# sell for less than mortgage | bank benefits with tracker being repaid



## walletpod (12 May 2011)

Hi - just wondering if anyone can provide some info on personal experience or knowledge of the below:

Property has a mortgage with tracker rate. Property value currently below what the outstanding balance on the mortgage is. Agree with a bank to sell for current market value. Bank accepts the proceeds from the sale as final settlement of the entire outstanding balance of the mortgage as they benefit from a cheap tracker being cleared. Is this possible?
Does anyone know the calculation behind how a bank would determine the € value of the annual loss amount on a tracker mortgage. At what stage would the bank consider crystalising the loss making tracker?
Not all tracker mortgages are loss making for banks - is this true? I understand it depends on the cost of borrowing but on the whole is that statement true?
I'm asking this question as it's one of the options that I see open to my family / current situation. I would rather run the scenario by this forum rather than be shot down by mortgage contact at the bank. If these questions / scenario seem ridiculous, apologies: I consider myself to be as some other posters put it a "financial noob", but given the times we now find ourselves in - I'm trying to educate myself as quick as possible about these type of scenarios.


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## 7seats (12 May 2011)

It really depends if the this is your Home or an Investment property?


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## walletpod (12 May 2011)

7seats said:


> It really depends if the this is your Home or an Investment property?


Thanks for the reply 7seats - apologies, a little more detail: property currently worth 220k, mortgage outstanding 320k, term left 26 yrs, tracker rate ECB + 1.1%.  This is our only property / primary place of residence.


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## confusedude (12 May 2011)

walletpod said:


> Hi - just wondering if anyone can provide some info on personal experience or knowledge of the below:
> 
> Property has a mortgage with tracker rate. Property value currently below what the outstanding balance on the mortgage is. Agree with a bank to sell for current market value. Bank accepts the proceeds from the sale as final settlement of the entire outstanding balance of the mortgage as they benefit from a cheap tracker being cleared. Is this possible?
> Does anyone know the calculation behind how a bank would determine the € value of the annual loss amount on a tracker mortgage. At what stage would the bank consider crystalising the loss making tracker?
> ...


 
This is kind of similar to what I'd like to do, as mentioned in my thread, but I like the concise way that you've explained it!

Incidentally I spoke with my lender (AIB) today - albeit a faceless person on the phone from HQ - and didn't get much joy. He was a very nice chap but seemed to be just following a script...


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## wbbs (12 May 2011)

To be honest I am very familiar with the mortgage banking area and with other associated areas of debt and I have yet to hear of anyone actually getting the bank to write off the shortfall in a sale situation.   Best case scenario is that they will give you a loan for the shortfall at mortgage rate.  Not the news you want but this is not really happening out there, there has been comment here regarding deals being done but I think you would want to be much bigger nuisance to the bank before they would consider anything.  The average home owner with just one mortgage is not giving the banks much trouble yet, now if you have 3 or 4 BTL's and huge home loan and out of work then they might be more inclined to deal.   There will have to be some solution brought in to allow people to move house but with negative equity but I doubt it will involve big write offs of debt.


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## walletpod (13 May 2011)

wbbs said:


> Best case scenario is that they will give you a loan for the shortfall at mortgage rate.


 
Thanks for the reply wbbs; I guess in our situation it would be better advised to continue on the tracker mortgage, and pay off a portion of the principal each month until such time as we can bridge the gap between current market value and outstanding mortgage value - as there is no way we'd get as good as rate (as ECB + 1.1%) on any personal loan the bank would draw up for the current shortfall.


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## Surfer (24 May 2011)

Well worth asking the bank though. I believe that the loan would continue to be at the mortgage rate for the original term of the loan. What you would really be doing is paying off a large chunk of the mortgage by selling the house and the bank would be left with no security on the loan. Still a lot better for them, you would think as they are getting the best current deal that they can. Good luck with it!


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## HostBidder (25 May 2011)

walletpod will you rent another property if you sell your home? Or will you be able to live somewhere rent free?

Would you mind telling us who the mortgage is with? (Obviously it's understandable if you'd prefer not to.)

You might find this thread helpful PTSB Mortgage holders to get 10pc bonus for paying lump sum off trackers


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## Surfer (25 May 2011)

I wonder if you sold for less than the outstanding mortgage, would PTSB classify that as paying a lump sum off a tracker and give you the extra 10%?


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## Brendan Burgess (25 May 2011)

No. A PTSB customer can repay only 50% of the mortgage. 

If the full mortgage is repaid within 6 months, the 10% is withdrawn.

Brendan


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## walletpod (31 May 2011)

HostBidder said:


> walletpod will you rent another property if you sell your home? Or will you be able to live somewhere rent free?
> 
> Would you mind telling us who the mortgage is with? (Obviously it's understandable if you'd prefer not to.)


 
Hi HostBidder - we'd prefer to rent a property for a few years until we manage to clear our debt. 

I'd rather not say who the mortgage is with, but it's not PTSB. I sent our bank a letter, and requested a formal response in writing to my request but have not heard anything back as yet. As soon as I do, I'll update this thread.


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## nediaaa (31 May 2011)

Hi , I would be very careful about paying off principle only as you are breaking your original mortgage terms and could stand to lose your tracker. 
Approach the bank and dont agree to anything until it is down on paper and formally signed.


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## walletpod (14 Jun 2011)

Just by way of update, I still have not received a reply to my query. I addressed the query to the branch where my mortgage is held. 

In any case our situation has changed somewhat in that our employment has offered us the change to go aborad. Which we are going to take. There's a seperate question I have on that (re the mortgage) which I will post under a seperate thread.


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