# Bank of Ireland - Forced to give up tracker on Buy to Let



## Wesley71

We have a Buy to Let mortgage with ICS which has been on interest only for the last 5 years. We're on a tracker rate. They're now forcing our hand and saying to continue with any forbearance, we have to give up our tracker rate or start making full capital repayments which are nearly double what we're paying. They're offering to push the loan term out to 40 years to faciliate smaller repayments but they say we'd have to go on to a variable rate. Can we force them to push the loan term out to 40 years and keep our tracker? Is it worth getting a solicitor's letter to them?

Any advice gratefully received.


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## Joe_90

> Can we force them to push the loan term out to 40 years and keep our tracker?



What does your mortgage agreement say?

Term 25 years, interest only for 5, reverting to capital and interest after 5.

Don't think you can force the bank to do anything, outside the terms of the agreement.


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## dereko1969

You'll have to give more detail. 
Did you start on interest only or was it capital and interest initially and then changed to interest only?
If the latter, why did you seek a change?
Was there a term limit to the interest only agreed at the time? 
What does your mortgage documentation state regarding changes?
What is the current term of the mortgage?


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## STEINER

joe_90 said:


> what does your mortgage agreement say?
> 
> Term 25 years, interest only for 5, reverting to capital and interest after 5.
> 
> Don't think you can force the bank to do anything, outside the terms of the agreement.



+1


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## Gerry Canning

Wesley71 said:


> We have a Buy to Let mortgage with ICS which has been on interest only for the last 5 years. We're on a tracker rate. They're now forcing our hand and saying to continue with any forbearance, we have to give up our tracker rate or start making full capital repayments which are nearly double what we're paying. They're offering to push the loan term out to 40 years to faciliate smaller repayments but they say we'd have to go on to a variable rate. Can we force them to push the loan term out to 40 years and keep our tracker? Is it worth getting a solicitor's letter to them?
> 
> Any advice gratefully received.


Solicitors letters are like confetti and without hard substance normally irritate.
Ics are losing money on trackers hence they want variable. Variable is dangerous as then Ics tells YOU the rate and unless things change your rate will continue to RISE.They can,t easily put you off a tracker , but they CAN insist you adhere to your original contract. @some stage it would have to include interest and principle. I can only suggest do your sums and see if in any way you can keep the tracker as it is valuable. 
Try to stay {friendly} with ICS.


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## MrEarl

Hi Gerard123,

My understanding is that the Consumer Code on Mortgage Arrars (CCMA) only applies in respect of homeloans or where the property securing the debt is the principal private (Irish) residence of the Borrower - this appears to be a loan, for a buy to let property & so not CCMA related.   The CPC (Consumer Protection Code) I think is more likely relevant, in this instance.

Assuming I am correct, the legally binding contract (loan agreement) stands, the Bank is entirely within it's rights in seeking to negotiate terms including the lending rates, if the Borrower is seeking an alteration to the contract between the parties.  The power of commercial negotiation .....

Regards

Mr. Earl.


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## Gerard123

Agree if not covered by code more difficult but reality is in negotiation you can put a strong case forward and would hold the line as no point agreeing with something completely loaded in the banks favour. In commercial negotiation no point in the bank seeking to draw blood from a stone either. Bank will listen to a proposition put forward if obvious intention on customers part is to have a solution. Unsustainable or short term solution is good for the bank either. 

Re financial advisor - I was definitely talking about getting someone who knew this space well, not a generalist. If you are comfortable or have a friend who is great. But in a negotiation you need to know your exact rights, such as for example whether there is any ability to draw on it to support a reasonable case put forward as part of a negotiation. No place for amateurs as too important. Good luck!


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## breakonthru

When this was put to me by PTSB about 18 months ago, I said I couldn't pay both cap and int. At that time, they did not request SFS, bank statements etc but sent the usual automated letter that arrears were increasing. Each time i got one i sent  a standard email back saying I couldn't pay cap and int only interest..

15 - 18 months later they send me new 'Letter of Offer'. Recapitalise all arrears, stay on tracker (1.7%), and another three years of interest only. They also requested SFS form, bank statements etc. no queries on this at all - but an excited rep. really wanted me to sign the 'new offer'.

I duly signed and kicked the can another hundred yards..


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## Wesley71

Thanks very much for all the advice. Just to give more info: The mortgage is 238,000 and it's already on a 35 year term. The house is only worth 160,000 so selling isn't an option.

Full capital repayments on a tracker will be 1200 per month. We're receiving 680 in rent so it's a substantial shortfall plus we're servicing a considerable mortgage on our family home. 

ICS is offering to push the mortgage out to 40 years on a reduced standard variable so repayments would be 900 per month. However what's not clear is how long we'd have that reduced variable rate. I mailed the bank today to find out.

Following your post, I'm wondering is it worth dealing with the pain of 1200 per month for a while since that variable rate will go up and we'll end up paying far more in the long run anyway? Plus, the rent we're receiving will not go any lower and will go up. We have good long term tenants.

We're also paying approx 1700 a month to the Revenue Commissioners in tax on the rental income and correct me if I'm wrong, but if it's clear we're making a big loss, the tax bill won't be as much?

Thanks again for all the advice.


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## Bronte

Wesley71 said:


> selling isn't an option.
> 
> 
> However what's not clear is how long we'd have that reduced variable rate.
> 
> Plus, the rent we're receiving will not go any lower and will go up. We have good long term tenants.
> 
> We're also paying approx 1700 a month to the Revenue Commissioners in tax on the rental income and correct me if I'm wrong, but if it's clear we're making a big loss, the tax bill won't be as much?
> 
> Thanks again for all the advice.


 
Firstly on the loss of a tracker rate. I see nothing wrong with this where it makes financial sense on a BTL or home loan. But that is something to be debated on another thread. 

Wesley you're breaking the terms of your mortgage so our options are limited. You cannot really force the banks hand but you can try and negotiate. I don't understand how extending the term from 35 years to 40 years and moving to a higher rate is such a great idea. But it means you repay 900 instead of 1200. Your rent is around 700 and basicaly that give you 'about' 600 to pay the 900. So you need to subsidise the mortgage to the tune of at least 300 (and this is without any voids, unforseen problems with tenants and serious repairs).

Can you tell us really how much rent you get into your hand after all costs and taxes annually?

Why is selling not an options? NE of 75K at the current variable rate over 40 years, how much would that cost you?

You have been offered a reduced variable, with no certaintly as to duration. I don't like the sound of that. It really means any gain financially in your income will be slapped with a hike in interest rate and the income gain will be wiped out. Banks are sneaky, that's what they are at here (in my opinion)

There is no such thing as rent not going lower. Ireland is heading to lot so cuts in wages, constant tax increases, reductions in rent supplement etc. So who knows for sure but rents could contract. In any case it's not something that can be relied upon.

Can you clarify the rental tax bill of 1700.  I presume this is an annual tax bill?  If yes then rent of 680 X 12 = 8160 - 1700 = 6460.  That's actually only 538 rent (and you've still to pay for a lot of things.  That 300 subsidy I mentioned earlier is diminishing.  

What you've not told us is whether you can afford to subsidse the rental.


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## Wesley71

The tax bill is the amount on the rental income we receive after allowable interest, repairs, insurance etc..
We can just about afford to pay the 1200 but it would be a real stretch.


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## WizardDr

@wesley71

I think as has been noted the BTL is not in the MARP process if there is no connection to your principal residence. I am assuming there is not.

The short of it is that you probably do not have any legal basis unless you are able to come up with something that clearly suggested an extension of interest only some time ago.

There are many in your position. The basic position is that ICS are saying you can stay on Interest Only but it will a variable rate (at their calculation not yours). 

The question is what is this payment against a full C&I (1200) and the current payment. Noting at some stage you will have to pay capital.

If you have ruled out selling (and I am with you on that) then:

- What is market rent versus what you are getting?
- The low tracker wont last forever and they will start rising
- etc

How strong at negotiation are you? I cannot predict how negotiations could go - they  may well have a policy on this.

I did not follow your tax computations. The interest is 75% deductible; there are wear and tear allowances on fittings; etc - how could you have a large liability?

I think it boils down to the fact that you see two positives on rents and TWMNBS (er the value of propecrty.
Then its the tracker plus capital vs a higher variable rate for another period - and then capital as well.
If the pain is tolerable I would go for it - and if you now know that then you will have a better negotiation strategy i.e. mentally you have a fallback and you will be far more confident in your negotiations with ICS. You need to realise that the Banks are making this up as they go along. You need to be persuasive and one way is to show some sacrifice. Unfortunately the CB have little support for BTL investors.


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## Bronte

Wesley71 said:


> The tax bill is the amount on the rental income we receive after allowable interest, repairs, insurance etc..
> We can just about afford to pay the 1200 but it would be a real stretch.


 
So you can actually pay the 1200 a month? Wesley I know you're new on here but please give us all the details. We are not your bank. The more concrete details you give the better the advice. 

What you appear to be saying is that you have a spare 700 Euro a month to subsidise the rental (receiving net of expenses say 500 Rent).  If you can at a stretch afford 1200 you can easily afford 900?

If I'm correct than really your issue is what, the NE, the fact the bank want to pull the tracker?


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## Wesley71

Just realised big error - it's a tax bill of 1700 a year! No wonder it didn't make sense.
Thanks - you've nailed it exactly. 900 a month is much more palatable than 1200 but how long will we have 900.
But if we do go for full capital repayments now and keep the tracker and then find we just can't cope, we could go back and renegotiate. I'm waiting to hear from ICS how much the variable rate is and when it goes up.
What people on this site have really clairified for me is we don't have much negotiating power on the BTL.
I appreciate that.


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## Gerard123

Wesley
Lots of food for thought above.  My view is don't go for the 40 years or the variable rate, unless some type of guarantee to prevent bank doing as they please. This will cost you. Who initiated the discussions around the extension and potential loss of tracker. What's the tracker rate and the variable rate being offered? 


Don't agree you have no negotiating power. You do. How many years are gone on the mortgage, when did you buy the property, did you ever top up the mortgage, was it always a 35 year mortgage or did bank previously restructure it? Where is house located, is it a strong rental area? Was it previously your ppr or did you buy it to let?



While things are tight sounds like you can just about afford the 1200 at the moment. If I was you I would keep going and if things become difficult then talk to the bank. If you do a deal now and things still become a problem, eg interest rates go up, it may be more difficult to do a second deal. Choose our timing.


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## WizardDr

@wesley I concur with @Gerard123 you actually have negotiating power.

Your strength would lie in the fact that if push comes to shove, you will pay the 1200 and stay on the tracker. Once it is clear to ICS that you do not actually have to avail of their leaking lifeboat of a much higher rate (ask them how high) whereas you can actually then tell them they will have to live with a much lower return as its not worth your while to change.

This may soften their approach and they may entice you to a better deal .

Of course in negotiations you would ever so polite and not be as direct - that is me merely saying that you have power and when you know that - you will get a better deal.
You are not quite as back to the wall as you thought as we already cut your tax bill.

If you need assistance - ask.


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## Wesley71

Thanks for this. Re: the mortgage - it's always been on 35 years. We took it out as a Buy to Let mortgage in 2006 along with a substantial residential mortgage based on financial advice at the time. Our economic circumstances have changed, along with the rest of the country, so it's been on interest only since 2008. Therefore, hardly anything has been paid off the capital. However it is in a good rental area, even though the rent is half the monthly return we owe on the mortgage!

I spoke to ICS yesterday and what they're offering is 1% over the tracker rate we're currently on so the rate would be 3.1% and they'd push the mortgage out to 40 years. However they couldn't say how long we would have that rate. This is what worries me. But pushing to 1200 right now could be difficult because we're v stretched with the residential mortgage. I just know that variable rate will go up but I'm v tempted to have a reprieve even for a couple of years until we're back on our feet.


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## WizardDr

@wesley71  We are in relatively unchartered waters here. The 1% up does not sound like a land grab - yet. I think it would be reasonable to ask them for a minimum period - a revised tracker for that rate - why not? - they will widen this margin that I can be absolutely sure of. If you are prepared to widen the margin why wouldn't you ask for a tracker on that basis?

Have a look at the rentals in the area. Make sure you are close to the going rate. Good tenants are all and well - but if this is easily rentable then you are subsidising.

A potential provocative thought - what would the Principal residence get as a rental - and occupy the rental property? Is that even possible?

I still think I would look at all options before any agreement with ICS. Bear in mind that the CB have little understanding, appreciation or interest in the BTL sector.
So any deviant actions by ICS - as in raising the rate later - will be met with 'you should have agreed that when you had the chance'.

Measure twice - cut once - as they say.


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## Gerry Canning

Small thing that might help: Review ALL your insurances, in the {fluffy} times we all got insurances with buckles and bows. Have a pragmatic look at your insurances.
In particular REALLY check what Critical Illness REALLY covers.


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## Brendan Burgess

I have dealt with an exactly similar case in this thread

BoI want me to give up tracker on RIP to extend interest only.

They have no right to force you off your tracker.
If you go into arrears, they can charge you penalty interest and they can seek to repossess the property.

Here is my summary from the other thread



> *Summary
> *Write back declining their offer.  Ask for the interest-only period to be extended.
> If they refuse, pay the interest and as much as you can. Show that you are trying to pay this loan.
> Wait until you see what they do next. If they charge you additional interest, you can live with that.



And I wrote about it here as well 

BoI kicking people in arrears off trackers


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## Bronte

Wesley71 said:


> However they couldn't say how long we would have that rate. This is what worries me.


 
You can be sure the minute they can they will increase the rate.  You need to be very careful and if they will not agree a term than walk away.


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