# Meeting AIB - what should I negotiate for?



## zxcvbnm (30 Apr 2013)

*Personal and income details*
Net (i.e. after tax) Income self: I receive about £4.300 net each month (I have lived in UK for last 3 years)
Income history: I am an IT contractor - when working, depending on contract, I can earn more than abocve. Above is probably my base. 
Net income partner/spouse: No significant other
Income history: 
number of children: I have no children
Amount of Mortgage Interest Supplement received : N/A
*Home loan*
Lender: I have no hoime as such. I rent in UK - and have 3 investment properties in Dublin. 2 are jointly owned with my sister - 1 owned solely by myself
Amount outstanding: N/A
Value of home: N/A
Interest rate: specify whether tracker or SVR or fixed rate
Monthly repayment 
Amount in arrears 

*Investment property 1* 
Lender: AIB
Amount outstanding: €410,000
Value of home: €275,000
Interest rate: c. 3%
Monthly repayment : 1100 (Thsi is interest only)
Amount in arrears: €15,000
Monthly rent received 1200

*Investment property 2*
Lender: AIB
Amount outstanding: €230,000
Value of home: €180,000
Interest rate: c. 3%
Monthly repayment : 900 (This is interest only)
Amount in arrears: €0
Monthly rent received 1000
Note: THsi is jointly owned with my sister

*Investment property 3*
Lender: AIB
Amount outstanding: €357,000
Value of home: €180,000
Interest rate: c. 3%
Monthly repayment : 900 (This is interest only)
Amount in arrears: €0
Monthly rent received 1000
Note: THsi is jointly owned with my sister


Note there is the a further €102,000 remortgage which was secured across teh equity off a combination of all teh above along with some from another property owned soly by teh sister who jointly own 2 of the above properties with me.

*Other loans and creditors -*


Personal unsecured loan to AIB - €30000
The VAT man - c. €45k-€50k. I currently pay them back about €350 a month. (I reclaimed VAT on teh investment properties when I bought them origianlly meaning I must pay VAT on my rental income - have the above amount outstanding)

My now 77 year old Mother has signed as a guarantor for up to €100k at the time of taking out the mortgage. THis was just for teh property I own by myself.
Her financial situation:
She owns her home outright - worth c. €300k.
She owns a commercial property outright worth about €200k for which she receives monthly rent of €600 a month. 
THere is a small holiday him, eqworth about €40k- 50k which is of enormous sentimental value to her.
She also has savings but dont know how much. Maybe €50,000 at a wild guess. She also receives a small pension. 




*Other savings and investments *
€15k in cash

*How important is retaining the family home to you? *
I dont own a family home as such. I am a single 37 year old guy - I rent in Uk. And obnly own investment properties in Ireland.

*Any other relevant information*

*What is your preferred realistic outcome? *
Declaring Bankruptcy in UK - howver this has significant consequences for my Mother and sister. Would be the ideal solution only for that.

*General Comments and summary*
It looks like AIB have finally agreed to meet me proper(as opposed to going through teh branch which was takling forever).

In summary my situation is that it costs me €12k a year between all property associated expenses just to keep them goinmg - and thats while I'm only paying interest only.
Between what I owe teh VAT man and teh negative equity in property I reckon I am down about not far off €400k.
SO basically I am paying out €12k a year just to remain at €400k debt. I've realised this cant go on.

I live in UK and woudl go bankrupt - but as my MOther has acted as a guarantor for €100k for the property I owmyself (Investment property 1 above). She is 77 years old and obviously I dont want her invvolved at all in any way (She has compoletely forgotten she ever even signed as a guarantor)

The next issue is teh fact that as I co-own 2 of them with my sister, if I choose to go bankrupot, then my understanding is theyt woudl sell the properties and she would then owe any shortfall as I woudl be bankrupt.
So the above 2 reasons are why I belive bankruptcy in teh UK is unfortunately not an option for me.

Saying all of the above - I am between a rock and a hard place as obviously I can not continue what I am doing. I am self employed also as an IT contractor. I coudl easily have times ahead when I am not in employment anyway. Currently I am paying out €12k a year for teh privilege of remaining €400kj in debt !

SO what do I go to the bank with. 
I suggested me and my sister swap our half shares so that we then owe one each outright - that would get her oput of the puicture. BUt I have been in topuch with the bank and it seem sunlikely they will agree.

When I meet teh bank next week (It is teh guys in tehmortgage lending department themselves I believ I am meetuing - yet to be confirmed) - what shoudl I try to negoitiate with them? 
I've no idea at thsi stage what is a good outcome or bad outcome.

They already 'suggested' over email that I sell the properties and they woudl then set up a loan for teh residual debt - but for me that is c. €325k (excluding teh revenue) - I woudl never be able to pay that back either. (AT least by keeping onto the properties there is some chance of an uplift in prices to eat into teh deb over teh next decade or something)

Also - realistically how woudl they tackle the guarantee my Mother gave? I have outlined her financial situation above. 
Ideally they woudl put a charge on teh home or something until her death meaning she woudl not be effected.  Is it likely they woudl force her to sell tehy commercial property? SHe receives rent from this so they woudl be cutting off an incom,e stream.

Anyone any advice?


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## cremeegg (2 May 2013)

Some thoughts after reading your post.

Your major strength in negotiations is that you are living in the UK and could go bankrupt there. This would be very much to the banks disadvantage.

Your weakness is your situation with your mother and sister, there is no need to draw the banks attention to this. If they mention the problems you going bankrupt in the UK would cause them, I would respond by saying, "Yeah thats unfortunate but what can you do". Don't let them see that you care.

Make it very clear to the bank that the present situation cannot continue. That if you (they) cannot come up with an alternative then UK bankruptcy looms. Then put the situation to the bank, with a "what do you suggest" attitude. See what they come up with.

They might agree to something along the lines of selling the properties (would this extinguish the security your mother has given) and leaving a loan over a long term. With this done you could later go bankrupt in the UK. This would leave your sister with the loan. After the bankruptcy is over you could contribute to the loan payments.

Not nice, but I don't see a better alternative.

Finally and I have to ask. How can you be an IT contractor and unable to key in "the"?


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## elcato (2 May 2013)

Firstly, you need to separate the VAT bill/arrears from the property situation. This has nothing to do with the bank. I'm not sure how true this is but in one of those 'great programs' made by RTE about people in negative equity and in a split mortgage, the woman claimed that her ex had gone bankrupt in the UK and she was saddled with all the debt on her current home. If this was true (note this could have been sensationalist garb) then bankruptcy is not an option and the bank would be aware of this, unless of course your sister was going to do the same.



> Finally and I have to ask. How can you be an IT contractor and unable to key in "the"?


or know where the spell check is ....


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## zxcvbnm (2 May 2013)

elcato said:


> Firstly, you need to separate the VAT bill/arrears from the property situation. This has nothing to do with the bank. I'm not sure how true this is but in one of those 'great programs' made by RTE about people in negative equity and in a split mortgage, the woman claimed that her ex had gone bankrupt in the UK and she was saddled with all the debt on her current home. If this was true (note this could have been sensationalist garb) then bankruptcy is not an option and the bank would be aware of this, unless of course your sister was going to do the same.
> 
> 
> or know where the spell check is ....


 
I didnt see the program - but that sounds right. If you enter a joint loan with the banks then both parties are independently liable for the full amount. 
So that is what would happen here with my sister.

THis is the conundrum I am in. I see no way out. Bankruptcy doesnt seem to be an option due to the above. And the way I am going this is just never-ending debt and getting absolutely nowhere.

It's the ultimate financial rock-and-a-hard-place I feel.

If the banks do eventually force me to go bankrupt does anyone have any experience as to how they may act against my Mother for the €100k?

MY hope would be that they would put a charge over one of her assets and in teh event of her death theywoudl then force a sale - which means I woudl lose out on inheritance but obviously that would be fine by me. It would shield her from any forced sale now. How likely is that does anyone know? THsi is my main concern really.

Also please note my improved spelling


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## elcato (2 May 2013)

I think your figures of 12k p.a. are a bit high as regards servicing the debt at the moment. I suspect the shortfall on your own property is probably about 3-4k and the other two might be 2-3k. This puts you in effect paying back 5k just to service things. If you do get a deal to sell and take the NE as a loan you will be paying back 4% on 400k which is a lot more than what you would at the moment. Your situation is not the best but not that bad either given the recklessness of your actions over the last few years (not lecturing). Sitting tight seems to me to be the best option at the moment. If circumstances change then deal with them then. I'm afraid if you're looking for a quick fix there just isn't one right now. Being optimistic, house prices could rise and rents could rise so that could improve your position down the line.


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## zxcvbnm (2 May 2013)

elcato said:


> I think your figures of 12k p.a. are a bit high as regards servicing the debt at the moment. I suspect the shortfall on your own property is probably about 3-4k and the other two might be 2-3k. This puts you in effect paying back 5k just to service things. If you do get a deal to sell and take the NE as a loan you will be paying back 4% on 400k which is a lot more than what you would at the moment. Your situation is not the best but not that bad either given the recklessness of your actions over the last few years (not lecturing). Sitting tight seems to me to be the best option at the moment. If circumstances change then deal with them then. I'm afraid if you're looking for a quick fix there just isn't one right now. Being optimistic, house prices could rise and rents could rise so that could improve your position down the line.


 
Its actually not far off the 12k.

Take my own property as an example.
Property tax - c. 600
NPPR - 200
PRTB - 70
Managment comapny - 1800
VAT on rental ioncome as I registered for VAT on purchase of properties - 2400 (which admittedly does come off the capital I owe the revenue)
Assuming a void period in the year - 1000
Ad hoc tasks that come up in the year - 500
Insurance - 180

The above all adds up to 6750. I then have a further half share in the other 2 properties. So whatever the total is, it's a sigtnificant sum I am handing out each year.
I think €12k is about right.

I see your point of the interest rate on the shortfall versus what it costs me to keep them going at the moment. Assuming 12k is correct, then it is effectively 3% interest I am paying on a €400k loan - while keeping the prospect of property prices eating into the debt in the future.

THat is why I am thinking I should definitely not take the deal the bank are suggesting of selling up and taking out a loan of residual debt. It woudl be a higher interest rate and no prospect of debt being eaten into by property price gains (assuming we are near the bottom right now)

I feel if there was just some way I could get my sister out of the picture then that would help a lot.
For us to swap our half shares and own one propertyu each outright (as opposed to us both having a half-share in 2), the bank said that basically we would have to re-alpply for new mortgages and then if we are with AIBs current lending criteria they may accept this.
But given our debt I very much doubt we will fall within their lending criteria - so that seems a non-runner.

AIB are tryingto force me onto capital repayments also which woudl obviously be the death knell.

One suggestion I have is allowing me enter into a 10 year interest only agreement or something like that. 
If I was the bank that to me would seem a good choice for them - albeit not so great for me. But may be the best my situation can offer.

Or is there any other possible solution that somneone can see that I am not seeing?


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## elcato (2 May 2013)

Well if you're negotiating and assuming you agree to sell 3 properties I would look for the following
1) Separate all debt into you singly and your sister singly
2) Have the mother's guarantee abolished (or whatever the term is)
3) You and your sister get a loan separately to deal with the shortfall
4) Wait a year and go bankrupt on your side of the loan
5) See if your sister can follow suit on her side

This may suit you but your sister of course may not agree as she may not want that. You could try a sweetener of after you go bankrupt offer to deal with half the amount outstanding that your sister owes. After all she looks like getting left in the lurch.
Alternatively rather than agree a whole payback of loan on the NE you could agree (with your mother's consent) to a charge on the family home so that you can defer till it's sold.


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## zxcvbnm (2 May 2013)

elcato said:


> Well if you're negotiating and assuming you agree to sell 3 properties I would look for the following
> 1) Separate all debt into you singly and your sister singly
> 2) Have the mother's guarantee abolished (or whatever the term is)
> 3) You and your sister get a loan separately to deal with the shortfall
> ...


 
It is a viable strategy - but as you point out, the thing there is that while it suits me as I am in the uk,it completely screws my sister as it woudl straddle her with a huge debt and no prospect of property price increases aiding her in the future. She will be remaining in Ireland.
(Her current total debt all in is about €120k - which compared to my €400k is at least manageable to some extent.)

I dont know where to go from here really. Normally when peopel are in debt, bankruptcy provides the way out - but in my scenario, not so.

I am beginning to think all I can do is go to the bank and insist they extend the interest only period indefinitely - and hope that property increases in value.
If they insist on capital repayments then I dont have it - menaing if they force a sale then my hands are tied at that point and I just have to deal with the consequneces I guess.

I just do not see any better resolution at this point.


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## elcato (2 May 2013)

> If they insist on capital repayments then I dont have it - menaing if  they force a sale then my hands are tied at that point and I just have  to deal with the consequneces I guess.


Then you politely tell them (off the record, not in writing) to get a court order and that in the meantime you will stop all payments from your rental income and pocket it. They will lose at least a years repayments and you will go bankrupt on your property alone. This may be enough to persuade them that you mean business. You could of course call their bluff altogether by saying you will do the same with the joint mortgages and see if they blink.


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## Negotiator (2 May 2013)

One thing worth considering is to offer AIB a cash settlement in lieu of your mother's PG. It's quite possible they would accept something in the region of €30k to €50k (possibly less depending on your mothers entire situation). A large chunk of cash I know but at least this would remove your mother out of the equation if she'd agree to the cash settlement.

AIB are leading the charge on debt deals and are probably the most realistic (not saying easy though) at the moment......the others really need to follow suit! 

I know it still leaves your sister but one step at a time. It might suit to sell the property and just let the bank take a second charge on her own home if there's substantial NE on it anyway. Then the second charge will fall away after 12 years!


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## zxcvbnm (2 May 2013)

elcato said:


> Then you politely tell them (off the record, not in writing) to get a court order and that in the meantime you will stop all payments from your rental income and pocket it. They will lose at least a years repayments and you will go bankrupt on your property alone. This may be enough to persuade them that you mean business. You could of course call their bluff altogether by saying you will do the same with the joint mortgages and see if they blink.


 
Ok - just to take this point, I dont underatand what you mjean I will go bankrupt on my property alone.

My undesranding is that I as a person go bankrupt. Are you saying I can gto bankrupt on a per property basis?
(i.e. dont go bankrupt on teh jointly owned properties?)


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## zxcvbnm (2 May 2013)

Negotiator said:


> One thing worth considering is to offer AIB a cash settlement in lieu of your mother's PG. It's quite possible they would accept something in the region of €30k to €50k (possibly less depending on your mothers entire situation). A large chunk of cash I know but at least this would remove your mother out of the equation if she'd agree to the cash settlement.
> 
> AIB are leading the charge on debt deals and are probably the most realistic (not saying easy though) at the moment......the others really need to follow suit!
> 
> I know it still leaves your sister but one step at a time. It might suit to sell the property and just let the bank take a second charge on her own home if there's substantial NE on it anyway. Then the second charge will fall away after 12 years!


 
Sorry - you've lost me slightly. not sure I fully understand your comment about a second charge? WHat was the first charge?


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## elcato (2 May 2013)

> Ok - just to take this point, I dont underatand what you mjean I will go bankrupt on my property alone.
> 
> My undesranding is that I as a person go bankrupt. Are you saying I can gto bankrupt on a per property basis?


A crap - yeah, I contradicted what I said earlier. I'd still threaten it though minus the bankrupty and maybe even chuck in 'Sure the sister is thinking of going abroad anyways' comment.


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## Bronte (3 May 2013)

zxcvbnm said:


> If the banks do eventually force me to go bankrupt does anyone have any experience as to how they may act against my Mother for the €100k?


 
They could put a judgment mortgage on her home, then they could go for a well charging order and evict her in order to get their 100K. That's a worst case scenario. Alternatively they might go after the commercial property. They might agree to converting it into a loan that she (you ) pay.

I'm confusing about how the VAT works on the rentals?

Does your sister have a job and assets and is she single or married etc. Need more detail on this.

You want to be very careful how you play this. AIB are not stupid and will know that if they let your sister and mother off that you will go bankrupt, now way will this go for this. Particularly in relation to your mother as she has assets. 

You need to think of this from the banks point of view. What would you want from the borrower in this situation. If I were the bank there is no way I'd go for some of the suggetions on here. It's a very very complicated situation.

Are there other siblings?


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## elcato (3 May 2013)

> You want to be very careful how you play this. AIB are not stupid and  will know that if they let your sister and mother off that you will go  bankrupt, now way will this go for this. Particularly in relation to  your mother as she has assets.


In my experience we give waaay to much credit to the negotiators here. Your mother's guarantee is purely on your property so the most she can lose is the 100k. That's small feed in comparison to what AIB are in for here.


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## zxcvbnm (3 May 2013)

Re the VAT, in the past when you bought a new property the price would include VAT. As an investor you were allowed reclaim the VAT - but then your rent would be inclusive of VAT meaning you must give about 1/6 of your rent back to the vat man until the amount of VAT you reclaimed day one is paid back. Depending on the rent you receive this could normally take 15 years to repay. Essentially it enabled people to get an interest free loan from the revenue.  The vat lump sum  I received is now gone. This scheme is no longer available anymore either. 
I still owe about €50k of that VAT. that is included in my overall debt figure of c. €400k. 

Yeah - your right about the possible consequences for my mother in that worst case scenario you outline. I'm  just curious in practice what I could actually expect to happen. 

My sister is single and she is in total negative equity of around €140k. She also has another property which she is paying both capital and interest.


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## zxcvbnm (4 May 2013)

As an aside - of my 400k debt, 30k of it is an unsecured loan of which I am paying €305 a month over the next 12 years covering both interest and capital. I'm thinking of just stopping paying this completely and instead use it to pay off capital off my own solely owned property for which my mother acts as a guarantor to the tune of 100k thereby lessening her liability. 
In practice how would the bank react if I did this?

I am guessing they could in theory force me bankrupt - which in turn would then force my sister bankrupt resulting in AIB crystallising a 500k loss which wouldn't make much business sense to me. 
Am I reading this correctly ?


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## zxcvbnm (5 May 2013)

Sorry to bump this one - but I have come up with one possible solution. Leaving my mothers guarantor aside for the moment, if I was to  declare bankruptcy in the UK, how would it effect my sister ?
I'm thinking the joint mortgages would all then go to her.  
However - that would then result in her being forced into bankruptcy. 
Or would it ? I wonder would they come up with some deal with her such as to allow a swap of the joint properties ? Currently she is paying back capital and interest on her own property and we are currently paying interest on the 2 joint properties. 
So I'm thinking would it be in AIBs interest to allow a swap or some debt deal ? - otherwise it would result in them realising a further 150k loss.

I would really appreciate some opinions back as I really don't know what to do - it seems more complicated than all other situations I've seen on this forum. I really need to approach AIB with some suggestion and I've no idea what to go to them with.


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## Bronte (6 May 2013)

If you go bankrupt your sister becomes liable for the full mortgage on the 2 investment properties she has with you. Can you post all her details. Ideally what you should do is ask the question as though you were the mother and then the sister. Maybe a separate post for each. Your situation is very complex.


If your mother's loan gets called in what are her options. Could your mother sell the commercial property and with the 150K out of the 200K plus her own 50K she can pay the 100K. She could then buy a different property and get rent from that.

What the the mortgage term on each of the loans. Any possibility of extending this and would that get you back into a profitable situation.

Also how many years to go until the NE is eaten up? Have you got an amortisation table?

How much per property are you subsidising them by.  Where is the 102K remortgage in all the figures above.


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## zxcvbnm (6 May 2013)

My sisters situation is that she is single, rents an apartment in Dublin, and between another property she owns outright in our hometown(which she is re-paying capital and interest ) along with the 2 half shares she owes with me in the other 2 properties she is in combined net negative equity of around 150k. She earns about 75k-80k a year. 

I understand that my sister would be liable for both joint mortgages if I go bankrupt - but basically I'm trying to come up with some creative deal by thinking outside the box which the bank may go for. That's the main point of this thread really. 

If my sister is lumped with both joint mortgages then she would basically be forced to go bankrupt as that level of debt would be too much. So does anyone think the bank may allow a swap of co-owned joint properties so as to allow her not go bankrupt. The benefit for the me is that it allows me go bankrupt (which is beginning to look more and more unavoidable ) - and the benefit for the bank is that she wouldn't need to go bankrupt resulting in the bank not realising  that further 150k negative equity she is in. 
(In thinking of bluffing the bank saying that my sister will instead join me in the UK and go bankrupt there and that way the bank loses out on well over 400k net).
Or uis there any deal I could offer them ? I think I have good earning potential also. Even with these debts I have I think it's possible I could still save close on 100k in the next 3 years. I could offer that as the savings come in and then go bankrupt?( or else give to my mother before going bankrupt) Any good haggling position for me to take when I meet AIB?

Re your suggestion of my mother buying a new property with money she has left over if she has to bail me out, this is not an option for her. She is 77 years of age and would have no interest in buying new property.

Not sure what an amortisation table is but property wound need to increase by about 70% before BE is eaten up. 

The 102k is included in the net NE figures above (sister at 150k NE - me at c. 400k NE)

It costs me about 1500 a month out of my pocket to maintain them for (I'm paying nothing off my capital at all ) - costs my sister about 600 a month.( she is paying some capital off the one she owns by herself but that's it)


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