Just entered arrears on Buy to Let Opinions welcome

C

Citywest

Registered User
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4
Income details
Net monthly (i.e. after tax) Income self: €4450 (includes, overtime, oncall, expenses, etc averaged out over the year) Private Company
Net monthly income partner/spouse: nature of income €1100 (public sector, since last september) before that was part time public sector and weekend work €11 per hr
Income history:
Amount of child benefit received (Should be €130 per child) ; €390 (3 children)


Personal circumstances so we can calculate your reasonable living expenses
The ISI calculate our reasonable living expenses as approx. 3k (not doing anything exceptional for College going student).We have 4 children (1 primary, 2 secondary, 1 college)
AIB allow €3700 for a family (with our demographics).
Our actual spending comes in around €3600 (including 2 (old) cars (needed for work in different directions, public transport not an option) and includes all property taxes, NPPR etc.

Home loan
Lender: AIB
Amount outstanding: 38K (1.2%) tracker, 67K (4.4%) variable, (0.85%) 42K tracker
Value of home: 275K
Interest rate:
Monthly repayment €193, €454, €212
Amount in arrears Nil


Investment property -
Lender: AIB
Amount outstanding: €211K
Value of home: €175K
Interest rate: 5.35%
Monthly repayment was €950 fixed now €1677
Amount in arrears €1677
Monthly rent received €850
2 issues here the mortgage reverted to capital and repayment and the dept of social welfare stopped paying the tenants rent supplement (they told her she is paying too much (rent is lodged directly from the dept to our back account) they have sent her forms to renegotiate. She says she will pay the shortfall but needs 2 contracts 1 for them for the reduced amount and 1 for her.


Credit Union
Amount of shares 1K
Amount of loan outstanding 14K
Monthly repayment €365
Term left 4 years


Other loans and creditors -
Overdraft - amount outstanding: Nil
Credit Card - amount outstanding €4.5K
Credit Card - monthly amount you are paying (making payments of 125 per month to reduce)
Term loan Amount outstanding €19K
Term loan term left 4 years
Term loan - monthly repayment €465
Term loan - interest rate 9.7%

Other savings and investments
PRSA and personal retirement bond

Do you expect any lump sums in the medium term future?
Yes. Have a €75K personal retirement bond, currently self-directed mostly in shares, its current value is €75K, would like to ‘grow’ it to €100K before I reach 50 (in 3 years time). I can retire (the bond, not me) it early and tax free (up to a value of so many times salary or something) provided I have left that employment.


How important is retaining the family home to you?
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
Out cashflow situation at the moment prevents us making fully repayments on the buy to let, I have requested that we make a fixed repayment of €1000 per month (till all our term loans expire (4 years), then make full capital and interest repayments.
This has been rejected by the bank and they say we have the capacity to pay (based on not paying the unsecured debt repayments)

What is your preferred realistic outcome?
We purchased the buy to let as a pension contributor. Ironically in hindsight we could have;
1. Gone to another bank in 2004 and received a tracker
2. Purchased from my pension (and any payments I made into the mortgage would have been tax free.
Property is barely washing its face and if we are forced to sell we will sell it (though it leaves a bad taste in the mouth, am looking for best options really; Thanks for your opinions.
 
All your outgoings on credit seem to total €2641 you take in €6000 per month, it seems that you are choosing to not pay the full amount on the buy-to-let, surely you can find a saving of €200 per month within the €3,600 you are currently spending?
 
Thanks Derek,
Probably not being realistic with our budget as there are some expenses that I am probably not including, since Our oldest Daughter went to college, Wife is paying (out of her salary),

1. Student loan for college fees €2750
2. Gaeltacht course (mandatory for that college course) €1000

No margin for emergencies, (car maintenance etc) even car tax at times. Have cut health insurance (now zero), no going out, no sky tv, cut probably come up with an extra €100 but need to work more hours.
will have more bills associated with child in transition year (ok because it delays college another year).

Also salary is made up of travel expenses associated with the job too (few hundred a month) so this is not guaranteed either.
 
Your options are limited. You appear to have been on a reduced repayment arrangement on the BTL loan and now they are correctly demanding that you comply with the terms of the agreement. They would see their secured loan as being a priority to the unsecured debt. Given the negative equity in the property this is not necessarily a strong position for them. However, if they don't back down, they may well decide to take action to resposess the property and a forced sale would lead to further problems for you in respect of the arrears. level of negative equity in the property is relatively low. Could you consider negotiating a deal with them for 1K pm on the basis that you place the property on the market? They may look at this.
 
Probably not being realistic with our budget as there are some expenses that I am probably not including, since Our oldest Daughter went to college, Wife is paying (out of her salary),
Click to expand...

This is a fair point. Cost of 3rd level eduction (particularly where offspring have to live away from home) has escalated to an alarming level, as poor frustrated parent can testify to!!!
 
Thanks Brendan, was just looking for a sustainable solution, could offer 1K per month for 4 years then full capital repayments but they didn't accept the €950 so cant see them accepting the €1000. I see this as a cashflow problem, we have reduced our overall indebtness from €460K in 2008 to €397K now but that doesn't really matter to the guy I have spoken to.

I have arranged a meeting with someone in our local bank but maybe I need to talk to a financial advisor who would look at this and say?
 
I don't think there's much a financial advisor can say to you at this stage! Your'e on a high rate on BTL exposure so rent is not even meeting the interest. To be honest, I'd certainly consider selling the property as a primary option anyway. You will need to offer them something in return for reduced repayments and this might cut it! You also need to assess how you will react if they refuse. i.e. what is your own bottom line repayment!
 
It may not be what you want to hear, but why don't you sell both properties (inc.PPR), clear all loans (inc. personal loans) and move on with your life? You'll still have enough left over for a very decent deposit for a new house, and a really good salary which should secure a new mortgage.

I sometimes feel people want top have their cake and eat it. There is a solution here and it's straightforward enough in my opinion.
 
Just sell the investment property and convert the 36k shortfall to an unsecured loan.
The repayment on the €36k remaining NE will only be approx €290 per month, improving your situation by approximately €550 per month.
It will also relieve you of all the hassle of being a landlord.
No point in selling your home due to the good interest rate and positive equity on it.
 
Citywest said:
Income details
Net monthly (i.e. after tax) Income self: €4450
Net monthly income partner/spouse: nature of income €1100
Amount of child benefit ; €390 (3 children)
Total: 5940

Our actual spending comes in around €3600

Home loan
Lender: AIB
Amount outstanding: 38K (1.2%) tracker, 67K (4.4%) variable, (0.85%) 42K tracker
Value of home: 275K
Mortgages: 147K
Monthly repayment €193, €454, €212
Total: 859
Equity: 128K


Investment property -
Lender: AIB
Amount outstanding: €211K
Value of home: €175K
Interest rate: 5.35%
Monthly repayment was €950 fixed now €1677
Amount in arrears €1677
Monthly rent received €850
Negative Equity: 36K


Credit Union
Amount of shares 1K
Amount of loan outstanding 14K
Monthly repayment €365
Term left 4 years


Other loans and creditors -
Credit Card - amount outstanding €4.5K
Credit Card - monthly amount you are paying (making payments of 125 per month to reduce)

Term loan Amount outstanding €19K
Term loan term left 4 years
Term loan - monthly repayment €465
Term loan - interest rate 9.7%

Do you expect any lump sums in the medium term future?
Yes. Have a €75K personal retirement bond, I can retire (the bond, not me) it early and tax free


Any other relevant information
Out cashflow situation at the moment prevents us making fully repayments on the buy to let, I have requested that we make a fixed repayment of €1000 per month (till all our term loans expire (4 years), then make full capital and interest repayments.
This has been rejected by the bank and they say we have the capacity to pay (based on not paying the unsecured debt repayments)

.
Click to expand...

Odd that there's 3 mortgages, is that dipping into equity to fund spending. Same story with the credit union as you've only 1K savings versus loan of 14K so would assume they will not accomodate you any further. Wonder is this the reason the bank are not giving you any leeway on the investment mortgage.

Your credit card company must love you as you are paying above 20% interest and not actually paying back the amount owing. It will take at least 3 years to repay and that's not counting the fact that the interest rate is being applied. How much of that 125 is interest?

Why is the child benefit for 3 children and not 4?

Why did you mention the ISI limit. Can you give us a list of your monthly expenditure.

Is your term loan with the same bank as your mortgage.

Does your bank know about the lump sum due in 3 years time. You should probably use that to pay off your debts, can you not access it now?

Income: 5940
Mortgage: 859 + 365 + 125+ 465 =1814 (need to add in spouses two loans). You need to find 827 monthly to fully repay your investment mortgage.
Remainder: 4126
You state you are spending 3600 a month, so you still have 526 to help with the investment mortgage. And you surely can reduce your 3600 spend to get the remainder.

You mention the bank told you to stop paying the unsecured debt. Does this mean the CU and the CC. 365 = 125 = 490. Do they also include the term loan of 465?

Are the two loans your wife is paying back coming directly out of her salary?

Last comment on the above, you are spending a lot of money on debt.

Rent supplement

Do not do two contracts, you are just looking for trouble. The government have said social welfare have 'discretion' on rent ceilings. So your tenant ought to apply for an exception to be made so that you don't evict her. You'll probably have to explain it to her, a letter from you to her might help her (that you're very sorry but the rent has to go up and she will have to leave as you cannot pay your mortgage if you don't receive the correct rent - something along those lines.

You mentioned NPPR, so presumably you're all up to date with tax on the rental.
 
Thanks all for your responses;

@Bronte.
All debt is pre 2008 and falling total indebtedness has fallen from approx 460K to 395K in that period.

Separate mortgages because one was 'ring fenced' as it really was equity release to fund the purchase of the investment property and to show revenue that this was the case.

yep credit card reducing as well and if we had a 'spare' 4.5K it would be the first to go.

Child benefit is 'only' allowed for children under 18, hence college going child not eligible.

Currently filling out a full SFS (including Wife paying for student loan etc out of her salary)

Term loan is with the same bank (AIB) yes.

Yes the bank does know about the bond, no I can't access it now.
Its a pension product basically the Company wanted to close down the company pension plan a few years ago (more responsibilities for trustees etc) and move everyone to PRSA's, fortunately I had the vision (this instance) to move to a self directed prb (personal retirement bond) I have 'grown' it to 75K and can retire it early (at 50, 3 years time). The pension guy wanted me to move it into the PRSA and insisted that the PTSB shares were a steal at the reduced price (Glad I didnt take that advice) last time he was in the office here he anounced he worked for a life company and had nothing to do with any bank (oh how time change) .

As for Tax etc yes have paid all the NPPR, Tax, and PRTB charges.

I have a meeting with the bank when we fill in the full SFS so will let you know what comes out of that.
 
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