Key Post If you have a split mortgage which you no longer need...

[Brendan Burgess]

I posted this thread in relation to borrowers with ptsb split mortgages who might not want their loans sold to a vulture fund.

If you have a ptsb split mortgage, which you no longer need...

But the same principles apply to borrowers with split mortgages from other lenders.

If you have a split mortgage and you can comfortably afford the full repayments, the sooner you resume full repayments, the quicker your credit record will improve.

If you have €100k of a tracker warehoused at 0%, you are saving only €1,000 or so interest a year. I suspect that it's worth paying this to have the flexibility of moving or topping up your mortgage sooner.

If you have €200k split but you are not on a tracker, you are probably saving €7,000 a year, so the decision is more difficult.

Brendan

 

[bowser]

Hi Brendan
We have a 50/50 Warehouse split with KBC and have just received our redress and compensation. We were restored to a 0.95% tracker on our main mortgage. Our monthly repayment has reduced from 800 to 470 per month and we are in a position to meet the full repayment. We are no longer in negative equity because of the balance adjustment from our redress. We plan to trade up in the next few years so it is in our interest to come off the split and correct our credit rating. I contacted KBC in relation to this and they advised to let things settle for a few weeks. We hope to come off the split in January as we want to try and rebuild our decimated savings somewhat and get back on our feet financially over the coming months. I'm still in disbelief about all of this, it really is life changing for us.

 

[Brendan Burgess]

Hi bowser

Agree that it is a good idea to build up some savings. But did you not get a compensation payment from KBC?

How much is in the warehouse now? It is costing you €1,000 per year per €100,000 warehoused.

I think you should come off the split and start the process of repairing your credit record as soon as possible.

It's quite likely that if you want to trade up and you have proactively cleared the warehouse, KBC will look favourably on a remortgage.Don't forget that you can move your tracker to the new house and pay an extra 1%. This is really worth paying €1,000 for to get yourself into this position sooner, rather than later.

Brendan

 

[bowser]

Thanks for the advice Brendan. Yes, we did get compensation but we have some serious catching up to do - we plan to do some home improvements and park some for savings. Our house is literally falling apart after years of neglect. It is very comforting after years of financial hardship to have a decent savings balance again, I sleep a bit better at night - although, I'd love to blow it all on a cruise
Our warehouse split is currently 119k active and 121k warehouse after the balance adjustment. We also have a top up 24k on variable rate of 4.25 warehoused 50/50 and another small top up of 5k warehoused 50/50 on a tracker of 1.1. I have asked KBC to clear the top ups from the balance adjustment and pay the rest off the main mortgage which is tracker 0.95% They have just paid it off the main mortgage but we'd prefer the dearer top up loans cleared first and just have the original main mortgage outstanding. I'm waiting on a response still.
We have our 5 year plan and aim to move house within this time. We are in no major panic to move immediately. To be honest, we are just catching our breath after all of this, it has been quite a journey. Just let the dust settle for a few months before we start the process. We do want to come off the split, I hated being on it, hated that all that money was sitting there, looming ahead of us and it is our intention to do so in January.

 

[Brendan Burgess]

We do want to come off the split, I hated being on it, hated that all that money was sitting there, looming ahead of us

Sorry bowser, this makes no sense at all. Although I have heard the sentiment expressed before.

If someone offers you an interest-free and repayment-free loan of €121k would you turn it down? If you can afford the repayments, then make them into a separate account and save up that money for when you need to pay down the warehouse.

Of course, paying off the warehouse now is better than blowing the money on a cruise.

Brendan

 

[bowser]

Confused now. Stay on the split or come off? I was joking about the cruise, sorting out the mortgage is our priority. We want to revert to a regular mortgage, no warehouse and correct credit rating. We are currently saving the difference in mortgage repayments per month.

 

[Brendan Burgess]

I was responding to your "I hated being on it and hated the looming bit" which makes no sense.

It was great to have a split as you were on the SVR. You should have been delighted to have had it.

But now, you may be better off getting rid of it now that it is a tracker.

Brendan

 

[bowser]

It makes perfect sense to me - the looming warehouse bit. Before we were restored to our tracker, I had no idea how we would ever be able to pay the warehouse - hoping that slowly over time we could reduce the split to say 60/40 as our finances improved. We were stuck on a split in negative equity. The only reason I was happy to have the split is that we could hold onto our house, the alternative was very unpleasant. Thankfully, things have dramatically improved and we can come off the split and correct things financially.
I understand now the difference of having a split depending on whether you are variable or tracker.

 

[Brendan Burgess]

It appears from another thread, that KBC, and other banks, may want people to set their overpayments against the active mortgage rather than the repayment-free warehouse.

This is consistent with reports of lenders not actively reviewing split mortgages and asking the borrowers to move some of the warehouse into the active mortgage.

The underlying issue probably is that the bank has restructured the loan so that the active part qualifies as a performing loan for Central Bank purposes and if they move some of the warehouse into the active part and the borrower defaults, then the whole loan would be classified as non-performing.

From the other thread:

I spoke to KBC. In summary...

1) You have a contractual right to exit your split mortgage at any time.
2) They have to make sure that you fully understand the implications so they send you a letter recommending that you get independent financial advice and they ask you to sign a letter saying that you understand the implications.

I thought that banks would set any overpayments against the warehouse, but in fact, the banks generally seem to be allocating any overpayments against the active mortgage - which, of course, is much better for the customer.

In their experience, people want to get rid of the warehouse for the wrong reasons. People say "I don't want to reach 70 and find myself still with a mortgage hanging over me."

KBC explains that even still it makes sense to clear the interest-bearing part first. If you overpay that, it will be cleared well before the person reaches 70. And then they can start clearing down the warehoused part.

The last thing KBC wants, for themselves and for the borrower, is for a borrower to exit the split mortgage, only to be surprised by the increased repayments and then to fall into arrears again.

But if you choose to exit the split mortgage, KBC has no choice but to comply with your choice.

Brendan