Is long-term renting our only option?

[seandubh]

Housing history is like this:

2001 bought investment property in town where demand for rentals in consistently high but house prices have plummeted, rents have also fallen.
2006 starting family, we moved out of rental accommodation and into a very overpriced PPR, deposit + furnishings from re-mortgaging first property.
2007 lost contracting work and found full-time employment in Dublin, commuted weekends for a time until my wife and children joined in 2008.
2008 Renting in Dublin commuter region. Initially paying a high rent which reduced over time. Concentrated on clearing unsecured personal debt.
2013 Ghost housing estate we rent in was repossessed from the developer. Landlord changed to be Savills on behalf of the receiver.
2014 Decision to sell all units. First viewings start the end of this month. Unit we are in will sell for €110,000. Interest appears to be high.

After some tough years my wife and kids are well settled in the area and would like to remain in the primary school and in the community.
We are concerned that an owner-occupier will purchase and we will have to move. Or that rents will rise once a new landlord is in place.

Need advice on how to proceed from this point.

Between 2008 - 2014 I concentrated on clearing car loans, overdraft, credit card debt and personal loans. In 2008 that debt all together came to almost €70k. It has been reducing since by about €800 / p.m and now stands somewhere around €15k. We don't have or use credit cards or overdraft and are maintaining a shared car.

Reason I concentrated on clearing personal debt was to attempt to increase available income to pay interest and capital on the PTSB mortgages when the demand came. As it transpired, interest rates remained low and despite some letters saying capital payments would soon begin, PTSB later changed their minds.

We started saving a deposit toward the house we are currently renting but haven't gotten very far with that. Location and size would be fine for us and repayments on a €95,000 mortgage at the right term would match our monthly rent outgoings of €650. However, the PTSB mortgages are unresolved and at some point we will have to pay interest and capital. I approached one lender who said no. I haven't approached PTSB yet as I'm not quite sure how to approach it.

Questions:

- Is it anyway realistic that we would qualify for a new mortgage? A negative equity mortgage with PTSB for example. And if not now, in 18-24 months time?

- Do we keep paying personal debt and then start saving or should I pro-actively request that repayments change to interest + capital on one or both of the mortgages?

- Are split mortgages available when not in arrears - the warehouse to be paid from a sale down the line? Seems this would almost guarantee that the bank that they get all of their money and also ease my monthly affordability problem?


Income details
Net monthly (i.e. after tax) Income self: €4250 full-time employment
Income history: only nominally permanent employment, volatile industry and moves can become necessary.
That said, reason to move to east coast was because there is abundant work in my industry.

Net monthly income partner/spouse: Occasional child-minding €200
Income history:
Amount of child benefit received: €260

Personal circumstances so we can calculate your reasonable living expenses
One adult family or two adult family: Two
Do you need a car for work or do you use public transport? Car
Number of 4 - 11 years old: 2
Monthly childcare costs: N/A
Monthly spend on special circumstances:


Investment property 1 - bought in 2001
Lender: PTSB
Amount outstanding: €200,000
Value of home: €80,000
Interest rate: 1.15%
Monthly repayment: €258.96 (interest only)
Amount in arrears: €0
Monthly rent received: €630

Investment property 2 - bought 2006 as PPR, moved out 2008 into rental accommodation the other side of the country when I found work there.
Lender: PTSB
Amount outstanding: €275,000
Value of home: €150,000
Interest rate: 1.05%
Monthly repayment: €307.77 (interest only)
Amount in arrears: €0
Monthly rent received: €700

Credit Union
Amount of shares: €2500
Amount of loan outstanding: €5000
Monthly repayment: €140
Term left: 36

Term Loan
Amount outstanding: €12,266.99
Term left: 36 months
Monthly repayment: €333.63
Interest rate: 7%

Other liabilities
Owe the revenue a balance of €1200 in TRS from the 2008/2009 period after we moved out of the PPR which we continued to benefit from but were not entitled to. This is being paid back in instalments of €200/p.m

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

What is your preferred realistic outcome? Would like the increased housing stability of a PPR for myself, my wife and kids and the ability to be able to work hard and manage the two investment properties as rental businesses to be sold at a later point in time.

 

[44brendan]

I hate to be the bearer of bad tidings but I can see no way that any lender would advance you additional funds guven your current borrowings. With both BTL facilities in high negative equity and given your unsecured debts, no real ability to make any level of capital reductions you will have to address this issue in the short term. I'm amazed that your IO period has been extended, given the rental income from the properties is well above the interest level being paid. In effect your RI is supplementing the reductions on your unsecured debts. Obviously your best approach in the short term is to extend the IO repayments as long as possible. However, a day of reckoning is likely to arrive soon and you will need to be prepared for it. Insolvency options should be looked at as you will need to get rid of this overhang of debt before you can restart your life. Forget borrowing more money. This idea is unrealistic, even if you could find an institution to lend to you!

 

[seandubh]

With both BTL facilities in high negative equity and given your unsecured debts, no real ability to make any level of capital reductions you will have to address this issue in the short term. I'm amazed that your IO period has been extended, given the rental income from the properties is well above the interest level being paid. In effect your RI is supplementing the reductions on your unsecured debts. Obviously your best approach in the short term is to extend the IO repayments as long as possible.

Appreciate your response and don't worry about telling it like it is. I would appreciate the opportunity to ask a few clarifying questions.

I really don't know why they have extended the IO period this long - it's not because of an explicit request on my part. I have just been keeping my head down. Your analysis is correct that the RI has been supplementing the reductions on the unsecured debt. Also correct that I can't make any bulk capital reductions, though with interest rates low, I could potentially pay capital & interest on these loans. At least on one of them.

That has always been my long-term plan: (a) clear other debt to increase available income, (b) start paying capital when demanded, (c) wait for house prices to rise sufficiently to sell at a smaller loss. I'm getting close to (a). I fully realise that (c) may or not ever happen but when I did an honest reckoning in 2008/2009 before the insolvency legislation was put in place and was faced with €60k unsecured debt and €475 secured in huge negative equity in 2008/2009 this seemed like the only workable option at the time.

I'm just wondering if anything has changed since, now that the legislation has been developed and that the banks are more actively addressing the crisis. I can't retract any of my mistakes... I would do a number of things differently if I could. The first property could have been sold to raise deposit/furnishings for the second or ideally we could have lived in rental apartment instead of buying second property at all. I'd have a much smaller amount of debt now. But I can't retract those mistakes and I just want to manage this as best I can while also living and providing as normal a life as possible.

However, a day of reckoning is likely to arrive soon and you will need to be prepared for it. Insolvency options should be looked at as you will need to get rid of this overhang of debt before you can restart your life.

Since I have cleared the majority of the unsecured debt and am continuing to clear the rest we're only talking about the €475k secured debt here. Is it worth going down the PIA route when there is only secured debt with a single lender involved? How does the PIA effect credit rating during and after the agreement. If agreement is reached, is the secured debt gone after the 6 year period? I doubt it and given this statement "You will not be discharged from the secured debts, except where this was explicitly provided for in the PIA." I'm struggling to see how going down a PIA route for secured debts only would be any different or preferable to negotiating with the bank directly or through a professional?

 

[44brendan]

(a) certainly makes sense for as long as banks are prepared to go along with current agreement
(b) Can you afford to do this? Servicing P&I on 475K of mortgage debt should be well above your income capacity. Do the math and see what repayments would amount to!
(c) Big gamble and likely to be somewhat unreralistic. You are currently 245K in negative equity on these properties. Yes the market is moving positively in Dublin, but outside the Capital movement is low and you don't appear to be in a position where you can meet an acceptable P&I repayment on both facilities.
Having said that, the banks have been very tolerant up to now and until they start making demands on you, there is no need to take any action. To a large extent the ball is currently in the bank's court and you can certainly consider your options up until they demand some change in the current repayment structure.