# Want to clear arrears - where to go for finance?



## Joe90 (7 Feb 2013)

Hi, I'm a long time lurker, but first time poster, and would like to  stimulate some discussion wrt clearing off arrears after going through a  bit of a wobble on mortgage repayments.

We were both out of  full-time work for about 12 months, and we contacted out mortgage  provider straight away when this happened in 2011.  I'm a teacher, and I  worked casually for 9 months, and claimed my stamps for the summer and  seasonal holidays, OH got 1 day a week in an office.  

I managed  to work every week, in about a dozen different schools, not every day,  but a few weeks here a there, and 2/3 days in other weeks.  Some weeks I  got SW, as I might have only got 2 days work.  All this time we filled  in the 3-monthly budget forecast for our mtg provider, and kept in  constant touch with them.  They firstly allowed us interest only on the  first 3 mths, then 3 months at half interest, and finally 6 months at an  agreed fixed amount.  

Finally in August, I secured a permanent  job, after applying to 173 different positions.  The same week, OH got  offered full-time hours where she works.  We contacted the mtg provider  once the final 6 mths arrangement was about to end, and informed them of  out good news, we have since resumed full payments and are making them  each month.  Happy days.

The end up from the arrangement is that  we have about €8k of arrears owing to the mtg provider, and they issued a  CGL to us each month to remind us.  I would love to pay this off with a  personal loan, and have priced the repayments at about €125 per month  over 4 years.  We have no other commitments other than our mortgage.  I  do not wat to lump it on to the capital o/s on the mortgage, as there is  about 26 years left on it, and I calculated (roughly) that we would be  repaying about €16k at the current variable rate if it goes on the  mortgage.  

I recently got our credit report from the ICB and  this records the arrangements, and has us in arrears since this  arrangement came to an end and we started making full mothly  repayments.  I feel that no-one is going to touch us if we apply for a  loan with these arrears.  We have about €3K with the CU, and have not  gone to them yet, but I did ask recently if they use the ICB for credit  application and the said yes, they do.  I checked B365 online for a  loan, and once you record the fact that you have missed payments on  anything, the site refers you to the holding branch.  We don't have an  overdraft or loan, have never bounced anything, and pay the credit card  bill in full every time we use it.  I would like to have some other  options, and would like to have a stonger bargaining position with the  mtg provider.  

I have €50k locked into 2 pensions from previous  private sector jobs, and I am thinking of offering them to the mtg co's  Life & Pensions subsidiary as a sweetener to maybe get a personal  loan.  I have never done anything with them, and I hope to get them into  a buy-out bond of some kind.

Sorry for the scéal fada.  If anyone has any pointers for us, it would be really appreciated....

J90


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## Brendan Burgess (7 Feb 2013)

> I would love to pay this [€8k arrears ] off with a  personal loan, and have priced  the repayments at about €125 per month  over 4 years.  We have no other  commitments other than our mortgage.  I  do not wat to lump it on to the  capital o/s on the mortgage, as there is  about 26 years left on it,  and I calculated (roughly) that we would be  repaying about €16k at the  current variable rate if it goes on the  mortgage.



No, No. No. No. No. 

If you borrow the €8k from a normal lender, you will pay around 10%.

The max you are paying on your mortgage is 4.5% ( assuming you are not with a sub-prime). 

Ask them to capitalise the interest. They will calculate your new repayments. But all you have to do is overpay your mortgage every month until the "arrears" are cleared. 

If you fell into arrears, your ICB record is already affected.  Paying off the arrears just resets the 5 year clock the day the arrears are cleared.  It doesn't clean your ICB record. 

With that in mind, you might consider capitalising your arrears and then not overpaying. Build up an emergency fund on deposit as you will find it very difficult to get a personal loan anywhere for 5 years.


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## orka (7 Feb 2013)

I totally agree with Brendan. You have access to a low-interest loan by asking your lender to capitalise the arrears but you can make extra payments to pay it off quicker - so it's cheaper and gives you more flexibility.





Joe90 said:


> ..we have about €8k of arrears owing ...I would love to pay this off with a personal loan, and have priced the repayments at about €125 per month over 4 years.


I don't know where you are calculating the €125 from - even at 0% interest, the monthly repayment (€8,000 divided by 48) would be €167. 

At 10% interest, a 4 year loan of €8,000 would have monthly repayments of about €201. Capitalising the 8K and spreading it over 26 years will mean about €43 extra per month at 4.5%. But if you pay the extra €158 (the balance betwen the €43 you have to pay and the €201 you would be paying on a personal loan) per month into your mortgage account, your arrears will be paid off in 43 months.

One caveat is I'm not sure what the lender will let you do then - they may let you stop paying the extra €43 per month or they may not and your term will end up being shorter.


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## Joe90 (7 Feb 2013)

orka said:


> .I don't know where you are calculating the €125 from - even at 0% interest, the monthly repayment (€8,000 divided by 48) would be €167.



My mistake - meant approx €125 every fortnight....


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## Joe90 (7 Feb 2013)

Brendan Burgess said:


> Ask them to capitalise the interest. They will calculate your new repayments. But all you have to do is overpay your mortgage every month until the "arrears" are cleared.
> 
> 
> With that in mind, you might consider capitalising your arrears and then not overpaying. Build up an emergency fund on deposit as you will find it very difficult to get a personal loan anywhere for 5 years.



Thanks for the prompt reply Brendan.  

TBH, I thought that by adding the arrears on to the principal o/s I would end up paying back a huge amount of money, hence the reluctance on my part to capitalise it.  I did not realise that I could capitalise just the interest on the arrears.  

We have a bit extra left over every month now we are both working and we still stick to the strict budget that we had to draw up when things were tighter.  I may split this extra to pay off  the arrears  as a mortgage overpayment and try to save the rest so that we can build up our savings.  

How will the mtg lender take this proposal?  I've had a phone call from the arrears dept about the o/s arrears every month since we advised them that our circumstances have changed, and we have told them that we would like to meet up with someone to go through the options, but so far the person who called from the local branch has not been able to provide us with a date to meet with them or concrete figures.  The OH got a call at work yesterday, and asked again that a branch official give usd a time to meet with them, still no call received....


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## Brendan Burgess (7 Feb 2013)

Hi Joe

Looking at my answer to you, I see why you are confused. I should not have said "capitalising the interest"  - that is a meaningless expression. Arrears are capitalised. 

Most people don't understand what _capitalizing arrears _means, so I did a Key Post on the topic. 

The bank should agree to capitalise the arrears in your case.  You still owe the same amount of money. But instead of looking for €8k arrears and €1,000 per month - they will wipe out the arrears and look for €1,050per month ( these are not the actual figures - just for illustration) 

But your loan will no longer be classified as being in arrears. 
They will stop ringing you.
Your ICB record will start curing itself. 

Brendan


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## Brendan Burgess (7 Feb 2013)

> How will the mtg lender take this  proposal?  I've had a phone call from the arrears dept about the o/s  arrears every month since we advised them that our circumstances have  changed, and we have told them that we would like to meet up with  someone to go through the options, but so far the person who called from  the local branch has not been able to provide us with a date to meet  with them or concrete figures.  The OH got a call at work yesterday, and  asked again that a branch official give usd a time to meet with them,  still no call received....




Just write to them and formally request that they capitalise the arrears. You might mention in the letter that you have sought a meeting to discuss the situation with them, but that they have not responded. 

Brendan


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## Bronte (8 Feb 2013)

The letter you send for a meeting should be by registered post.


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## Joe90 (10 Feb 2013)

Thans for the advice.  Just drafted the letter now - hopefully the lender will accept the proposed overpayment of €120 per month, and we should be clear in about 6 years!  

Just one last query: if we have these arrears cleared earlier, could we continue with the overpayments indefinately?  I'd love to clear off this mortgage early, we love our home and have no plans to move, and the negative equity aspect of the ownership of the property is not keeping us awake at night.


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## Brendan Burgess (10 Feb 2013)

> hopefully the lender will accept the proposed overpayment of €120 per month,



The lender does not have any choice in the matter.  If your agreed payment is €1,000 per month and you pay €1,120, they must accept it.

By the way, make sure that your agreed payment is €1,000. Don't change it to €1,120 because if you do, you won't be able to reduce it to €1,000 when you choose to do so.


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## SarahMc (10 Feb 2013)

I wouldn't offer to overpay in the letter. If you do not have a fixed rate you can overpay as much as you want, whenever you want anyway. This month you might fire €300 at it, next month, your car insurance might be due, and you might not overpay at all.

Keep that flexibility, just ask for the arrears to be capitalised. The bank will be happy with that.

By the way congrats on the permanent teaching post, as you know they are like hens teeth now. Don't worry too much about your ICB record, you might find your permanency and a frank explanation for the arrears cancels that out.


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