# 70 year old couple with €500k mortgage on €1m home.



## Bateman (1 Feb 2013)

My parents in laws' home is worth around €1m.  They're 70 and have a mortgage of €500k on which they're currently paying interest only.  The bank are harrassing them and demanding that they switch to full capital and interest repayments.

They have an unemcumbered villa in Spain worth circa €600k and 2 other unencumbered investment properties in Spain worth circa €250k each.

Their income arises from a private pension and the State Pension and amounts to around €50k per annum.

Their plan is to sell the 2 investment properties in Spain and to use the proceeds to clear the mortgage in full.  They do not want to sell their home.  The bank are insisting on a "fire sale" (i.e. sale within a month) of the investment properties, but the estate agent has advised them that he will definitely get €500k for the two properties but that it'll take around a year because of the market.

What's the best way to deal with the bank?  What rights do the bank have vis a vis forcing a sale of their home?

Many thanks.


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## manninp2 (1 Feb 2013)

Let the bank bluster.

Write to them explaining what you are going to do and then just do it.

Keep the bank informed all along the way via registered post.

By the end of the year, hopefully the houses will have sold and you can clear the mortgage and tell the bank to PFO.


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## Brendan Burgess (1 Feb 2013)

This seems strange. 

Is it a tracker rate? If it is, I can see why the bank would want it paid according to the contract.

What does the mortgage say?  Is the loan due to be repaid? 

If they have a €500k tracker which is overdue, then a fair compromise would be to switch it to SVR until the loan is paid off. 

The problem from the bank's point of view is that people often say that they are selling something, but have no intention of doing so. 

Is it Bank of Scotland?  They are particularly anxious to have their loans repaid.


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## oldnick (1 Feb 2013)

Your parents-in-law aged 70 owe half a million euros on their one million euro home.
They want to stay in that home but don't want to repay the loan at present.

They have assets in Spain worth over a million euros which the bank can't touch, but won't use these vast assets to pay their debts in Ireland  because some estate agent has said he'll get the right price in a year ?  In Spain? where  every indication is that prices will fall and fall? 

This reminds me what estate agents were telling me here at the start of the property collapse in 2007.

The honourable thing to do is to sell the Spanish assets at whatever price they can get today.
Indeed, it is also the wisest thing to do because whatever they'll get today could be much less in a year's time.

If they don't wish to sell their Spanish assets then they could easily downgrade to a humble half-million euro property in Ireland.

The expression "wanting jam on it" springs to mind.


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## mercman (1 Feb 2013)

oldnick said:


> This reminds me what estate agents were telling me here at the start of the property collapse in 2007.



This reminds me of what Estate Agents have always told me.


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## Brendan Burgess (2 Feb 2013)

mercman said:


> This reminds me of what Estate Agents have always told me.


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## Bateman (4 Feb 2013)

Hi Folks

Thanks to those who've made constructive comments or enquiries.

The loans on their PPR have matured.  They are on low tracker rates and they're with one of the (so called) pillar banks.

I'm struggling to understand the confusion regarding what the estate agent has said to be honest.  If your home is worth (say) €250k but I tell you that you absolutely must sell it within one month, you may only get €100k for it.  But if I say "sell it in an orderly fashion", then you're likely to realise its market value.  That's all that the estate agent is saying (i.e. that in a "fire sale" he will get considerably less than in an orderly sale).  All that's being asked of the bank is to accept interest only payments for a period of up to 12 months after which they'll be paid in full (whilst having security over a property that's mortgaged at 50% LTV).  Hardly asking for the sun, moon and the stars, is it?

Many thanks.


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## dereko1969 (4 Feb 2013)

Bateman said:


> Hi Folks
> 
> Thanks to those who've made constructive comments or enquiries.
> 
> ...


 
What do you mean by "they've matured" - is the agreement with the bank that the tracker term has ended or that the full amount of the loan is due to be paid in full now - as in they had a 10 year loan, the 10 years are up now and they still don't want to pay? Giving more detail would help.

If the term of the mortgage has ended, how were they planning on paying this money back?


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## Bateman (4 Feb 2013)

Sorry, by matured I mean that the amounts are due to be repaid.

They were planning to use other capital to clear the mortgages which is unfortunately unavailable.

My main query is whether the bank can force them to sell their home.  Otherwise, they're just going to sell those assets and repay the bank in full.


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## dereko1969 (4 Feb 2013)

So they want to choose when and how they pay the full amount of €500k due without having discussed this with the bank in advance? Without having made any effort (going on your posts) to sell the Spanish properties in advance, why didn't they put the Spanish properties up for sale a year ago? - did they forget that the money would become due?


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## 44brendan (4 Feb 2013)

This is the PDH of your in-laws. As such they are entitled to the protection afforded by the MARP process in respect of any discussions with the Bank on repaying the facility. irrespective of whether the initial payment agreement with the Bank has matured. In effect this means that the Bank must afford them at least a 12 month window to deal with repaying the facility. They should write to the Bank to enter the MARS process and fill in the appropriate forms with the offer to continue paying IO for 12 months and that in that period they will fully co-operate with attempts to sell the Spanish properties in order to clear or significantly reduce the facilities. assuming that there is a reasonable market for the properties in Spain, this should provide them with a satisfactory source of repayment of the facility. Irrespective of that, the Bank cannot take legal proceedings to re-posess the property for at least 12 months. As theye are servicing interest payments in that period, I would not see this as being a major concern for the Bank.


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## huskerdu (4 Feb 2013)

Bateman said:


> I'm struggling to understand the confusion regarding what the estate agent has said to be honest.  If your home is worth (say) €250k but I tell you that you absolutely must sell it within one month, you may only get €100k for it.  But if I say "sell it in an orderly fashion", then you're likely to realise its market value.



There is no confusion, We just dont believe the estate agent, based on the information you have given. 
If I put a house up for sale. An estate agent has told me that it will sell for 250k in a year but at the moment the best offer on it is €100K

It  is worth €100k.  It is not worth 250K. It might be worth 250K in a year if house prices increase but then again it might not.


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## Woodie (4 Feb 2013)

huskerdu said:


> There is no confusion, We just dont believe the estate agent, based on the information you have given.
> If I put a house up for sale. An estate agent has told me that it will sell for 250k in a year but at the moment the best offer on it is €100K
> 
> It is worth €100k. It is not worth 250K. It might be worth 250K in a year if house prices increase but then again it might not.


 
I'd second that opinion.  In the current market Spain, Ireland the hopes of that kind of market turnaround in a year is unlikely.  The property is worth what someone is willing to pay for it.  I would be extremely wary of the estate agent who said that can more that double the price in a year.  Get the valuation from three agents and then pick the one that quotes you the price which you hand an heart know the property(ies) are worth - usually the middle valuation.


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## Brendan Burgess (4 Feb 2013)

Folks

You have to distinguish between the general market rising by 100% and the much reduced price one gets in a fire sale.  I presume that the estate agent is not forecasting a 100% price rise. He is simply saying "These will take some time to sell. But if you want cash tomorrow, I can get a bargain hunter at €100k" 

Brendan


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## oldnick (4 Feb 2013)

It appears from his post that OP and his aged parents DO believe that they may get twice as much in a year than today. 
 ("If your house is worth ,say 250k, but you must sell within a month then  the best offer may be 100k"). 
And this wishful thinking is for properties in Spain !

The point is that the couple don't wish to make capital repayments and instead  pay only the very low interest, even though they have three separate properties in Spain worth more than the outstanding loan.

It is an abuse of the MARPS process and an abuse of their  loan conditions to be in a position to repay their very cheap loan, but refuse to do so in the belief that they may get more money on the sale of their  Spanish properties in a year's time. 

Whilst I hate the banks and normally would be never be in favour of them repossessing anyone's PR, in this case I think they'd be morally quite right to do so, and am surprised that the MARPS process would be applicable in this case.

There are thousands of people in genuine difficulty .This couple in their one million euro house are not.


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## honest (4 Feb 2013)

oldnick said:


> There are thousands of people in genuine difficulty .This couple in their one million euro house are not.


 I agree with oldnick there.   However if they are paying interest only, they could always sell the properties in Spain over 2 or 3 months....the bank will still get their money.   There are a hell of a lot of people worse off.  Their net worth is still over a million, and the OP says their income from a private pension and the State Pension and amounts to around €50k per annum.   Lots of people would cut off their right hand to be in that position.


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## huskerdu (4 Feb 2013)

Woodie said:


> I'd second that opinion.  In the current market Spain, Ireland the hopes of that kind of market turnaround in a year is unlikely.  The property is worth what someone is willing to pay for it.  I would be extremely wary of the estate agent who said that can more that double the price in a year.  Get the valuation from three agents and then pick the one that quotes you the price which you hand an heart know the property(ies) are worth - usually the middle valuation.




To be fair, I did not mean to imply that the OP thinks that the value will double in a year. Sorry if I came across that way. I used the OPs numbers as an example. 

My opinion is that they should put the apartments up for sale ASAP. Do not take the first offers in a "Fire Sale" type situation, but be realistic that whatever sorts of offers are coming in , are indicative of what the apartments are worth now and approx what they will be worth in a year ( depending on market fluctuations). 

If someone owed me money and they owned an apartment and they argued that they cant sell now because it will take a year to get the real value of the apartment , I wouldn't believe them. It sounds too much like stalling .


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## Bateman (5 Feb 2013)

Brendan Burgess said:


> Folks
> 
> You have to distinguish between the general market rising by 100% and the much reduced price one gets in a fire sale. I presume that the estate agent is not forecasting a 100% price rise. He is simply saying "These will take some time to sell. But if you want cash tomorrow, I can get a bargain hunter at €100k"
> 
> Brendan


 
This.

Nobody is forecasting a ridiculous price rise.  The bank are saying that they absolutely must sell the villas (they're houses rather than apartments) within one month.  The estate agent is saying that in such a fire sale scenario, he may only be able to get 50% of the properties' true value.

And to those who are seeking to invoke a moral argument, my parents in law have had the bulk of their pension pot stolen (i.e. they fell victim to a high profile financial scandal) and they lost a very significant amount of money in respect of bank shares. That is why there is a short term issue regarding the clearing of the mortgage.  The debt will be paid though and within 12 months.


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## Bronte (5 Feb 2013)

Now it's clearer.  The term of the mortgage has ended but the money to pay back the capital has disappeared (in bank shares collapse and bad financial scandal with their pension).  

Nevertheless they have other options.  They can sell their current home and downsize.  An elderely couple in Dublin can get a much more manageable home for 500K surely.  

Or they can put all 3 spanish properties on the market and see which will get the best price to pay back the Irish property.  What they are trying to do is to force the bank to accept their decision of waiting a year or so (in a Spanish falling market).  I don't think a year long strategy should be acceptable to the bank.  Between 3 and 6 months.  They should talk to the bank.


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## Bateman (5 Feb 2013)

Bronte said:


> Now it's clearer. The term of the mortgage has ended but the money to pay back the capital has disappeared (in bank shares collapse and bad financial scandal with their pension).
> 
> Nevertheless they have other options. They can sell their current home and downsize. An elderely couple in Dublin can get a much more manageable home for 500K surely.
> 
> Or they can put all 3 spanish properties on the market and see which will get the best price to pay back the Irish property. What they are trying to do is to force the bank to accept their decision of waiting a year or so (in a Spanish falling market). I don't think a year long strategy should be acceptable to the bank. Between 3 and 6 months. They should talk to the bank.


 
Thanks.

I genuinely do not think that they're looking for the sun, moon and the stars.  They do not want to sell their home and they have assets which are on the market and should realise sufficient cash to clear the mortgage in full.  

We're in dire economic times at the moment and it's nuts in my view to sell valuable assets in what's clearly a buyer's market.

All they're saying is that they won't firesale their assets.

Too many people say "sure just sell your home" when pensioners hit a speedbump or have difficulty paying property taxes.  It's not easy for someone to be forced to sell their home.  These people have been very good customers of the bank over the years so asking for a little wriggle room is not unreasonable.


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## seantheman (5 Feb 2013)

Is there any problem with the OP providing a link to the properties that his in-laws are trying to sell?


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## Bateman (5 Feb 2013)

seantheman said:


> Is there any problem with the OP providing a link to the properties that his in-laws are trying to sell?


 
Sorry, but I'm not willing to do that.


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## Bronte (5 Feb 2013)

Bateman said:


> I genuinely do not think that they're looking for the sun, moon and the stars. They do not want to sell their home and they have assets which are on the market and should realise sufficient cash to clear the mortgage in full.
> 
> We're in dire economic times at the moment and it's nuts in my view to sell valuable assets in what's clearly a buyer's market.
> 
> ...


 
Well it sounds like they want the sun moon and stars, or at least they want the bank to agree to their demands rather than negotiating. They can quite clearly afford to do as they are contractually obliged to do and that is pay off their home loan. If the bank is open to negotiation on the time frame on this then fair enough. But have the borrowers in writing given the bank a time frame for selling the spanish property. When exactly was the capital on the homeloan due to be repaid?

And not just for your benefit, but for everybody, a good relationship with a bank even a long standing one means nothing. It's business.

I hope the above doesn't sound too unsympathetic, it's not meant to be.


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## Dermot (5 Feb 2013)

As regards looking for another year to sell the villa with the hope of getting a higher price I just want to point out a few relevant facts without breaking the rules of speculating on property prices.
The Spanish economy has the following problems.
A huge over supply of property in all sectors,
An unemployment rate of over 26%
Falling wages,
Rising property taxes,
Rising personal taxes,
Low rental prices,
Falling tourism numbers
Difficult to obtain a mortgage.
All of these problems are expected to get worse before they get better.
Look at above and draw your own conclusions. Like everything else you need to pitch the price ahead of the curve not behind the curve. I think your parents-in -law had a good idea a year ago of the problem that is now being discussed but thought things might get better. No ill will intended in my post.


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## AlbacoreA (5 Feb 2013)

What is the bank losing out here. Interest on the capital payments above the interest only payment? Can some deal be worked out around that.


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## 44brendan (5 Feb 2013)

Again to repeat my previous post, these clients are entitled to the protection of the MARP process, whatever the Bank or other posters may think in respect of allowing them flexibility to sell the properties abroad. Just advice them to approach their Bank on this basis. If the Bank refuse they are entitled to appeal.


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## Bronte (6 Feb 2013)

I totally forgot about Marp, that's a very good point.  That will give them plenty of time to sell (if that's a good thing we cannot debate)


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## oldnick (6 Feb 2013)

I am confused by Brendan's repeated references to MARP which gives the impression that by applying for MARP one gets an automatic stay of repossession. i.e. it can be used by those who won't pay rather than those who can't pay.This is not the case.

MARP process is designed basically for those who have trouble paying -or, to be precise, it is a process designed to ascertain if, how and when a borrower can repay the debt -and after masses of questions a solution/compromise is reached.
During the process and assuming the borrower is fulfilling the requirements  the lender must hold off for twelve months.
But if the borrower is not fulfilling the requirements (delaying response, making false declarations etc) then ,basically, the MARP process is nullified.

Also, if the borrower were to declare that he/she could more quickly repay the debt but doesn't want to because he/she can make more money on his investment in a year this would be grounds for the lender to disregard any time-limit and move ahead.


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## Dermot (6 Feb 2013)

Having followed the postings on this subject I would consider that this case would be an abuse of what MARP was intended to do.


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## 44brendan (6 Feb 2013)

In response to Old Nick. Yes you are correct that the borrowers must co-operate. However, all indications from the OP are that the borrowers are co-operating. There is no inference in the actions of the borrowers that they wish to hold off on the sale of foreign owned properties for an unreasonale time. Having first hand experience of MARP from a bank's perspective, my opinion (based on the summary of the debtors actions as outlined by the OP being an accurate presentation of the facts) is that they are preapred to deal with the facility, but are refusing to be rushed in to a fire sale of the foreign properties. As they are covering interest payments on the facility and intend to continue doing so, this should buy them an extension of at least 12 months.


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## dereko1969 (6 Feb 2013)

44brendan said:


> In response to Old Nick. Yes you are correct that the borrowers must co-operate. *However, all indications from the OP are that the borrowers are co-operating*. There is no inference in the actions of the borrowers that they wish to hold off on the sale of foreign owned properties for an unreasonale time. Having first hand experience of MARP from a bank's perspective, my opinion (based on the summary of the debtors actions as outlined by the OP being an accurate presentation of the facts) is that they are preapred to deal with the facility, but are refusing to be rushed in to a fire sale of the foreign properties. As they are covering interest payments on the facility and intend to continue doing so, this should buy them an extension of at least 12 months.


 
Where did you get the part in bold from? Not how I've read the same material.


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## oldnick (6 Feb 2013)

Until now I had believed that MARPS was a process to aid those in genuine difficulties.
However, I bow to your personal knowledge and experience.

I have a different interpretation of the borrowers' actions. I believe that they are being unreasonable, but that's a personal view. My ,perhaps harder, action would be ....

Insist that they immediately advertise for sale all three properties at a price that reflects current market value in the areas concerned -mainly because all indications are that they may get less in a year in Spain than a so-called fire-sale today.

In addition, change their interest to the present variable rate of the bank. Surely no lender would continue lending at a loss when they have knowledge that the borrowers possess far more than the outstanding debt ?

Anyway, it's starting to look like I've got it in for these borrowers, so I better stop now.

P.S. Just seen Dereko's post which echoes my own interpretation of borrowers' attitude.


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