# Struggling with Family home + investment property. Losing tracker on investment.



## introuble (21 Dec 2012)

Hi this is my first post so trying to give as much info as possible.
  Basically I was working as a bricklayer up until 2008 and since then have been working as a cleaner. 
I am also in my 1st year of studying  a 3 year degree in Environmental engineering in the hope that I will get a better paid job (I go to class/study around working full time hours and it is not a problem)

  As a cleaner I earn €380 net per week plus I get a van to drive to and from my work
  I have 2 mortgages both with AIB


My own home, mortgage owed €335k, tracker rate of 1.85%, 33ish years left repayments of €1200ish a month, no arrears,Current value €230k.  It is a 3 bed home and I have 2 rooms let at €270 a month each. Although the rental income is very hard to rely on as rental demand isn’t great and I prob only end up with both rooms rented for 6-8 months of the year.
An investment property, mortgage owed €135k, tracker rate of 1.625%, 11ish years left repayment of €1113 a month, no arrears, Current value €160k.   With management fees, revenue, repairs, new usc charge I have another €300 a month costs for the investment property. I receive €1000 a month in rent and never have any trouble renting it.


No spouse
No children
 No loans
 
  Basically I have €1540 a month coming in for rental income (although sometimes can be a little lower) & mortgages/property costs going out of €2613. Half my wages a month is going on this and I have practically nothing left for heat, food etc.

  I had got behind with my mortgage payments on my own home missed about 6 months sporadically since 2008. Went through MRAP i GOT 6 months of reduced payments of my own home of €500 a month but this ends next month.
I have spoken to my bank and told them this is not sustainable for me to meet all repayments in full as they are structured now and asked them if they will extend out the term of the investment property to 20 years to give me a bit of breathing space. They said yes but they will choose the “new“ interest rate on the investment property. 
  We discussed selling the investment property and putting the financial gain into my family home but after solicitor fees, capital gain tax etc. there would prob be very little left and although I will manage for a while financially I will may be at risk of losing it especially as I can’t rely on the rent.

  I am just wondering what the consensus is on what I should accept as the “new“ interest rate? Or am I in such a bad negotiating place that I have to accept whatever they offer me.
  Any other thoughts appreciated should I just sell the investment property and try to keep my own home going?

  Thanks
  introuble


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## Brendan Burgess (21 Dec 2012)

It seems clear enough.  You have a very cheap tracker on which the bank is losing money. There is no reason at all that they would extend this very cheap loan for you. You have positive equity in the property, so you have to sell it and pay off the loan. 

Are the two properties with the same lender? If so, you should try to come to some overall agreement. That you will sell the investment and use the surplus to bring down the home loan. But they convert the home loan to interest only for 5 or 10 years.

brendan


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## dub_nerd (21 Dec 2012)

What would be the point of an interest only period on the home loan? That would just put additional years on the mortgage (which sounds like it's already a forty year term). Getting rid of the investment property --even if it didn't generate much equity to plough back into the home loan -- sounds like it would save over four hundred a month in outgoings. That's €113 shortfall between rent and mortgage per month, €300 in additional costs, and presumably there could even be a current tax liability even though the place is making a loss. If those savings make the main mortgage bearable, then perhaps you don't want to rock any boats that could jeopardise the tracker on it.


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## Brendan Burgess (22 Dec 2012)

> What would be the point of an interest only period on the home loan?



Hi dub

The OP is simply not in a position at the moment to be paying capital off the home loan.  He should just pay the interest while that is all he can afford to do. When his income improves, he can resume paying down the capital. 

Brendan


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## manninp2 (22 Dec 2012)

I don't see why he should be forced to sell.

The interest on the two loans is ~€8,400 per year.

The rental income on the two properties is ~€15,800 per year.

Rental income > Interest = Solvent Loan


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## dub_nerd (22 Dec 2012)

Brendan Burgess said:


> The OP is simply not in a position at the moment to be paying capital off the home loan. He should just pay the interest while that is all he can afford to do. When his income improves, he can resume paying down the capital.


 
I suppose I was looking at the fact that he's not in arrears on either property at the moment, so he's just keep his head above water. Disposing of the investment would improve his situation by over €400/month, which makes the other mortgage more manageable. However, as you say, he might prefer to negotiate a wider margin of safety than that.


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## dub_nerd (22 Dec 2012)

manninp2 said:


> I don't see why he should be forced to sell.
> 
> The interest on the two loans is ~€8,400 per year.
> 
> ...


 

I suspect the small print in the contract says that the bank can kick him off the tracker rate if he doesn't keep up the schedule of interest+capital repayments originally agreed. He can't just choose to pay interest only.


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## introuble (8 Feb 2013)

Hi Guys. Just a little update. 
2 of my  siblings have moved into my own home with me and are paying €270 x 2 a  month and know I can rely on them for it for at least a year.
The  bank have also agreed that they will extend out the mortgage on my buy  to let to 20 years although I lose tracker new rate is 3.2% meaning my  repayment will now be €750 per month as opposed to €1113
So my new annual rental income is now 
+6,480 (€270 x 2 x 12) for my own home
+12,000 (€1000 x 12) on buy to let
-14,640 (€1220 x 12) mortgage repayments on own home
-9,000 (€750 x 12) mortgage repayments on buy to let
= -5,160
It is still fairly tight with management fees and paying revenue and usc/prsi on rental income but I just keep things to keep ticking along for next 2 years until I finish my degree and improve my wages.
Thank you for all your advise really appreciate it


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