Your debt isnt growing if you extend the lenght of your mortgage
You lent me money at a higher rate than you borrowed it for. If we agree that I pay it back over 24 months instead of 12 I pay you interest for an extra 12 months, you make more money by me paying money back over longer.
I pay more back to you because ive taken longer, thats how you pass it on to me. but my debt doesnt increase. Were arent talking about not paying anything or paying nothing until the end of the mortgage term we are talking about paying slower which is very different
from wikipedia, your own source
It calls restructuring an alternative, hences it is not a form of debt forgiveness
No it hasn't. You are confusing 'debt' with 'total repayable over time'.If you pay back more, then your debt increased.
Could you oblige and post the full paragraph where you picked that particular sentence from please? I cannot as I am new.
http://en.wikipedia.org/wiki/Debt_reliefAlternatives
Contemporary
In modern times, the most common alternatives to debt relief in cases where debt cannot be paid are forbearance and debt restructuring. Forbearance meaning that interest payments (possibly including past due ones) are forgiven, so long as payments resume. No reduction of principal occurs, however.
In debt restructuring, an existing debt is replaced with a new debt. This may result in reduction of the principal (debt relief), or may simply change the terms of repayment, for instance by extending the term (replacing a debt repaid over 5 years with one repaid over 10 years), which allows the same principal to be amortized over a longer period, thus allowing smaller payments.
Personal debt that can be repaid from income but is not being repaid may be obtained via garnishment or attachment of earnings, which deduct debt service from wages.
Why keep talking about something that already exists?
Yes we do have debt forgiveness in this country and always have; people have always had probably repaying debts and have gone bankrupt – walking away from their debts and assets. I think what people mean when they ask now ‘will there be debt forgiveness?’ is whether there will be a formulaic or standard approach agreed by or imposed on the banks to help those who are struggling to pay their mortgages. I can’t see the banks ever agreeing anything except on a case by case basis and I can’t see any true debt forgiveness (ie you owe less tomorrow than you did today) that lets the borrower retain 100% of the asset.
We already have debt forgiveness in this country for anyone who wishes to avail of it
He gets to live in the house but it is not his unless his son-in-law gives/sells it to him. And yes, anyone with a relative willing to buy back their house can stay in their house – but that is not debt forgiveness. The bank is in no worse a position for the son-in-law having bought the house and let his father-in-law live there....yes you can actually keep the asset as bankrupt builder John Fleming has just proven, he lives in the same house as before, and his debts are cleared.
No. As long as you are paying the interest, there is no debt forgiveness – the debt is still owed.When you go on long term interest only and get to live in the house, is this not partial debt forgiveness as well?
This depends on what the bank eventually gets back. In theory, the arrears continue to mount up, adding to the debt and until some/all of the debt is written off, there is no debt forgiveness. I would only call something debt forgiveness when there is an acceptance of non-recoverability so that no matter what changes in the borrower’s circumstances (e.g. an inheritance), the debt can never be reactivated.When you decide not to pay, but get to live in the house for years and avoid repossession, (because the loss to the bank from a fire sale would be too high), is this not debt forgiveness as well?
Why keep talking about something that already exists?
We already have debt forgiveness in this country for anyone who wishes to avail of it, and yes you can actually keep the asset as bankrupt builder John Fleming has just proven, he lives in the same house as before, and his debts are cleared.
If this is not Debt Forgiveness, i don't know what is.
When you go on long term interest only and get to live in the house, is this not partial debt forgiveness as well?
When you decide not to pay, but get to live in the house for years and avoid repossession, (because the loss to the bank from a fire sale would be too high), is this not debt forgiveness as well?
No it hasn't. You are confusing 'debt' with 'total repayable over time'.
If you take out a 25 year mortgage today for 100K at 4%, you will pay 528 per month and end up paying a total of 158,352 to the bank (the 100K capital plus 58,352 interest). But your debt TODAY is 100K.
If you take out a 30 year mortgage today for 100K at 4%, you will pay 477 per month and end up paying a total of 171,871 to the bank (the 100K capital plus 71,871 interest). But again, TODAY your debt is 100K.
As long as you pay interest on your outstandings (which those extending their terms do), there is no debt forgiveness - your debt before and after restructuring is the exact same. The total amount you repay actually increases but because it is a lower monthly amount, it is an attractive option to some people.
Let's say I took out a FTB mortgage of 185k over 25 years, total repayable inc interest is 277k.
If I extend that to 30 years the repayment is 298k.
So if the bank extend your loan and don't charge you more/higher interest rates, meaning you are repaying what you would have repaid in the first place, then you are getting debt relief.
You quoted the same page yourself but here you go:
I wouldnt usually use wikipedia a a source for this type of thing but your quote came straight from that page so I used it aswell
. Rescheduling, refinancing and reorganisation of debt is also classed as debt relief.
You are incorrect. Because when you extend the term you have to pay more interest. The interest rate can stay the same but you will pay more.
There is no debt forgiveness in that scenario. It's just a restructuring. So the bank is not at a loss. And if the extension of the loan results in higher borrowing costs for the bank, then they have the option of increasing the interest rate to the borrower.
To me debt forgiveness is when some of your debt is written off.
And again, if you restructure to reduce the debt what do you call that?
Debt forgiveness is defined as:
First of all, what sort of definition gives the phrase as its own definition? Debt forgiveness is the forgiveness of debt? Really? And you base your answers on this? What you are actually quoting from is the Wikipedia definition of ‘debt relief’ which you are using throughout your posts interchangeably with debt forgiveness even though they are slightly different things. Debt relief could possibly include any measures to give relief to the debtor; debt forgiveness is, well, debt forgiveness – some of the debt is forgiven (that means written off) – the clue is in the phrase. It should also be clear from the thread title that people want to understand what debt forgiveness means – not debt relief (although in reality there is much more likely to be a debt relief regime introduced than a debt forgiveness one).
- " the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations."
Yes, but the interest is the amount accrued at a given point in time – it does not include all future interest. Debt is a point-in-time amount – it does not look forward to ‘what will I ultimately have to pay’ but ‘what do I owe today’. When companies prepare their accounts, the debt amounts are the amounts owed at the balance sheet date – they don’t include future interest payments. In your example:Debt is "an obligation to repay a sum of capital, plus interest.".
Let's say I took out a FTB mortgage of 185k over 25 years, total repayable inc interest is 277k.
what is your debt the day after you take out the mortgage? If you inherit 300K and want to pay off your debt the day after your mortgage, would you expect to repay your 'borrowed the day before' 185K or is the debt 277K/298K?If I extend that to 30 years the repayment is 298k.
I am slightly wary of feeding what is increasingly looking like a troll but anyway...
But humouring you for a moment
Anyway, why do we even care anymore, all future losses in our Banks are covered by the ESM European Stability Machanism
Do you know what I was told recently by a professional? 'What ever you do, do not ask for a write down or it will be the rock you will perish on'.
I guess they meant that a writedown would close the door to anyother options? Just curious
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