# Which option will the bank choose?



## daftpunk (9 Jun 2013)

*Personal and income details*
Net (i.e. after tax) Income self: €2200pm Public Servant
Income history: Full time and permanent
Net income partner/spouse: €188 Disability Benefit
Income history: Had Good salary until serious illness and had to give up work as a result. 
number of children 3
Amount of Mortgage Interest Supplement received Nil
*Home loan*
Lender: A.i.b 
Amount outstanding: €320,000
Value of home: 150,000
Interest rate: Tracker 1.65%
Monthly repayment 1200
Amount in arrears Nil, I did have three consecutive periods of interest only/reduced payments(maybe this is arrears I'm unsure???)

Have been on Marps since 2011.


*Other loans and creditors - *
Credit Card(s) 5500
Credit Union Joint loans of 9000 against savings of 2000- mainly for car loans, we live 20miles from town/shopping/work etc.


*Other savings and investments *


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


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. 

*Any other relevant information*

*What is your preferred realistic outcome? *
I would like to honour my debts but have enough to live on left over in my salary. Even the amount in the PIA examples would be realistic.


A.I.B has told us they have our mortgage SFS application now in the 'long term' mortgage dept.(never heard of this before). They have contacted me and told me about two options that might suit our situation;
1. Split mortgage
2. Voluntary sale.

Which would be a better outcome with our salary?

I would like the split mortgage as we keep our home and get a relatively comfortable amount of money to live on. Plus they eventually get all the mortgage repaid.

The voluntary sale would see half the loan repaid(sale price) and the other half outstanding, forcing us to rent and pay the other half, which would quickly bring us back into the unsustainable repayment amount.

Which are they likely to choose from a financial point?

Thanks.


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## Dermot (9 Jun 2013)

I appreciate that tracker rates are quite low at the moment and that you are in negative equity at the moment. I do not have a solution to your problem but looking at the two options given by AIB and the consequences arising from them I just want you to consider one other option.
You are currently paying 1200 per month of a mortgage at tracker rate of 1.65% which is made up of €440 pcm interest and €760 pcm towards reducing the principal.
You could think of the €440 pcm interest as rent.  Would you be able to rent a property for that sort of money that would suit you.
I get the feeling that you are a very responsible person and that it will be tough going but I would still try and keep tracker and pay the mortgage.
How old are the children and what would suitable accommodation in the are you live in cost.


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## daftpunk (9 Jun 2013)

Hi Thanks for the reply.

The kids are 4,5 and 7.
Rent is approx. 600-700 per month where we live.

The house is important to us and we are so lucky to have a tracker. We know this.


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## Dermot (9 Jun 2013)

It would appear the experts on this subject are enjoying the sun today and may be able to give you better advice.
I am just looking at the options that AIB have given you.
What Rates of interest are you likely to be paying on the split mortgage?.
As regards the voluntary sale. You might not get 150K but assuming you get very close to it you will have costs both legal and selling agent which will leave you about 140K and a balance of 180k of an unsecured loan. I cannot see how you will be able to pay this and rent a house as well.
I would not be to sure that you would get a write down on your mortgage while retaining the tracker rate.
How long have you the mortgage and how long is left.
Are you reducing your Cr. Card and Cr. Union loan and can you eliminate either or both.
I am still inclined to advise you to hold onto the tracker mortgage.


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## daftpunk (9 Jun 2013)

Hi Dermot,

30 yrs left.
They only hinted at those two options: 1. split and 2.voluntary sale.
I read that AIB leave the split mortgage at current rate i.e. tracker with nil interest on the parked amount. I hope we would be offered this, as we would like to stay put. If forced into a voluntary sale I would really have to look at emigrating.
We currently are paying 600-700 pm on credit union and credit cards, while on this current reduced payment period. This expires in August.

I think the advice you offered is very good and thank you.

If any of the other sun worshippers who read this soon want to offer advice we would welcome it also. We need all the help possible.

Is the new PIA scheme for us???


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## cremeegg (10 Jun 2013)

If I understand correctly you have a net monthly income of 2200 salary +814 disability +390 child benefit=€3,404

Your mortgage repayments cap and int are €1,200 that is 35%. That is high but not extremely high.

It seems to me that the best option for you is reduced capital repayments. How much can you afford to pay per month. Any thing more than the interest is reducing your balance out standing each month.

It is not clear from your post what the position is regarding the CU or the Credit Cards


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## daftpunk (10 Jun 2013)

HI cremegg, thanks for your reply.
Yes your figures are right but the disability benefit is temporary and will not last much longer, so we will have 752 cut from our income soon.

That will really bring us into an unsustainable situation.


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## Baby blues (11 Jun 2013)

Watching with interest as in a similar position, thinking of the pia route as cu loans bigger, worried they won't allow it as we still have an income.


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## 44brendan (11 Jun 2013)

The split mortgage proposal is far from ideal, given the high level of negative equity. However, the alternative option is to agree to a voluntary sale of the property. Realistically this would only be feasible if the balance of the loan was W/O by AIB. Given the potential reduction in income following expiry of disability allowance you will not be in a position to service any of the residual balance. 
Ideally you need external advice from MABs or other. But essentailly focus on calculating what you can afford to pay AIB. Forget unsecured loans as you have no capacity to service them. Calculate all reasonable outlay and then approach AIB with a proposal based on the income balance.


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## daftpunk (11 Jun 2013)

Hi 44brendan, thanks for the advice, that's the kind of advice we were looking for. One thing though please, we thought that we better keep the credit union repayments up no matter what as this is our only realistic chance of future borrowings, in emergency situations etc.
But you think that we should forget unsecured borrowings?
We thought that even paying the minimum to them would be worthwhile.

Hi babyblues, hope things workout for you too.

Thanks for the advice. We thought a split mortgage, where half maybe is parked for 20 years or so, would see us in a good position as maybe with inflation the parked amount might become affordable in that time. 
Anybody have any thoughts on that please?


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## daftpunk (14 Jun 2013)

Does anybody know what is the criteria to meet for getting a split mortgage?

Why would they choose voluntary surrender over a split mortgage?


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## Dr.Debt (14 Jun 2013)

First of all, don't let the bank do all the deciding. The most important thing for you is that you decide whats best for you and your family.

If  I had three children and a very cheap tracker mortgage like you have, I  would be trying desperately to keep my home and opt for a split  mortgage.

Giving up your home voluntarily may leave you in a worse financial position.How much would it cost to rent a home in your area ?

If  the bank would agree to parking half your mortgage in a split mortgage  while retaining the tracker mortgage rate of 1.65%, you will be in a  much better position ?


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## daftpunk (14 Jun 2013)

Thank you dr.debt. 

What can we do if they decide against offering us both options and choose voluntary surrender only?

Would the new pia be an option for us?


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## Dr.Debt (14 Jun 2013)

I would start by telling the bank what your preferred option is.

If the bank are not willing to go with that, Yes I would look at a PIA in that case


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## daftpunk (19 Jun 2013)

UPDATE;

Split mortgage offered

60/40 split

repay 60% 
40% parked

nil interest on parked

Thanks for all the replies and advice


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## Baby blues (19 Jun 2013)

Daftpunk,

Is this the route you are taking? Was the personal insolvency not an option?


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## daftpunk (19 Jun 2013)

I was told today if you refuse a split mortgage, with some new mortgage arrears code on the way, that they can take the tracker from you and force a voluntary sale. This was told to me from a friend,not anybody to do with the bank. Apparently it was on national radio today. Central bank involved. 
Plus they are reviewing the split every 3 years to assess your circumstances.
So if I find myself in difficulty still,then the p.i.a is an option I hope???


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## Dr.Debt (19 Jun 2013)

Its a good deal. Shake their hand and move on with your life


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