Family Home - Rental Mortgages - Can't keep up

T

Twinkle11

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Personal and income details
Net (i.e. after tax) Income self: 3700
nature of income: private sector - position stable at moment

Net income partner/spouse: 0
Income history: Lost job in 2010 - not worked outside home since

number of children: 2

Amount of Mortgage Interest Supplement received: 0

Home loan-Family home
Lender: AIB
Amount outstanding: 287,761
Value of home: about 260,000 now - although wouldn't get that
Interest rate: split loans - 177,040 @ 4.4% + 110,721 @ 4.49%
Monthly repayment: 1,708
Amount in arrears: 0

Investment property
Lender: AIB
Amount outstanding: 164,899
Value of home: 150,00
Interest rate: 4.4%
Monthly repayment: 1,105
Amount in arrears : 0
Monthly rent received: 950

Summary of discussions and agreements with the bank
Approached last year for reduction/break on investment property repayments as we used most of our savings on it (bad tenants!) and are struggling to meet all outgoings each month and wanted to do something before we fall into arrears etc. They refused on the basis that it was not in serious enough negative equity to warrant any reduction.

Other loans and creditors -
Overdraft - happens most months, but usually have some savings to get it back on track
Credit Card: Use it to get us though the month so owe about 2K min monthly on that and try to clear it using savings! Hence, savings have almost run out

Family: we've cut down a lot over the last 2 yrs trying to get on top of this. Most annual payments have been moved to monthly, cut down/shop around for all insurance etc, tax car for 3 mths at a time. Buying small amounts of oil in winter. Most grocery shop in aldi/lidl. No un-necessary shopping. Buy mostly second hand clothing for youngest, and other where I can. Don't go out at all. Youngest has been very ill over past year so a lot gone on medical bills. Rental property is killing us as we have to top up repayment each month, repairs/replacements are killing us. Need about 800 to fix our own heating, need to sort a car out so I can maybe start childminding, but just can't get head above water at all.

Have 2 cars on road, main one 13yrs old and on its last legs but DH needs one to get to work and need one to get to school as we're in the country.

Other savings and investments:
Husband pays into work pension + 200 AVCs
My pension is about 20K but since I left work its been parked as it is on accountants advice
Old house from my parents - maybe worth 20-30K but long drawn out family dispute about selling it so its not going to be liquidated anytime soon!
And apart from that - NONE - 1000 in savings a/c at moment. Cannot get any regular savings at all as there is nothing left each month!! Only got through this year as we got some overtime that was missed initially.

How important is retaining the family home to you? VERY

Which of the following best describes your situation?
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.

Any other relevant information
NPPR won't be paid on time again - don't have it!
I think the last time we approached bank we were too honest in the statement of means, as really only gave the very cut down picture. In the process of trying to put it together again, but this time including all the cost that a 'normal' family would have, as in getting kids hair cut, dental bills, etc - all the things we have pretty much cut out as we just can't afford it.

What is your preferred realistic outcome?
Get the family home mortgage to a level we can manage, would like to keep the rental as its the only investment we have for our future but not if it means we continue to seriously struggle and can't save anything.
 
Hello Twinkle

Your position is a difficult one to comment on. Your income is too low to adequately service your payments and live on, yet at the same time not so low that you want to give up.

Your negative equity is small which makes your position more tricky than if it was very large. The bank could reposses you with out much loss to themselves.

Your income appears to be 3700 + 260 CB +950 = 4910

Your debt service 1708 + 1105 = 2813

leaving €2,097 per month, hardly adequate for a family of four. And the other costs of the rental property have to come out of this.

It is not clear from your post what the credit card position is, are you spending an extra €2,000 a month and clearing from savings?

If you sold the investment property your income would be €3,960 and your debt service 1708 leaving €2,252 and no other rental costs, still hardly adequate. And you would still have a debt to AIB of €15,000 or a bit more.

Can you explore your rental expenses and credit card position a little more.

If you went for a reduced capital repayment on the mortgage it is difficult to advise which to prioritise. Can you tell us how long is left on the mortgages.
 
Hi, thanks for replying. I'm doing so many budget versions here my head is melted!

Just added an extra bit above on Savings/Investments - don't think it can help us any though.

We tend to use the credit card for any irregular/large payments over the month, and then clear it from savings, as well as topping up current account from savings.

Credit card generally used for car tax, service, repair/heating oil /medical /dental /unexpected expenses. Generally its around the 1500 mark max but have had a bad two months so was 2500 this month which really wiped us out! This was down to a few things, weddings/communions/christening/brithdays/having to buy kids clothing/footwear, about 700 dental expenses since march, consultant at 180 and 1300 gone into the rental in repairs/replacements in past 3 mths, and of course the blessed household charges were paid eventually!! NPPR not and won't be done on time! We're in GP#s at least once a month with someone! The rental expenses were a major blow last year, as had one bad lot move out - renovate it to get new tenants in. Have yet to do tax return this year but I know we'll get something back as we've pre-paid 500 last year, that normally pays car inurance and maybe oil or tax towards end of year. Fell out with accountant so have to find another or do it myself somehow!!

We have 19yrs left on the rental property mortgage, and 21yrs left on family home.

Honestly, I don't think we'll get on top of it as it stands. All thats kept us going was a bit of a cash injection, and that has come to an end! Like being stuck in a great deep black hole with no way of getting out.

Just don't know how to approach the bank on this - there have been months where I was tempted to just not pay one of the mortgages but I guess that wouldn't achieve anything. I think we're just in over our heads and it scares me to say that? Have looked at trying to get some work but will be paying out more than earnings on childcare so don't see the point.

Any advice appreciated.
 
Why is the mortgage on the family home split into two mortgages?

Can you cash in your pension of 20K, sell the rental and repay the NE, that gets rid of that.

Cancel the 200 AVC, and that gives you an extra amount monthly.

The 20K family inheritance should be doggedly pursued, you need the money. I'd ear mark that for a car, NPPR and any other amounts you may owe to revenue. I sincerely advise you to pay the NPPR if at all possible, the fines are really bad otherwise.
 
I understand that the situation is stressful but I don't think you have a clear picture of where you are at with either your personal spending or the rental.

I agree with Bronte that the AVC should go, especially if it can be resumed later.

You also refer several times to not being able to save anything. In fact if there is an AVC in place there must also be a basic pension so you are in fact putting money aside. The capital repayments on both properties are in effect savings as well.

Now put aside a quiet evening to work out in detail your spending, it really appears that you don't have a clear picture here, and knowledge is power. It will help if you understand what you are spending and what you are spending it on.

Then another quiet evening and work out the income and expenditure on the rental. Again Bronte is probably correct to advise selling it, but work through the figures to see how the position would change if you sold it.

Again I understand the stress you must be under but you need to try replace worrying with getting a better understanding of your position.
 
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