Extending the term of a €10k mortgage to 12 years

Hello,
My husband has applied for a moratorium on his AIB mortgage payment of 445 euro per month for six months. He has asked for a complete break or an interest only facility. There is 23 months left on it and the outstanding amount is under 10K.

Today the AIB contacted me on his behalf (could not get him on the phone) and suggested a new term of 12 years of euro 20 capital and 180 interest per month = 200 per month x 12 years = 29K - approximately 20k more in their pocket - which I told them. Apart from the obvious greed factor, why would AIB be suggesting something so bizarre when there is only 23 months left?

There have been two moratoriums in the past (i) interest only and (ii) complete break. On both occasions the retained amounts were spread within the remaining term which he has satisfactorily maintained.

His request is based on his current unemployed status whereby he needs a breathing space to catch up. We live at subsistence level and if the AIB "suggestion" were to be accepted they would trap him for another 12 years.

He submitted the statement of accounts form ten days ago and will give them other requested documentation tomorrow. AIB said it will take up to 8 weeks to obtain a decision. I told AIB that we may have to go into arrears in the next few months regardless of the decision. I was met with silence.

The ball is in their court now. Were they jumping the gun to offer such a suggestion rather than consider the six month break as requested.

Comments appreciated.

Hello

I think you may have mixed up the numbers here.

It may be 20 interest per month and 180 capital per month. It doesnt make any sense the other way around. Even still the numbers dont look right but it' s definitely not 20K interest on a capital sum of 10K over 12 years. You need to see this in writing.

Either,you have been quoted for an unsecured term loan of 12 years at over 20% interest,or a 5 year mortgage at about 5%.
Please communicate with the bank by post or e-mail and insist on them doing the same,so you have some figures down on paper.
The problem with either going interest only or a moratorium for 6 months,so near the end of the loan,is that your remaining payments would be 600 ish.Can you afford that?

Hi Diana

Agreed that the numbers look a bit odd. I suspect that you have misunderstood them.

Forget the term of the loan for the moment. It's actually irrelevant.

Under the MARP, they can't change the interest rate if you are on Standard Variable Rate.

You owe €10k
Assuming a standard variable rate mortgage of 4.5%
The annual interest wil be €450
The monthly interest repayment would be €40

(If you are on a tracker, the monthly interest could be €20)

I suggest that you stop your direct debit and simply pay the €40 per month, if that is all that you can afford.

It would be better to get their agreement as then your ICB record would not be damaged. However, if you are in arrears already, then this is not a factor. But you should not be repaying capital if you cannot afford it.

They are very unlikely to try to repossess your home over a €10k mortgage.

If they offer you a 12 year term, agree to it.

The repayments on €10,000 over 12 years at 4.5% are €100 a month. Can you afford this?

You will not be "trapped for 12 years". A borrower can pay lump sums off a variable rate mortgage at any time. So you can pay it off in two years if your financial circumstances improve.

Hello Brendan,

Maybe I did misunderstand the initial suggestion, but am sure AIB told me E200 per month over 12 years. Could this mean that they want to alter the interest rate? AIB did ask me if I wanted to change the interest rate.

Taking on a 12 year term might seem okay on the face of it, but it would mean another insurance protection policy which is more money on top of the adjustment.

Thank you also to Van driver and Dr. Debt for your responses. I will know more in the next week or so and shall revert for more advice no doubt!

,,