# Deep NE but interest rate dropped to .05% for 5 years. A good deal?



## molbanagers (19 Sep 2015)

Offer from Lender.

I would like to get some feed back on the following offer from my sons lender. He jointly purchased the apartment in 2008 and had been paying the full mortgage up to 2013 solely with some help but he could not continue with this. He works in the private sector on an average salary. The mortgage was given in the first place because the other  borrower had a very good wage 60,000 a year. Anyway he continued to pay half of the monthly rate and has always engaged with the bank. The gave him a trial period this year paying a monthly rate of 1124.23 based on a mortgage of 220,000 over 30 years.
They are now offering him a low fixed rated which i will outline.
His current mortgage loan is 403,449.47,
Current repayments 1,84494, rate 3.95.
The term is 328 months
Current Arrears 32.083.45
Current cost of Credit ( excl arrears) 605,646.91
The offer is as follows:
Proposed fixed rate 0.05%
Proposed fixed term ; 72 months
Proposed new mortgage loan term extension; 52 months
proposed capitalisation  32,982.45
proposed fixed rate repayment 1,147.033
Proposed variable rate 9following expiry of fixed interest rate  3.95%( based on current rate subject to change)
Proposed variable repayment (following expiry of fixed inter rate; 1,714.12
Proposed cost of credit (inc arrears) 610,536.21
My son would like to keep his apartment but the property will remain jointly owned. He was hoping to finally sever this tainted relationship. My son will still have to pay the maintenance fees (1600.00) Insurance protection and Property charges. This does not seen to be a satisfactory  situation.The building society has said it he doesn't accept this in the next 20 days that he will be receiving a letter detailing that the protections of MARP will no longer apply to him.
I would very much appreciate your views and forgive me if I have not explained this properly.


----------



## Brendan Burgess (19 Sep 2015)

Hi Moll

The offer is a great offer. They are reducing the rate of interest to 0.05%! In other words, almost all his repayments for the next 5 years will be capital. So he will have reduced the balance outstanding from €403k to about €334k. 

It's a fixed rate, so he is protected from general rate rises. 

Could he rent a similar apartment for less than €1,147 per month or €1,300 a month to include maintenance fees and property charges?  If he can't, then it's likely that he should jump at this.  OK, his ex partner will continue to jointly own the property, but so what? He is getting good value accommodation for the next 5 years.  

What are the alternatives? 

If the apartment is in deep negative equity and if he has other debts, and if he cannot afford the repayments,  then he could consider going bankrupt.   That would certainly sever the tainted relationship.  Even better, his ex would now be fully liable for the debt. 

How much is the apartment worth?  He will have a mortgage of €334k after 5 years. Is there a reasonable chance that the apartment will be worth that after 5 years? If so, then he can try to sell the apartment and be free of the mortgage.  It could well be messy in that his ex might not co-operate. But then he can ask the lender to seek repossession in the courts. 

It would be great if he could get his ex to cooperate.  Does she realise that she is still liable for the full debt? Does she realise that she will be prevented from borrowing again, because of the arrears on this mortgage? What does she want?  But she might be happy just to let him pay the mortgage down and build up equity in the apartment.  Then if he ever wants to sell it, he will need to pay her off. 

Fortunately, there isn't any practical way of forcing the ex to co-operate if she chooses not to.

Brendan


----------



## molbanagers (21 Sep 2015)

Hi Brendan,
Thank you for your prompt reply. To answer a couple of your questions. 
(1) I understand that she will co-operate.  
(2) The negative equity was originally 50% but it has increase but I'm not sure by how much. 
(2) Rental accommodation would be at least 1,200
My son is in arrears on his management fees of about 6,000 and property tax.  
If my son decided to sell having built up the equity and maintained the apartment why would he have to pay her off, I don't understand this. He will be the one making all the payments and maintaining the apartment. He will also be paying the mortgage protection for both. 
Thanks again,
Moll


----------



## 44brendan (21 Sep 2015)

The issues of management fees and property tax will both catch up with him. How come he is not being pursued more vigorously for the unpaid mgmt. fees? I doubt very much if these issues will not become an issue in the short term.
Given that he is only paying the rental equivalent on this property for 6 years the deal as presented does make sense. However this ignores mgmt fee/property tax issues.
Currently the property is jointly owned and any repayments made will reduce the debt liability of both parties (not a major concern for him if payments are rent equivalent). However there will come a time when a decision has to be made to either sell the property or transfer the ownership. He cannot sever this without the co-operation of both the Lender and the co-owner!


----------



## Bronte (21 Sep 2015)

How much is the property worth?


----------



## molbanagers (21 Sep 2015)

Hi ,  Thanks to all for taking the time to respond.
It was valued in 2013 at 175,000 but not sure what is the value now. 
He is making some effort to repay the management  fees. It does not appear that the lender wants to transfer ownership to him solely.


----------



## Bronte (21 Sep 2015)

Is the current mortgage including arrears 403k?


----------



## molbanagers (21 Sep 2015)

He has been on a trial payment for the last 3 months of 1124.24 and the arrears were adding up. I am not very good at this but I don't think it includes arrears. The following is the current position as given in their offer. His original mortgage was 409,00.00 100% loan crazy.

His current mortgage loan is 403,449.47,
Current repayments 1,84494, rate 3.95.
The term is 328 months
Current Arrears 32.083.45
Current cost of Credit ( excl arrears) 605,646.91
does that make sense?


----------



## Brendan Burgess (21 Sep 2015)

If the property was worth €175k 2 years ago, it's probably gone up by about 20%. So let's say it's worth €210k today.
After 5 years, he will owe €334k.   So he needs a 60% increase in values over the next 5 years to exit negative equity.  

No one can forecast house price increases.  If they fall, he is no worse off, he is still insolvent.  If they rise by 30%, then he will still be in €60k negative equity. If they rise by 60%, he will be out of negative equity. 

If he goes bankrupt now, he will be in bankruptcy around 3 years and probably have a bad ICB record for the following 5 years. 

It's a hard call. But given that the repayments and rent are the same, then I reckon he should hold on.  At some stage, he will get out of negative equity and have a property which he owns. If he goes bankrupt, he probably won't be able to buy again for many years. 

He needs to start paying his management fees.  It will take him a long time to clear the backlog, but he is part of a community and he is letting down his neighbours by not paying them. 

The lender will not allow his ex off the mortgage.   I assume that she is unable or unwilling to pay anything? He should tell her that he will take over the mortgage and try to pay it in full, as long as she gives up all rights to ownership. This will have to be done by a side agreement. It might be difficult to enforce after 10 years when there is negative equity, but it would be better to have it, than not to have it. 

Brendan


----------



## molbanagers (21 Sep 2015)

There is definitely no easy solution for my son. My head is in melt down at the moment, but I want to thank you all for support.
Moll


----------



## Bronte (22 Sep 2015)

I think this needs to be looked at from all angles.  Is it a good deal or not.  Is it better to throw in the towel. 

7 years into a mortgage already
Fixed term of 6 years on offer.
What happens if it reverts to SVR then, can he afford that
Current mortgage extended by 4 years.  Presumably because 32K recapitalisation is added to the 403 = 435K.  NE now is a whopping 260K !!
What is the current end year of the mortgage?
What is his monthly salary?

*Girlfriend*

I'm not a bit happy about this aspect.  Tied to another person.  Even if you draw up a legal agreement she is still liable.  Your agreement might not stand up.  She might get awarded half of any gain.


----------



## Bronte (22 Sep 2015)

molbanagers said:


> There is definitely no easy solution for my son. My head is in melt down at the moment, but I want to thank you all for support.
> Moll



Moll you are going to have to sit down and put different scenarious down on paper in order to get to a point where a decision can be made.  Use the 20 days to do so.  How about this as a starting point.  What if he handed the keys back.  Can you do the figures for that.  Would it be a big relief to your son?

What type of property is it?  Is it Dublin?  Can he rent a room?


----------



## molbanagers (23 Sep 2015)

Thanks for all your contributions. 
Just to answer your questions Bronte, the apartment is a 3 bed in Dublin. It is possible that he might be able to rent a room. Having read all your comments the way I see it is, although the bank have given him a extremely low interest rate for 6 years they are still getting their pound of flesh. They also continued to apply interest on the arrears even thought my son was working with them to find a solution.  
His his presently 7 years into a 35 year mortgage. His mortgage will be extended for an extra 4 years.That would mean his total term will be 39years.
(1) no closure on this deal
(2) Any side agreement they might reach has no legal standing. 
(3) Any extra payments he might be able to make will benefit her also.(gifts from family)
(4) Even if he gets out of NE, which is unlikely in the new future he still won't own the apartment.
(5) He will probably have to pay her off ( see Brendan"s reply) if he wants to sell at a later date.
Still don't understand this! She will not have contributed anything.
What a relief it would be not to have to revisit this again in 6years. Its been like this for the last 6years and its taken its toll. 
Handing back the keys and going into bankruptcy whats the difference?


----------



## molbanagers (18 Aug 2016)

Hi Everyone,
Unfortunately my son situation is still unresolved. I will try and outline the current position.  He was considering whether to accept the offer(August'15) and asked the EBS if his signature only would be enough.  He heard nothing back.
So he presumed the offer has lapsed as they required both signatures on the agreement. Then in March'16 he received a letter from their solicitors. 
Heading ; EBS -v- ETC.
The correspondence stated that the matter has been adjourned and next comes up before the County Registrar in October'16. I know my son has buried his head in the sand since then and is now really very worried.
They say ''adjourned'' but as far as we know other then some confusion before while he were in negotiations letters were crossed.    Any advise would be welcomed as we are both unsure of what to do.  Thanks


----------



## Brendan Burgess (18 Aug 2016)

OK, they have started formal repossession proceedings against him and his ex. 
They missed the first court appearance, but the case was adjourned, so this doesn't matter too much. 

At the next hearing, the EBS could get a repossession order. 

What has he paid since last September? 
It's not enough to write to the bank and then do nothing. 
He needs to engage with them. It's not too late, but it gets harder the longer he leaves it. 

Brendan


----------



## molbanagers (19 Aug 2016)

Hi Brendan,  He has continued to pay 1125.00 each month. The offer was for 1147.03 . Problem is the interest is going up at 3.7% and the arrears are now 41,000 ''sick'' 
Any advise will be welcomed. thanks


----------



## Brendan Burgess (19 Aug 2016)

He must immediately contact the bank by phone.
He must get the name of the person to whom he speaks and their contact details.
He must follow up with an email about whatever was agreed.

He must show up in court and tell his story.(He should also attend the court a few times before the day he is due so that he sees what happens.)

It's highly unlikely that the Registrar will grant an order against someone who is paying a good amount and who shows up in court.

But she will also tell him that he must be proactive. He had a great deal 0.5% and he let it slip through inaction.  This has cost him over €12,000 in the last year. It's just madness.

The banks do help people who help themselves as evidenced by the great deal EBS offered. But they have to take legal action against the borrower if he avoids contact - that is a Central Bank requirement.

Brendan


----------



## molbanagers (21 Aug 2016)

Thank you for your advise and I agree he has to act quickly. However although the interest rate was a good deal it did not address the situation of the other party on the mortgage and he would be paying down the mortgage ,plus all the other costs involved in the holding onto the apartment, what about the other party in all this? still a legal owner of the apartment. Not that i think taking on the whole debt on something that is unlikely  to achieve its full price for a long time is a good deal. 
How can he start again and be free of all this stress and worry, does he have to keep coming back to this for years?
Sorry for ranting but so much stress. 
mol


----------



## Brendan Burgess (21 Aug 2016)

Unfortunately, the problem between your son and his ex cannot be solved by the bank, without a repossession. 

If he adopts that attitude, he will lose his house. 

Joint ownership is a huge problem but it's a problem caused by the joint owners, not the lender. 

If he wants to keep the house, he should do as I have suggested. Otherwise, he should attend court and agree to the order for possession. 

There is a risk that his ex might attend court and consent to the order which could be awkward for him.

Brendan


----------



## jdwex (22 Aug 2016)

How many people are living in the apartment? If it's just himself in the 3 bedroom, he should look at renting out two of the bedrooms


----------



## molbanagers (22 Aug 2016)

i understand what you are both saying and he will just have to act quickly.

Unfortunately he has 2 dogs so that makes renting difficult. 
 thanks again.


----------



## Brendan Burgess (22 Aug 2016)

molbanagers said:


> Unfortunately he has 2 dogs so that makes renting difficult.



And where will the dogs go when his house is repossessed? 

Your son has to start living in the real world.


----------



## molbanagers (23 Aug 2016)

I take you point but his world hasn't been very nice for the last couple of years or mine either. Will let you know how things work out.
Mol


----------

