# BTL IO 10 years lapsed - Monthly Payment Increase from €165 to €2850



## delgirl (19 Sep 2014)

I understand from this post by Brendan that other BTL investors who purchased property using IO mortgages between 2004 and 2008 may find themselves in the same boat as the person below.

Olive Moran, Bank of Ireland Mortgages Manager, has stated that some 75% of Bank of Ireland investment customers have availed of the bank’s ten-year interest-only mortgage.

A neighbour of mine has come to me with a predicament in which her son finds himself and I would be grateful if someone who has some experience of this situation could let me know what the best course of action for him is or who he can seek detailed help / advice from before he speaks to the bank.

- Property cost in 2004 €195,000 - currently worth around €120,000 
- BOI IO Tracker Loan taken in 2004 for €180,000 - 15 year term
- IO period has ended after 10 years* and reverts to P&I
(*he says this wasn't explained to him when he took out the mortgage, otherwise he would have opted for P&I from the start)
- No arrears on the loan and never any late payments
- Current monthly payment IO Tracker - €165
- Payment due as from Jan 2015 P&I - *€2,850 monthly for remaining 5 years!*

He lives at his mother's home - so no PPR mortgage
Has no debts at all - not even credit card, pays the balance each month
Earns ca. €50,000 per annum

BOI have asked him to complete an SFS (Standard Financial Statement) and a Mortgage Negotiator will call him on 2nd October to discuss his situation.

Anyone any idea if it will be likely that BOI will grant an increase the term of the mortgage from say 15 to 20 years and to spread the P&I payments over this period?

If he could extend the remaining term to 10 years, he could afford to pay the P&I.

Any advice appreciated.  Thanks.


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## Monbretia (19 Sep 2014)

What age is he?  I would imagine they will extend it if it means he can pay the repayments.

I don't buy that it wasn't explained to him about the interest only, did he really think he would have a loan of 180k only costing him €165 per month.    When he was signing the loan offer with the solicitor the terms would normally be gone through too so methinks he wasn't listening rather than not being told.


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## dereko1969 (19 Sep 2014)

There's no way he didn't know what he was getting into, selective amnesia it seems.


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## delgirl (19 Sep 2014)

He's 38, so I suppose that would bode well for him to have the term increased.

Is there any hope of him increasing the term and retaining the tracker?


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## Mrs Vimes (19 Sep 2014)

delgirl said:


> He's 38, so I suppose that would bode well for him to have the term increased.
> 
> Is there any hope of him increasing the term and retaining the tracker?



Plenty of us 38-year-olds with a lot more that 10 years left on the mortgage 

He may need to argue to keep the tracker.


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## elacsaplau (20 Sep 2014)

Hi Delgirl

I'd be interested to learn what did your neighbour's son believe in relation to his contract with the bank?


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## Bronte (22 Sep 2014)

delgirl said:


> - BOI IO Tracker Loan taken in 2004 for €180,000 - 15 year term
> - IO period has ended after 10 years* and reverts to P&I
> (*he says this wasn't explained to him when he took out the mortgage, otherwise he would have opted for P&I from the start)
> Thanks.


 
What's his rental income on the investment? I find it hard to believe he didn't understand what he was getting into, there was nothing to stop him at any stage paying down the capital amount from rent. 

Where is the 10 years of rent?  That's an unbelievable low tracker, around 1%.  What exactly did he plan on doing when the 10 years were up, did he not think about that?

You mentioned a figure there of 75% of BofI investors got IO of 10 years, surely that only applied to some years?

Your friend needs to extend the term, that is the best solution, not sure the bank will agree, I imagine they will want to take back the trackers as it is losing them money.  

Bank might decide it's unsustainable and force him to sell at a loss, and repay them the negative equity over time, if they do, he has to try and aim for a good interest rate.  I think he probably needs professional advice on how to negotiate with the bank.


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## Brendan Burgess (22 Sep 2014)

Check out this thread which discusses it and maybe ask Macaw what happened him

http://www.askaboutmoney.com/showthread.php?t=187553

and here

http://www.askaboutmoney.com/showthread.php?t=177583

and here

http://www.askaboutmoney.com/showthread.php?t=174868


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## MrEarl (22 Sep 2014)

Bronty said:
			
		

> .....I think he probably needs professional advice on how to negotiate with the bank.


 Absolutely no doubt, not least if the Borrower didn't understand the most basic of repayment terms outlined in the loan documentation (which I am also struggling to believe).


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## delgirl (22 Sep 2014)

Thanks for the advice everyone - I think he perhaps got carried away on the BTL cloud that a lot of people were on during the boom.

I also think his poor mother is more concerned than he is!

He's getting €600 per month rent from the property and has some savings - I didn't want to ask how much.

I'll post back once his SFS has been evaluated for the benefit of others in the same boat.


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## Bronte (22 Sep 2014)

delgirl said:


> He's getting €600 per month rent from the property and has some savings - I didn't want to ask how much.
> 
> .


 
And presumably the savings came from the money he was making on the rent? Please confirm he is tax compliant?

Taking 195K / 15 = 13K or 1100 a month plus interest makes it around 1300 a month, with rent of 600, not good over 15 years. 

For property value, take 600 X 12 X 12 or 15 makes it's worth 86K or 110K. So current value of 120K might be right. Depends of course on location and desirability.

If he has enough savings to bridge the NE gap he might be able to sell.  Or if he is able to put a decent lump sum off the mortgage, and keeps his tracker, he might be able to actually afford the mortgage on his current income plus rent.   But that's very doubtful over 5 years.


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## cremeegg (23 Sep 2014)

I would have a slightly different take on this than the other posters.

When these long term IO mortgages were taken out the assumption was that the properties would be sold at a profit during the IO period and the capital repaid from the sale proceeds. This was the logic behind issuing this type of mortgage in the first place. The rent paid the interest and the sale proceeds paid the capital. In a world where property prices could only go up this seemed sensible at the time.

Now 10 years later the sale proceeds will not cover the capital repayment. What to do.

I know of someone in this situation who wrote to the bank outlining exactly this and offered to continue paying IO until such time as the property could be disposed of at a price which would clear the mortgage. That was a few years ago and although the bank huffed and puffed, they accepted this. The property could probably now be sold at a good enough price to clear the mortgage.

I suggest your friend write to the bank outlining the above and offering to pay an amount equal to the rent or some such each month, i.e. the interest plus some capital. He should then amend his payments and do that. He should then ignore any correspondence from the bank up to the point where they are threatening to repossess or appoint a rent receiver. i predict that they will do neither.


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## Brendan Burgess (23 Sep 2014)

He should ask the lender to extend the interest only. The bank will be reluctant to do this. Bank of Ireland is the most difficult bank to deal with. 

If they refuse, he should use his savings to keep up the full repayments for as long as possible.  They may be enough to pay down the negative equity over time.

But unless you have all the figures, you, or we, won't be able to advise him properly.

Brendan


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