Is a borrower in arrears if no monthly capital repayments but c.repaymemts overpaid?

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honest

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Say during the boom a borrower borrows money for a property, to be repaid over 20 years, the first 2 years interest only. Lets say he has kept up interest only repayments to date, and has paid off "in a lump sum payment" a very substantial amount of capital, from the sale of other property. Lets say the capital is paid off "ahead of itself", to the extent that the same amount is paid off as would have been expected to be paid off by 2018 had the person made monthly capital repayments. The borrower is not making monthly capital repayments, just interest only. Is the person in arrears or not? The bank expects monthly capital repayments on the balance between now and 2018. Yet the capital that was originally envisaged to be repaid by 2018 has already been paid off.

(A) In this very unusual situation, whats the position....is the bank correct in saying the borrower is in arrears even though he is already very much "ahead of himself" overall on repayments?

(B) What impact should it have, if any, on the borrowers credit reputation / rating....should it be affected / damaged or not?

Thank you in advance of any replies.
 
You'll have to read the contract you entered into with the bank to find the answers to these questions.
 
Given your other posts I'm not sure why I'm bothering to reply but it will all depend on the contract as stated above. But think about it logically, if someone does not pay what is agreed on the due date agreed then they fall into arrears and additional interest can arise on these payments, the fact that the borrower deems him/herself to be up to date doesn't matter if penalty payments have accrued.
 
DebtCert said:
You'll have to read the contract you entered into with the bank to find the answers to these questions.
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I gather there is nothing in the contract about what happens if a persons overpays the lender to the tune of hundreds of thousands of euro, in a lump sum payment.

dereko1969 said:
But think about it logically, if someone does not pay what is agreed on the due date agreed then they fall into arrears
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you do not understand ; the borrower did not pay what is agreed, they overpaid by hundreds of thousands of euro.
 
Ah you're back again.

Is this the same person that borrowed too much, now paying back too much.

I do know that with our loan when we pay off a lump sum the bank leaves the term the same and reduces the monthly repayments, they don't stop the repayments so it may be in the contract that the loan is to be repaid in monthly installments over the term of the loan.
 
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honest said:
I gather there is nothing in the contract about what happens if a persons overpays the lender to the tune of hundreds of thousands of euro, in a lump sum payment.


you do not understand ; the borrower did not pay what is agreed, they overpaid by hundreds of thousands of euro.
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Sorry but you do not understand anything, I'm out.
 
Joe_90 said:
Is this the same person that borrowed too much,
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Not necessarily. Think of this as a stand alone case. There are a lot of different people who took out different mortgages in the country.


Joe_90 said:
now paying back too much.
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not "paying" back too much in the present tense, but he paid ( past tense) back a large lump sum amount (from the sale of other property). There is a huge difference between "paying back too much" and someone who paid back many years monthly capital repayments in one go in the form of one lump sum. The bank agreed to this and subsequently many years ( 3 or 4 or 5 or 6, I'm not sure, but it does not really matter ) were interest only by mutual agreement. Now personnel in the bank have changed and is the new manager correct in saying the borrower is in arrears even though he is already very much "ahead of himself" overall on repayments?

The borrower has, at this point in time, paid back hundreds of thousands of euro more than the bank or anyone would have envisaged being paid ( by now ) when the loan was taken out. If such a borrower is "in arrears" what do you call someone who has not paid back capital or interest to date?
 
Hi Honest

This is an interesting question.

In general, if there is no discussion to the contrary, I think that such payments would be considered as payments in advance.

In simple terms, if someone is due to pay €500 in August, and they pay €1,000, it would show up as "payments in advance" on the statement.

If someone pays off €100,000 and asks for that to be set off against the capital and have the repayment reduced or the term shortened, I think that they are in a new mortgage contract. So if the repayment is reduced to €400 per month, then that is now due. If it's not paid, they are in arrears.

Brendan
 
Given other posters comments I was tempted to look bank at the OPs previous posts.

I didn't do this because the question seems a reasonable one, and at least some of the other posters don't seem to have understood it.

If the situation is covered in the contract, then that would have to be considered.

However the contract does not seem to address this and so an authoritative answer could only come from a court.

I also have on a number of occasions paid a lump sum off my mortgage. in fact it is probably not that unusual, redundancy payments, inheritances, investment policies maturing.

In the event that I was unable to meet the regular monthly payments, I hope that the fact that the amount I now owe the bank is less than the original contract anticipates at this time would count for something.

As for the interest, if a lump sum was paid then the expected total interest would fall. If later on monthly payments are missed then the expected total interest would rise from this lower level.

As I said I have deliberately not read the OPs previous posts, but it seems to me sometimes we can be a little intolerant of people who don't fit the usual boxes.

As for borrowing too much and then paying back too much. Well the OP isn't the only one who borrowed too much in the past. If he was fortunate enough to be able to pay back a large part of this later, I don't see why he should be lampooned for that.
 
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