how to renegotiate loan repayments with meaningful equity but tight cash flows?

B

buckrogers

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A loan for an investment property was restrucured to interest plus reduced principal repayments about 5 years ago.
This loan has been sold to a vulture and given that the previous agreement is expiring the vulture wants to revert to a full P+I repayment schedule.
Your thoughts / advice on best strategy would be must appreciated.

Income details
Net monthly (i.e. after tax) Income self: Employee - 6k monthly after tax​
& a volatile non contractual performance related annual bonus (which added an extra 40k annnual post tax in last 12 months or ca 3k monthly ).
Net monthly income partner/spouse: nature of income Employee - Spouse 1k after tax​

Personal circumstances so we can calculate your reasonable living expenses
adults
Do you need a car for work or do you use public transport? no car
Number of children 0- 2 years old: none
Number of 3 years old children: none
Number of 4 - 11 years old: none
Number of 12 - 18 years old: 2
Monthly childcare costs:
Montly spend on special circumstances: e.g. exceptional healthcare costs - none

Home loan - Primary Residence
Lender: hsbc
Amount outstanding: 250k
Value of home: 900k
Interest rate: 2% fixed
Monthly repayment 1,8k
Amount in arrears n/a

Home loan - Holiday Home
Lender: hsbc
Amount outstanding: 300k
Value of home: 400k
Interest rate: 2% fixed
Monthly repayment 1,6k
Amount in arrears n/a

Investment property A- this is loan i need advice on negotiations
Lender: Vulture
Borrower - me only , spouse not a borrower
Amount outstanding: 500k
Value of home: 800k
Interest rate: 1% (tracker)
Monthly repayment : vulture wants to increases payments from 1,5k (under prior plan) to 3,5k (normal amortization schedule to maturity)
Amount in arrears - the loan is not in arrears but has been restructured in the past so principal payments are behind the original repayment schedule.
Monthly rent received 2,8k
Summary of discussions and agreements with the bank:
This loan was restrucured to interest plus reduced principal repayments about 5 years ago.
The loan was sold a vulture recently and given that the previous agreement is expiring the vulture wants to revert to a full P+I repayment schedule.

Investment property B
Lender: BBVA
Amount outstanding: 30k
Value of home: 200k
Interest rate: 4% fixed
Monthly repayment ,7k
Amount in arrears n/a
Monthly rent received ,8k

Investment property C
Lender: ABN Amro
Amount outstanding: 40k
Value of home: 200k
Interest rate: 4% fixed
Monthly repayment ,6k
Amount in arrears n/a
Monthly rent received ,7k

Other loans and creditors - NA

Other savings and investments - >150k in long term investments - insurance etc

Do you expect any lump sums in the medium term future? No

How important is retaining the Investment property to you?
The rental property is no longer in negative equity. I could offload it and repay the loan. However, my current plan is to keep it for the long term.
My goal is to negotiate as low as possible repayment schedule.

Any other relevant information
My income as well as my other other assets / liabilities are in an EU country other than Ireland
Holiday home recently acquired.

What is your preferred realistic outcome?
A repayment plan of ca 2k per month
 
As you know, this is an Irish website, so you are unlikely to get much information on the practices in other countries.
buckrogers said:
Other savings and investments - >150k in long term investments - insurance etc
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buckrogers said:
Holiday home recently acquired.
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Why don't you just pay your mortgage as it's due?

buckrogers said:
Monthly repayment : vulture wants to increases payments from 1,5k (under prior plan) to 3,5k (normal amortization schedule to maturity)

Monthly rent received 2,8k
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Even after tax, the rent will cover a good part of your repayments.

It's extraordinary that they gave you a loan for a holiday home, when you were unable to meet your repayments on your existing loans.

Brendan
 
Thanks Brendan,
Just to clarify Investment property A is in ireland and the loan was made by a reputable institution with a longstanding irish banking licence under irish law. This insitution only lent to me for investment property A and nothing else. In the meantime that loan has been bought by a vulture.

Brendan asks - Why don't you just pay your mortgage as it's due?
well I am paying but paying the full amount they request is not feasible without liquidating other long term investments.
 
buckrogers said:
without liquidating other long term investments.
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Then liquidate them.

Be careful about messing around with this. The Vulture Fund might, and indeed, should, appoint a Receiver to the property if you go into default.

For example, if it takes you some time to liquidate enough of your investments, then this could go out of your hands.

You also have an unclean credit record in Ireland, just in case that ever matters.



Brendan
 
You have 2 properties B and C above worth a combined €400k and you are collecting a monthly rent of €15k.

And YOU are asking US for advice ?
 
Thanks Brendan - Well given that there is equity in the property I agree that defaulting would be unwise.
However you dont think that aiming to negotiate a repayment schedule tailored to the cash flows of the investment property is a realistic strategy?
 
Investment Properties B&C - combined rent 1.5k per month vs repayments 1.3k.
yes ",7k" means 700 to you & I. Apologies for confusion...
 
buckrogers said:
you dont think that aiming to negotiate a repayment schedule tailored to the cash flows of the investment property is a realistic strategy?
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Hi Buck

Well, there is not too much harm in asking. But just don't do something stupid and fine a Receiver appointed.

They will ask for a Standard Financial Statement and when they see that you can afford the full repayments, they are likely to require them.

But lenders are unpredictable and I could be surprised.

Brendan
 
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