expect to be bailed out, despite the fact the government bailed out the banks! if we knew property would fall so far & mortgage int relief would drop to 75% then we wouldn't have held on to those BTLs but we had no crystal ball.


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## Brendan Burgess (24 Feb 2014)

Folks

Nora took this thread off topic with a story of her own/.

Please don't reply to such posts. I have deleted her post and the responses. 

Brendan


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## Bronte (25 Feb 2014)

Jizzy said:


> We are not anticipating any favours from the bank and don't expect to be bailed out, .


 
Well it looks to me based on what you posted that is exactly what you want. 

Is the 3K on credit card spend in the opening post an error. 

You are not willing to forgo lifestyle to fund your purchases, is that correct?

Where on earth is all your income going. 

Income 7260, and mortgage of 2200 = 5060 to live on. 

Investment 1. Rent 1400 less 770 + 66 + 250 + 116 = 1202. Excess 198

Investment 2. Rent 950 less 170 + 41 + 250 = 461. Excess 489

So on top of your 5060 you are getting income from the rentals of 687 Euro. I'm absolutely amazed the bank have even accommodated you thus far. You're not even paying that excess to them and you're not paying them a penny out of the income of 5060.

If the bank appoints a rent receiver you will be in really big trouble. You'll end up in a far worse situation, and when they get around to you, they have your lovely fat salary to take and you will be forced to an income of 1800 a month.

Maybe that's why they haven't bothered with you up to now, they know your income and the bigger the mess you're digger yourself into they will get everything back.

What exactly is the term of each mortgage, the actual interest rate, and were they originally interest only etc. How did the low payment of 170 Euro on Investment property 2 come about. A rough idea of your ages would also be helpful.

Do you have any savings?


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## Springsteen (25 Feb 2014)

" The Reasonable Living Expenses for a family of 4 with one car are €1,800 per month. " Quote, Brendan Burgess.

I've seen internal bank documents recommending a family of four live off 3000 euro per month.

Remember, some of your monthly expenses are property related (BTL's, insurance, management fees, Tax etc)

Best of luck in restructuring your loans. Unfortunately the banks only take notice of your situation when you're in arrears. They're snowed under at the minute.

My advice, protect the family home at all costs (and the tracker). Let the BTL's go into arrears. Write to the bank with a genuine proposal, meanwhile organise your monthly expenses to fall within 3000 euro per month.

The banks are doing deals. Remember there is already a bad debt provision in place for you negative equity.

Whatever you decide, best of luck.


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## Bronte (25 Feb 2014)

Springsteen said:


> "
> 
> Remember, some of your monthly expenses are property related (BTL's, insurance, management fees, Tax etc)
> 
> .


 
Even with all that deducted the OP is taking money from the rentals.  

I think it's very dangerous advice to give someone on a high income the suggestion to default on the BTL's.  Fair enough if she cannot afford them, but that does not seem to be the case.


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## Jizzy (25 Feb 2014)

Thanks Springsteen, thats my thought too....we wil protect our home at all costs & keep the tracker on it. With the BTL's we will come up with some proposal that is realistic for us. If BOI agree great if not then we will go into arrears and they can have the keys.


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## Springsteen (25 Feb 2014)

Bronte, I'm not advocating arrears as a solution, where appropriate its a negotiating tool. Let me clarify, I'm suggesting the Op allow 3000 living expenses (not including BTL property related costs) and then pay PPR full Capital and Interest. If there is money remaining pay what you can off the BTL's. If not go into arrears on BTL's. PPR is safer. Tracker is safer. The number crunching and negotiating will start with the BTL's, selling them, refinancing or forgiving residual debt.

My point about arrears is sad but true, the banks will not negotiate with you as long as your loans are performing. Why would they? In fairness to them they're too busy dealing with much worse cases day in day out. Its akin to ringing the insurance company to tell them a tree is about to fall on your house, they'll ask you to call back when it does!

If the Op genuinely cannot cover all debt, which i'm assuming is true, then arrears is inevitable. In that case use the arrears to your advantage if the banks wont negotiate.

Best of luck Jizzy


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## Jizzy (25 Feb 2014)

Springsteen, the ideal situation would be if they allow us go interest only on our home and cap & int on the rest...then there would be light at the end of the tunnel as we would breakeven & sell within 10 years. We have a few proposals ready. We will of course cut back but we will not live afraid to turn on the heat or elec. & compromise on our kids education. We have US passports so if things get too rough then we will leave Ireland.


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## Springsteen (25 Feb 2014)

Jizzy, int only on your PPR will improve cash flow. Deleveraging on the BTL's will reduce the negative equity. Capital appreciation will do the same, however, speculation is not the best practice in these scenarios. (we both read the same papers and yes poperty and rent are on the up!). 

For your PPR, consider your age and the years remaining on the loan. At some stage you'll have to pay it off or sell.


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## Bronte (25 Feb 2014)

Jizzy said:


> . We will of course cut back but we will not live afraid to turn on the heat or elec. & compromise on our kids education. .


 
What do you mean cut back, you've into your hand near on 8k a month, and you think cutting back means not having heat or electricity. 

You really need to be very careful before you do anything drastic with the banks, they are most definitely going after people this year. So I'll once again advice you to not default on the BTL's as you'll get their backs up, and your worst case scenario of losing the two great trackers will be on the table, as will the appointment of rent receivers.

It is absolutley not simply a case of you defaulting and you giving them back the keys. With your income you should actually seek proper financial advice from someone who can negotiate for you.


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## Bronte (25 Feb 2014)

Springsteen said:


> The number crunching and negotiating will start with the BTL's, selling them, refinancing or forgiving residual debt.


 
Do you actually think it is possible for a write off of debt in the case outlined?


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## Jizzy (25 Feb 2014)

No they won't write off the deficit....They may put a judgement on our house but there is no equity there either..........


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## ClaireM (25 Feb 2014)

Jizzy said:


> No they won't write off the deficit....They may put a judgement on our house but there is no equity there either..........



Do they not also have the option of applying to the court a judgement and then an installment order for any deficit? With your income they could probably get a significant installment?


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## Jizzy (25 Feb 2014)

If it goes that far, we'll be gone


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## Bronte (25 Feb 2014)

Jizzy said:


> If it goes that far, we'll be gone


 
So much for you not being bailed out as per post 20.  You can afford to pay, don't want to pay and want us taxpayers to pay if you decide to high tail it to America.


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## 44brendan (25 Feb 2014)

Policy of threatening to leave the country may not in practise prove to be that simple. i.e. with both parties on high levels of salary & assuming employed by Irish companies it would likely be difficult to re-locate & assume that both jobs and salaries could be easily replaced in the US. OP, you have received good advice in how to approach the banks and you are likely to have some level of flexibility if you co-operate with them. Given your financial position, I would not be hopeful of agreeing any write down of the balances outstanding!


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## Jizzy (25 Feb 2014)

Yes good advice received. Thank you all.
Bronte don't know why you are annoyed with me. The government created this situation. The tax payers are paying for the governments decision to bail out the banks.
They aren't interested in looking after the people only institutions. I have paid thousands in stamp duty & now hit with property tax. I pay huge amounts of PAYE. What has the government done for me? I'm on my own.
I'm signing off now. Good luck to all.


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## mrbea (25 Feb 2014)

Jizzy said:


> Yes good advice received. Thank you all.
> Bronte don't know why you are annoyed with me. The government created this situation. The tax payers are paying for the governments decision to bail out the banks.
> They aren't interested in looking after the people only institutions. I have paid thousands in stamp duty & now hit with property tax. I pay huge amounts of PAYE. What has the government done for me? I'm on my own.
> I'm signing off now. Good luck to all.


 
There is something funny here.  Lets look at the figures. The properties are currently worth 850k and loans outstanding are 1160k.   That suggests the properties were bought say 6 or 8 years ago, as many properties were. 
How much did the properties cost?   Say 1.3 million as you have been paying off capital on the PPR and may have had deposits on some / all of the properties.  
Now lets look at your joint income, which is 84k a year.  I assume that is net of taxes?   Are all borrowings in joint names : lets assume they are? 

What bank lent you 1.3 million when your income is only a tiny fraction of that.  Interest rate, tracker rates now are much lower than they were say 5 or 8 years ago....I remember they fluctuated between 3 and 6 % approx then.   At one stage (about 2007/8? ) they were 6%.  , in which case interest only on your loans then would have been 78,000?  And you were paying interest plus capital on your ppr?  How did you survive?  What bank approved that? 

Best of luck in whatever you do anyway.


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## Brendan Burgess (25 Feb 2014)

Jizzy said:


> ...
> . The government created this situation.
> 
> The tax payers are paying for the governments decision to bail out the banks.
> They aren't interested in looking after the people only institutions. .



Hi Jizzy 

I would be concerned that this way of thinking will reduce your chances of getting a deal.  

The government did not create this situation on their own.  In fact, you are primarily responsible for your predicament, because you borrowed heavily for a speculative investment. 

This is not some academic argument. If you accept that you are the primarly cause of the problem, you will then accept that it really is up to you to solve the problem. If you are hoping that the goverment or the tax payer or the banks will bail out a speculative investor with a net income of €80,000 , it may prevent you from sorting this out directly yourself.


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## Sully 12 (24 Apr 2014)

Hey Jizzy, We are in a similar position but have already re-emigrated back to USA as unable to find stable employment. I am curious to see how your situation worked out. Our mortgages reverted back to variable rate and we are now in arrears on both investment properties.


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## ClubMan (26 Apr 2014)

Springsteen said:


> " The Reasonable Living Expenses for a family of 4 with one car are €1,800 per month. " Quote, Brendan Burgess.
> 
> I've seen internal bank documents recommending a family of four live off 3000 euro per month.


I think that Brendan may be quoting the Insolvency Service of Ireland figures. The banks may have their own figures for "necessary expenditure". Certainly in the case of a single parent with one child plus car the ISI figure (I think it's about €1.3K) is lower than BoI's (€1.6K).


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