# Case Study; mid thirties family guy



## BrokeGuy (22 May 2014)

Hi guys,

Comments welcome; shame it has come to do but...


 

*Income details
Net monthly *(i.e. after tax) Income self: Full time employment (private sector), net pay for me is €2,605. I am full-time employed for last 6 years.

*Net monthly *income partner/spouse:  Part-time employment (3 jobs), net pay is €1,260 and she has been working like that for the last 2 years (before that was unemployed for 18 months and before that she was made redundant – no redundancy.

*Amount of child benefit received:* €260 

*Amount of Mortgage Interest Supplement received*: €0

*Personal circumstances so we can calculate your reasonable living expenses 
*
*Do you need a car for work or do you use public transport?*    2 cars needed 
*Number of children 0- 2 years old*:    1 child
*Number of 3 years old children:* 
*Number of 4 - 11 years old:*              2 children (one is only with me 50% of the week)
*Number of 12 - 18 years old:*
*Monthly childcare costs:*                  €350 per month (one child is on half days, the other is on that “free school year”
*Montly spend on special circumstances: e.g. exceptional healthcare costs* : €310 per month maintenance to mother of my oldest son



*Home loan
**Lender:    *Bank of Scotland*
Amount outstanding:  * €286,000
*Value of home*:  €180,000*
Interest rate: specify whether tracker or SVR or fixed rate:* Tracker so paying very little, 1% over ECB maybe*
Monthly repayment : *€700 now, reduced repayment*
Amount in arrears :  *None
We have been in MARP for years now, honestly can’t remember, maybe 4 years or so and in that time we have been paying €700 per month. 

*Investment property (1)*
*Lender: *AIB *
Amount outstanding: *€195,000*
Value of home*: €115,000*
Interest rate:  *Small again, tracker*
Monthly repayment  *€249*
Amount in arrears  *None   (see below)*
Monthly rent received *€600
Re arrears, bank are pulling the plug on interest only but we are making payments each month of the interest but the bank are deeming an arrears to exist of circa €4,000 which we don’t even acknowledge

*Investment property (2)*
*Lender: *BOS *
Amount outstanding: *€140,000*
Value of home*: €45,000*
Interest rate:  *Small again, tracker*
Monthly repayment  *€350*
Amount in arrears  *€700*
Monthly rent received *€350
Was paying capital and interest up to February of this year when going on reduced payments. In arrears because my DD didn’t commence due to SEPA and when it did I didn’t have the money.
*Investment property (3)*
*Lender: *BOS *
Amount outstanding: *€35,000*
Value of home*: €25,000*
Interest rate:  *Small again, tracker*
Monthly repayment  *€150*
Amount in arrears  *€300*
Monthly rent received *€0
Was paying capital and interest up to February of this year when going on reduced payments. In arrears because my DD didn’t commence due to SEPA and when it did I didn’t have the money.


*Credit Union 
**Amount of shares  *€1,500
*Amount of loan outstanding *None*
Monthly repayment  *n/a*
Term left*  n/a


*Other loans and creditors - **
Credit Card (self) - amount outstanding: *€8,000*
Credit Card - monthly amount you are paying  *Nothing, in process of claiming it as a bad debt
*Credit Card (spouse) - amount outstanding: *€8,500*
Credit Card - monthly amount you are paying  *€250 per month but that is getting too hard

*Other savings and investments   **None

Do you expect any lump sums in the medium term future?  I wish!... No*
*

How important is retaining the family home to you?    **Very but being 35, €289k is a lot to repay so can’t see that being possible with 3 kids etc**Which of the following best describes your situation? *

*I don't care about keeping the family home. 
I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it. 
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.   **This one – if possible*


*Any other relevant information

What is your preferred realistic outcome? 

*
The capital and interest on my home loan over 25 years at 4% is €1,505 and I think the most we can pay, based on current circumstances is €1,050 and that would require the loan to be €200,000 or thereabouts. Granted we could commit to €286k over 25 years at current rates but they won’t last forever and if they revert to anywhere near 4% I would be in a pickle once more unless our income increases and who can bank on that.
Renting a house at my age with 3 kids is seriously underwhelming so not sure what I can do.


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## Bronte (22 May 2014)

BrokeGuy said:


> *Income details*
> 
> *Net monthly *net pay for me is €2,605.
> *Net monthly *income partner/spouse: €1,260
> ...


 
What has your two banks said to you?

Why is there no rent on Property 3

How much are the properties costing you in maintenance and taxes and other costs

What are the exact tracker rates for each of the 4 properties

What are the full repayments on each mortgage and it's term

Please double check my figures. What happens the income left after expenditure of €2716? 

Your rental income exceeds the current mortgage payments by €200


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## BrokeGuy (22 May 2014)

*What has your two banks said to you? *AIB are being an ass in that they wont officially grant interest only saying they want capital and interest when it is clear I can’t pay that. BOS have granted interest only with little hassle other than the  bible of info I have to give them each time – lately they are really slow in getting back to you and are now a nuisance about it. I have made no proposals on the overall long term problems.*

Why is there no rent on Property 3? *This is an apartment in Bulgaria which was bought with a loan for €45k and they don’t pay rent but I don’t pay maintance any more – I ask them to offset the rent to that.*

How much are the properties costing you in maintenance and taxes and other costs*: The three rentals cost probably €2,500 in a good  year and more if anything needs to be fixed… usually only about €2,500 - €3,000 though.*

What are the exact tracker rates for each of the 4 properties *Sorry but I don’t know, I think the house is plus .75% with the others being plus 1.1% *

What are the full repayments on each mortgage and it's term: *Has to be an estimated because so long since paying full repayments, something like this:
Home: €1,200 over 25 years
Rent (1) : €1,000 over 25 years
Rent (2): €635 over 17 years (this is actual)
Rent (3): €240 over 18 years (again actual)*

Please double check my figures. What happens the income left after expenditure of €2716? Sounds great but these are the additional costs:*
Food: €1,050 (we keep receipts and that was the food bill, including toiletries and some medicines on average since December)
Car petrol: €240 per month  (2 cars)
Car parking: €50 (at work, unavoidable)
Car tax/insurance/repairs: €150 per month (on average)
Life Assurance (home and 3 rentals): €59 per month
House Insurance (home and 1 rental): €50 per month
LPT etc :€35 per month
Gas / Electricity/ Bins:  €335 per month (average since January)
Health Insurance: €30 per month (just for the two youngest kids)
Swimming lessons/karate/scouts: €110 per month for the two children
TV and internet:  €130 per month (€40 is for internet which I need when working at home)
Management fees for rental 2 : €80 per month
Xmas/Birthdays etc: €100 per month (I save that via the Credit Union)
Car Loan: €210 per month (this goes to the CU but there is no actual loan, was a loan but kept up the payments because our cars are 11 years old and will need replacing at sometime


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## Bronte (22 May 2014)

That's excellent detail Brokeguy. 



BrokeGuy said:


> *Home loan*
> *Lender: *Bank of Scotland
> *Amount outstanding: *€286,000
> *Value of home*: €180,000
> ...


 
What are both your ages. Please clarify the actual term remaining on the first two loans. It's time you sat down with your bank and sorted this out. I wonder what AIB would do if you just handed back the keys. The rent on that is not even close to paying the loan. But if you pay them interest only, they are not losing any money, and what can they do, force you to sell it and then what. 

Please clarify EXACTLY what the banks are saying to you, what options suggestions and threats. 

Your home loan is fine based on your income. It's the drag elsewhere that is causing so much grief. 

I think BofS should let the Bulgarian property be sold. That's a riduculous situation. And for the sake of 10K they can just add it as a top up to one of the others, but it's one headache less.

A solution might be on all investments to only pay interest only, with some capital, to get the NE down. I haven't the time now to figure if rents cover IO and a bit more. Can you confirm that actual interest only amount of each loan. 

I've very curious how you managed to buy three investment none of which, not one, meet even the mortgage repayment figure, and more so, because they are all excellent trackers.

I'd also like to know how you thought this made sense when you were buying. The answers to this are often quite interesting. 

But it is most certainly time to bash heads.

Someone else might comment on how to bring your spending down further. I agree with you saving for a car.


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## Matthew Moore (22 May 2014)

I think you will find it hard to get a deal from any bank when your spending is so high compared to the reasonable living expenses (RLE) they'd be working off. Roughly, the RLE, excluding mortgage, for a couple with children your ages is €2063.50 per month. It appears your expenditure, excluding mortgages is €3539 approx per month.

[broken link removed]

Some of your spending seems very high like utilities, considering we had a pretty mild winter. Could you switch and get a better deal?
€90/month for TV? 

If keeping your family home is so important you should reduce your spending and you should be fine, you'd probably be able to keep your investments too.


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## 44brendan (22 May 2014)

You have a major insolvency position here which cannot be addressed without serious reductions in bank debt. Sooner or later the Banks and CU are going to become more active in seeking higher level of repayments from you. All indications from the information you have laid out is that bankruptcy would appear to be your best option. However, you should seek professional advice as soon as possible. All of your current repayment agreements are making little or no impact on your level of borrowings and cannot be resolved through negotiation.


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## kaza (22 May 2014)

I agree with pat2 - your spending is high compared to the RLE guidelines. €242 a week for food shopping is quiet high - we are a 4 person family and would spend half of that. Plus €335 per month on gas/electricity and bins is very high - you should look to switch. Plus €90 for tv per month is an expensive package.

What have AIB said about the option of interest with part capital?


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## Matthew Moore (22 May 2014)

44brendan said:


> You have a major insolvency position here which cannot be addressed without serious reductions in bank debt. Sooner or later the Banks and CU are going to become more active in seeking higher level of repayments from you. All indications from the information you have laid out is that bankruptcy would appear to be your best option. However, you should seek professional advice as soon as possible. All of your current repayment agreements are making little or no impact on your level of borrowings and cannot be resolved through negotiation.



The OP would not be suitable for bankruptcy. If he reduced his expenditure he could meet his obligations. No PIP is going to supply a letter that states he is suitable for bankruptcy with his current income.


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## BrokeGuy (22 May 2014)

Guys,

Thanks for the feedback, I do appreciate it, but I should clarify some things:

1. Myself and the Mrs are 35 and 37 years old

2. The electricity was down as €200 per month – that is an error; it is actually €100 per month (it is billed as €200 every two months hence that mistake)

3. Mobile phone bills were not included in that list (€60 in total)

4. Regarding food costs… €1,000 includes essentially everything from Tesco, e.g. nappies, baby stuff, toiletries so that is a factor

5. TV is expensive at €90, I accept that, but given I don’t drink, don’t smoke, don ‘t go out I think I’d like to treat myself to having Sky Sports.. feckin hell if that is taken why bother… I seriously would just quit work

6. I think the suggestion above that I would be fine if I cut expenditure is very naïve to be honest… where can I cut? Knocking €40 off the TV bill or stopping one of the children’s karate lessons (€50) won’t make headway. Also remember that even if the bank take the keys on the rentals I am actually then down money because there is a small surplus there.

7. Also worth noting that there is no deduction for healthcare – luckily I don’t even have a doctor for myself but there are 4 others who can be sick and that is a cost

8. No deduction for clothes; the nine year old needs clothes and while I was lucky with hand-me-downs for the 4 year old and baby they have ran out for the former meaning he needs to catered for. Pennys are cheap but not free. As for myself, I am literally right now wearing a suit I bought around 8 years ago and I have spent around €200 on clothes in 4 years all of which were on shoes which I need for work.


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## ontour (22 May 2014)

BrokeGuy said:


> Also remember that even if the bank take the keys on the rentals I am actually then down money because there is a small surplus there.



I am not sure that the three rental properties have a surplus and even if they do now, it is not sustainable:

- Rent In (600+350+0) =11,400
- Reduced Repayments (249+350+150) =8488
- Maintenance, management charges, property tax, income tax etc.~3,000

This is leaving you down €88 and assumes that there are no vacant months in the properties that are let and no major remedial expenses. It also assumes continuation of the reduced repayments.

The complexity of your portfolio is hiding the fact that your current spending is not sustainable even if all the investment properties and their loans disappeared:

 All of your expenses add up to about 3,150 without the home loan. (I have also left out the car savings).   Assuming the normal payments on the home loan would be about 1,100, your monthly outgoings with just a family home and no investment properties would be 4,250.  You earn 3,865 plus 260 child benefit.  

Have MABS been of any help to you?
If you are sure that default / insolvency/ PIP / bankruptcy are not an option you should pay off the credit card rather than saving for a car if the credit card is on a high interest rate.


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## Delboy (22 May 2014)

1k per month for food/toiletries is crazy. Family of 4 here and we're under 400e on average.

Cancel sky sports for the summer- I did last week and will get it back when the GAA is over in Sept. Will get 1st 2 months free as well when I sign back up.
Ring UPC/Sky and negotiate a better deal...90 very high. See threads on this elsewhere on AAM


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## suzie (22 May 2014)

If not in contract mobile can be reduced, shop around. for example using tesco you can top up by €15/month for free calls, and using the credit as you wish (ie data and/or text bundles)

S


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## Bronte (23 May 2014)

ontour said:


> All of your expenses add up to about 3,150 without the home loan. (I have also left out the car savings). Assuming the normal payments on the home loan would be about 1,100, your monthly outgoings with just a family home and no investment properties would be 4,250. You earn 3,865 plus 260 child benefit.
> 
> .


 
This is a very good point, ignoring the rentals he is overspending.

Income is 4125.
Mortgage: 1200
Listed spending: 3189
Credit card: 250 
Total spending 4639

We can subtract the 100 Error on ESB and car savings of 210 and 80 (rental costs) so expenditure could be 4249. And it's still more than earnings. 

Pat2 says the guidelines state 2063 spending plus mortgage of 1200 makes 3263, he's a long way off that. I do believe though banks are more flexible than the guidelines. But they would straight away tell him to stop paying the credit card. 

Does maintence of 310 need to be paid in a situation where a child is half time with each parent. Is it a court ordered payment. It seems a very reasonable amount but not if one cannot afford it.

What then is the solution.  Sell all 3 investments with banks agreement and keep home.  He can keep out of the insolvency system as apparently the banks are coming to deals.  But a deal has to be done.


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## BrokeGuy (23 May 2014)

Thanks again guys, all comments welcome, even if criticism.

To the person spending €400 per month on food for 4… I seriously can’t see that… we have decent dinners etc but not exactly high on the proteins with the auld Tesco chicken being of favour… for example baby food, nappies etc are easily €40 per week or €173 per month.

I am aware that I am “over-spending” but if over-spending means paying bills, running the cars etc, yes I am guilty. But I am not over-spending by virtue of having holidays, drinking, socialising, smoking, gambling, even buying clothes, dvds or cds… that is why it is a head scratcher. 

At this stage it is a real worry as I am not exactly happy in my job but cant move because I need the money and what is the money doing if it merely means I can kick the can down the road with the bank. It is actually a pointless position.

Re the maintenance… I don’t know, it is fair point and it will have to be discussed. It is not under court order but up to 3-4 years I could afford it but lately it seems high given I also pay for his school books, xmas, birthday presents and a lot of his clothes. If she agreed to cover these costs from the €310 that would be some relief especially given he has dinner with me 4 times a week so I in fact house him more than she does.


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## vandriver (23 May 2014)

You have mentioned tesco twice now in your posts,have you not tried Aldi or Lidl?


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## Bronte (23 May 2014)

BrokeGuy said:


> Thanks again guys, all comments welcome, even if criticism.
> 
> 
> But I am not over-spending by virtue of having holidays, drinking, socialising, smoking, gambling, even buying clothes, dvds or cds… that is why it is a head scratcher.
> ...


 
I don't believe anybody is criticising you, you have asked for comments and suggestions and that is what posters are doing. Yes it's tough for you, no doubt about it, and your income has decreased due to more taxes etc and kids also cost money. So you don't have holidays but you do have a family, and that's what your money is going on. But you have to see what you can do to alleviate your own situation. For you that means cutting back even further. 

You are also going to have to look at the maintenance, but not sure about this as that would depend on her circumstances. It seems to me you have the child half the time and the costs associated with that, whereas we don't know if she has enough income to support the child without you paying some maintenance (please don't post up her details it wouldn't be fair)

Can your wife change to working full time? Any other income generating options out there?

You still have not stated what your banks are actually saying to you. You are avoiding dealing with it.

Based on your ages there may be some leeway to extending the mortgage terms somewhat to see if they make sense.  But we don't know what options your bank is offering you. 

Have you thought about hiring a professional to go thorough your options in dealing with unsustainable mortgages etc.   A Pip, or IMHO or one of the posters on here who deal in this area.


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## serotoninsid (23 May 2014)

Check your mortgage documentation and determine  EXACTLY what your actual tracker mortgage rates are. I'd imagine folks here can give you more accurate feedback on which properties you can prioritise and which should be gotten rid of first once you post that info.

Drop sky sports completely - I know that's a decision you have to make for yourself - but I wouldn't pay for that rubbish! - not one cent.

Drop Tesco's and switch to aldi/lidl.

Someone else mentioned about tesco mobile pay as you go.  I'm in the process of switching away from vodafone myself right now to 48months.ie - who have a ten euro/month deal (however, this may not suit you as it's not unlimited calls - so be mindful of that if you consider that option.  Most likely the tesco deal will suit you better).....something I should have done at least 12 months ago.


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## Delboy (23 May 2014)

BrokeGuy said:


> Thanks again guys, all comments welcome, even if criticism.
> 
> To the person spending €400 per month on food for 4… I seriously can’t see that… we have decent dinners etc but not exactly high on the proteins with the auld Tesco chicken being of favour… for example baby food, nappies etc are easily €40 per week or €173 per month.



€400 tops per month...and believe me, I count it up each month.
We don't scimp either but both working means very little cooking at home for a few days a week. All fresh food and meat, cooked from scratch for each meal.
I like my steaks and roasts at the weekend.

You have 1 kid in nappies and spend 173 per month on that + baby food. As it happens I was in Adli last night and picked up nappies....5.80 for pack of 40 (4 nappies per day avg = 10 days). So 17.40 for the month cover nappies (for a 2yr old). And there's no way my OH would use nappies that were'nt up to the standard of the pampers etc.
We never buy prepared baby food...he gets the same as the adults. But I appreciate that each family are different when it comes to this type of thing


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## BrokeGuy (23 May 2014)

Sorry if this sounded defensive "Thanks again guys, all comments welcome, even if criticism", it didn't mean to, I meant to say I don't mind if the comments are tough, otherwise there is no point.

Regarding the banks; we have made no proposal to the bank on a long-term basis, merely extending the interest only periods each time. 

Regarding professional assistance; we have half went down the road of engaging a PIP but I am reluctant on being a guinea pig here, think those in the door first will get harsher treatment than those in a year or two 

Re Tesco: we do some shopping in Aldi too, just referred to Tesco more because it very nearby

Re spouse working more hours; certainly possible (she is a chartered accountant) but when you do the numbers on the additional childcare costs and the problems next year in collecting one child from school at a certain time it seems impossible (unless she got great wages which she won't because the wages have been hammered down)


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## 44brendan (23 May 2014)

I'm assuming that your partner/wife is not jointly liable on the BTL loans.  Despite the contention by Pat2 that you are not a suitable candidate for bankruptvy, I really don't see any capacity here to service the high level of borrowings you are carrying. Most of the advice here is to cut back on your spending, but while there may be some scope here, you would need to cut back to a seriously frugal level over an extended term to service the debt level you are currently carrying. Due to current forebearance by the BTL lenders the position has not yet moved into the unsustainable level. This gives you time to get some good professional advice on your options. 
Seek out a good professional advisor who has the capacity to fully assess your current position and make recommendations on what your options are when the banks come looking for higher levels of repayments.


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## Matthew Moore (23 May 2014)

44brendan said:


> I'm assuming that your partner/wife is not jointly liable on the BTL loans.  Despite the contention by Pat2 that you are not a suitable candidate for bankruptvy, I really don't see any capacity here to service the high level of borrowings you are carrying. Most of the advice here is to cut back on your spending, but while there may be some scope here, you would need to cut back to a seriously frugal level over an extended term to service the debt level you are currently carrying. Due to current forebearance by the BTL lenders the position has not yet moved into the unsustainable level. This gives you time to get some good professional advice on your options.
> Seek out a good professional advisor who has the capacity to fully assess your current position and make recommendations on what your options are when the banks come looking for higher levels of repayments.



A PIP would surely recommend something like voluntary sale of the investments and use excess income to service the shortfall over the term of the DSA/PIA. I can't see them saying go straight to bankruptcy when he clearly has a capacity to pay something. It is a requiremnt of bankruptcy now that a PIP must give you a letter stating that your circumstances would not allow any other solution.


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## Matthew Moore (23 May 2014)

BrokeGuy said:


> Sorry if this sounded defensive "Thanks again guys, all comments welcome, even if criticism", it didn't mean to, I meant to say I don't mind if the comments are tough, otherwise there is no point.



It's not easy to post all your information and have people commenting on it, fair play to you for giving it a go. 

Ultimately 35 is still young enough, you'll more than likely have 35 years of work left in you. With that in mind and based on your relatively good income, your family home mortgage should be easy enough to manage. Ditch the BTL's if needs be, bring your spending down and you'll be able to manage. Without adjusting your spending the whole situation will eventually be out of your control.
The reasonable living expenses I posted could be a good guide to see where your spending is high. It's very doable to live within them, I'm leaving on a little less than what a couple in our situation should have myself at the moment.


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## so-crates (23 May 2014)

BrokeGuy said:


> Sorry if this sounded defensive "Thanks again guys, all comments welcome, even if criticism", it didn't mean to, I meant to say I don't mind if the comments are tough, otherwise there is no point.
> ...



It may feel like the comments are tough and they are hard to read when you feel like you have been hammered down. 

Basically they are separating your personal business from your investment business and while the difficulties or incipient difficulties in the investment business are there, they are both hiding and magnifying an underlying personal expenditure issue. 
They are hiding it because the size of the problem you may face with the investment dwarfs your personal expenditure so you don't really see it clearly. 
They are magnifying it because any small personal overspend has much greater knock-on consequences on your ability to sustain your investment business so greatly increasing the stress on you.

It might be worthwhile looking at it as two separate problems yourself. Tackling the personal budget wouldn't be easy - though I agree with the comments relating to ditching Sky Sports, not because I am being harsh or judgemental about small pleasures but because if your monthly personal overspend is €514 that represents 17.5% of that overspend so it is an easy one to tackle.

Separating the two will then give you the room in your head to address the investment business and decide the most prudent approach to it.


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