Case Study-Unsustainable mortgage? Advice please anyone

Hi all,

I'll give as much info as possible so if anyone could come back to me with some advice I'd really appreciate it.

Personal and income details: 575 net per week
Income history:[/B] Permanently employed
Spouse Income: Long term Unemployed (construction) - not in receipt of social welfare as due to means testing my income is deemed too high. No opportunity to retrain as we would have to pay for courses ourselves. Has had 6 weeks work recently but theres no point completing a new SFS as by Christmas this work will be gone again.
Kids: 1st baby due in 3 weeks
Lender: BOI
Mortgage interest Supp: TRS? 150 per month
Amount outstanding:249,072.53 Value of home: 155,000 (IF EVEN)
Interest Rate: Variable
Monthly Repayment: 800 per month Interest only
Arrears: 13,247.86

Summary of discussions with bank:

Have had problems for the last 4-5 years with mortgage. Have a lot of short term debt between us. Most short term debt has been negotiated down to the minimum payment but I am paying the full amount on 2 credit union loans (€5184.84@280 per month (should be paid by June 15)+ €3032.62@232 per month (should be paid by Dec 14). I'm also paying the full monthly amount on a car HP agreement as I need car for work (€3797.07@118.67 per month (should be paid by Aug 2016). Periods of interest only (6 month intervals in the last 4-5 years). Last SFS completed March 2013 and received letter dated 07/10/2013 saying mortgage was unsustainable so options were voluntary sale/surrender/trade down. BOI have not put any options up to us like split mortgage ect which were discussed with local bank when we completed our last SFS. Maybe I'm in fairy land but I feel that we are sustainable? If they could just be patient and let me try to get a handle on the short term debt - we have sought advice from MABS and citizens advice and I do know the mortgage should be prioritized but I would like to maintain our relationship with local credit union as realistically they will be the only people to ever lend to us again! Please someone advise. We are sending in an appeal letter re the letter received re voluntary sale/surrender/trading down.

Savings: None

Preferred outcome: Was really hoping for a split mortgage/some short of long term arrangement. I want to pay everyone - I'm not looking for write offs of any of our debts. Feel that the bank are playing hard ball as we are paying out €512 per month to the credit union on short term debt and they want this for the mortgage. I feel that this is a bit short sighted on their part as I will have the most of it cleared this year. We just need a bit more time from them. AM I IN FAIRYLAND?

I've listed monthly outgoings below for further info:
Domestic & General - €8.08
Alarm-€25.26
Sky-€78.4
BOI Home-€59.96
BOI Life-€36.77
GE Car-€118.67
GE Home Loan-€22.57 (Negotiated to the lowest amount)
Ivor Fitzpatrick-€32.17 (Negotiated to the lowest amount-BOI legal loan)
Credit Union loan 1-€232
Credit Union loan2-€280
Bins-€25.45
VHI-€159.5
Vodafone average(landline)-€45
Credit Card-€25 (min monthly payment balance of €1000)
Mortgage-€800
Airtricity-average figure (gas & electricity)-€150
Food-€220
Savings (car maintenance + nct + ins + tax)-€70 (not always possible)
Misc (clothes + entertainment)-€75 (not always possible)

Am I right in thinking that the main earner is you and that you are pregnant? if so what kind of income will you have while on maternity leave? Will it be the state contribution of €262 or will your employer top up?

Realistically i would imagine that you will have quite a lot of outgoings over the next few months with a new baby. I would be concerned that more debts will build up.

At a quick look i would say that your sky subscription should go. Can you review your health insurance and alarm?

Hi idkwatmi,

Many thanks for your reply. Just to follow up on your post:

Am I right in thinking that the main earner is you and that you are pregnant? if so what kind of income will you have while on maternity leave? Will it be the state contribution of €262 or will your employer top up?
Yes I'm the main bread winner and currently pregnant - my wages will remain unchanged during maternity leave - thankfully.

Realistically i would imagine that you will have quite a lot of outgoings over the next few months with a new baby. I would be concerned that more debts will build up.
We have been extremely lucky with family and friends who have given us nearly everything we need for the baby. We had to get a few small things which we have done and paid for. Also we dont need to factor in childcare costs and I have been bulk buying and storing items such as baby wipes ect so there shouldn't be a big change to groceries outlay. Boy or girl - between family and friends I will hardly have to buy clothes ever!

At a quick look i would say that your sky subscription should go. Can you review your health insurance and alarm?
Agree with you on the SKY. Health insurance was the best deal I could get when I went to all the providers. Alarm is monitoring and we get a reduction on the house insurance because of it so they kind of cancel each other out.

You have an average monthly income of €2,491. Outgoings as listed total 2,310, excluding savings and miscellaneous. balance of €181 to cover same. Logic would dictate that you continue paying off the CU loans and clear the CC balance as quickly as possible. In order to achieve this you will require a continuation of your int only arrangement until Dec 2014. At that time you can supplement mortgage payments by €200+ ( interest rates may shift). payments can be increased further following clearance of 2nd CU loan and CC balance. You do appear to have an ability to chip away at the mortgage balance at an increased rate from Dec 2014. Also realistically, your partner should over time increase his chances of getting employment. I'm a banker and can see the benefits of living with you on this basis. Unfortunately, you are dealing with some strange people in these call centres where logic often does not lead to a good decision. Put those figures down and present them as a proposal to the Bank. If they decline you may well have to make a decision as to how to progress. If it were me, I would respond to them stating that I will continue to meet my interest payments until Dec 2014 and increase payments from then. They will probably huff and puff at this, but are unlikely to progress to legal if you continue making the repayments and keep your word on a Dec 14 increase.

Couple of things come to mind, firstly well done for taking responsibility for dealing with your debt.
I think you have the will to pay it and that is half the battle.
Your sky could be cut down by about 50 a month.
Your house insurance seems very high, shop around on next renewal. Check rebuilding costs on SCS website and do overview of contents. I get discount for having an alarm of about 50 annually so you should have a saving if you got rid of the monitored alarm.
Shop around on the life assurance too I did this year and made a considerable saving.
What about your partner picking up some part time work, local supermarkets, or other places that will be looking for seasonal workers with christmas coming. He's not in receipt of SW so won't affect that but would be a help to ye.
Gas and electricity could be reduced - switch to energy saving lights, LED, turn off anything not in use, don't leave stuff on standby. With gas I have it on for longer but at a lower temp so place never gets too cold. Pay about 400-450 for the year. Put an extra layer on.
Good luck with it.

You haven't mentioned medical/dental expenses or petrol costs? Also your grocery figure is currently very low but it will increase with a baby in the house despite you having bulk bought some items. My grocery bill increased by €40 p/week. If b/feeding doesn't work out you have baby milk to buy which is another €10 alone per week without even costing out the nappies. After your 3 free GP visits run out, since you are working you will have to pay for GP visits until the new Under 5 free GP care kicks in, estimated to be the middle of next year. As someone with young kids who currently pays GP fees, some months can be horrendous in medical plus prescription costs! Heavily used Calpol is €7.55 for eg.
Congratulations and I agree previous posters, BOI will have to wait until your short term costs are sorted and then you can increase mortgage repayments.

Thank you so much everyone for your replies and advice. Thanks for taking the time. Its great to get opinions that I'm not mad in trying to pay down the short term debt. I was really stressed in the last few weeks since receiving the letter and a not so nice phone call with the person in Dublin dealing with our case but after some rational thought I'm now more confident that BOI wont repossess our home when we are paying €800 and the full payment is €1200 odd. Heres to the ongoing battles. Again huge thanks and I will be taking a look again at all our outgoings and following your advice.