# Can a bank do anything legally if you are making reduced mortgage repayments?



## tml (23 May 2011)

My parents are currently paying interest only on their mortgage. The mortgage amount outstanding is circa €150,000 and their interest only repayment is €550pm. The full capital and interest repayment is nearly €1700pm and there’s about 8 years left on the term. They are due to go back on full repayments in 2 months time but they cannot afford this. 

Their income has severely reduced since they took out the mortgage – nothing to do with the recession, my father had a heart attack a couple of years ago and can no longer work so is in receipt of the disability allowance and my mother is a dependent adult. (We are trying to find out if she might be able to claim the carers allowance for him). He is also in receipt of a small private pension of €400 per month so their total income is circa €1800 per month.

They have applied for the mortgage interest supplement but they are only entitled to €1 per week so that’s not much good. They tried selling the house but had no offers. With help from myself and my 2 siblings they should be able to make a payment of around €800 per month to the EBS. 

Long term my mother will inherit her parent’s house so will be hoping to sell that and reduce her own mortgage. (My grandmother is 87, in a nursing home, and her house is rented out so we obviously don’t know when this will be)

While they are not currently in arrears obviously they will be soon so my question is, can EBS do anything legally (try to repossess the house etc) while they are making some sort of payment to them?


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## Brendan Burgess (23 May 2011)

Short answer, they can but they won't. 

Your parents are protected by the Code on Mortgage Arrears. 

If they can pay at least, 66% of the interest on the mortgage, they can defer the balance for up to 5 years.

However, in dealing with the EBS, they should seek a negotiated solution which keeps everyone happy. As they are paying 4.4% interest, the EBS should be reasonably happy with interest only for the moment at least. I would not offer help from the children at this stage. 

What is the value of the home? Do your parents want to move anyway? Could they consider selling the house, paying off the mortgage, and moving into her mother's house? 

If they want to keep the house, they should be able to do so. If they don't have much equity in the house, they could consider offering the granny's house as additional security. 

Brendan


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## Sunny (23 May 2011)

Talk to EBS, explain the situation and see what options the bank can offer. It's important that your parents don't get stressed out. The bank has to abide by a code of conduct so any attempts at legal action etc are a long way off.


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## tml (23 May 2011)

Thanks for the replies, ideally they want to hang onto the house, it would break their hearts to sell it. Hard to tell what the value is now, they originally had it on the market 2 years ago for €450,000 but as I said got no offers. The house next door is up for sale for €275,000 (this house has been rented out for 20 years and is no where near the condition my parent’s house would be in). 

My parents also built a 1 bedroom granny flat in our back garden which would presumably add some value (my brother has just decided to move in with his girlfriend, now my grandmother is in the nursing home so will be giving my parents €400 per month to help out which is why they will be able to increase the repayments to EBS)

I don’t think offering my grandmothers house as security is an option as she has availed of the “fair deal” scheme for her nursing home care so this will take up to 15% of her assets when she passes. (don’t mean to sound cold about this we will all be devastated when she does but no one lives forever so we need to be practical!)

When I contacted EBS a few months ago they said that while the interest only period is unlikely to be extended, they “technically” cannot approve a reduced repayment arrangement but just keep paying the reduced amount and let the account fall into arrears. I was just worried about the possibility of legal action etc. Feel a bit more reassured now!


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## HostBidder (24 May 2011)

Brendan Burgess said:


> ...If they can pay at least, 66% of the interest on the mortgage, they can defer the balance for up to 5 years...


1. Are the banks obliged to accept an offer of 66% of the interest?

2. What should a customer do if their mortgage provider says no to an offer of 66% of the interest?

3. Is interest charged on the unpaid interest? E.g. if there is €2,000 on unpaid interest this year, will the bank charge interest on that €2,000 for each of the next four years that it has not been paid?

Thanks!


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## Brendan Burgess (24 May 2011)

HostBidder said:


> 1. Are the banks obliged to accept an offer of 66% of the interest?



Absolutely not. The borrower is obliged to pay as much as they can afford. So if they can afford to pay the full repayment, they must do so.

One cannot simply offer 66%, if one can pay a lot more.



> 2. What should a customer do if their mortgage provider says no to an offer of 66% of the interest?


They can appeal it to a separate internal appeals process within the lender. 

If they reject it, then that's that. But in practice, the bank will not seek repossession where a borrower is making an effort.



> 3. Is interest charged on the unpaid interest? E.g. if there is €2,000  on unpaid interest this year, will the bank charge interest on that  €2,000 for each of the next four years that it has not been paid?


If they are in the Deferred Interest Scheme, they won't charge interest. 
If they are not, they are free to charge interest.

The interest on interest is small, so it's not a huge issue.
Year 1 - €2,000@ 5%= €100 x 5 years = €500

Total interest saved after about 5 years = €1,500

Thanks!


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## HostBidder (25 May 2011)

Thanks Brendan, that is very helpful.



> Absolutely not. The borrower is obliged to pay as much as they can afford. So if they can afford to pay the full repayment, they must do so.
> 
> One cannot simply offer 66%, if one can pay a lot more.


Is the answer to "Are the banks obliged to accept an offer of 66% of the interest?" still "Absolutely not", if one *cannot* afford to pay more?


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## Brendan Burgess (25 May 2011)

The borrower is obliged to pay as much as they can afford. 

If they can only afford 66%, then that is all they are obliged to pay.

If they can pay 66%, then they will qualify for the Deferred Interest Scheme. 


The key point to understand here is that a borrower does not have the right to reduce their repayments to 66% of the interest if they can pay more.


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## HostBidder (26 May 2011)

Brendan Burgess said:


> ...If they can only afford 66%, then that is all they are obliged to pay.
> 
> If they can pay 66%, then they will qualify for the Deferred Interest Scheme...


Thanks a lot for that Brendan.  Would you happen to please have a link to where I can view more info on that?


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