May be about to go into arrears on family home; two BTLs

@meath man

Another way to look at this.

Say you are living in a house worth €550k with a mortgage of €475k with a tracker rate of ECB +1%.

Would you consider taking out a mortgage of €850k at ECB +2% to buy a house for €900k.

Of course you wouldn't. It would be the height of madness. You might like to trade up but you would realise that you could not afford to.

So, it's absolutely clear to me that you should sell your family home and move into Rental Property 1.

I think it's very important to do that as quickly as possible. You can always find excuses for delaying it. But delaying it is very risky.

The big risk is that a property price "softening" or fall, might push you into negative equity and you would lose all three properties. You could end up homeless and insolvent. If the best price you are offered falls below the value of the mortgage, you will need Pepper's permission to sell it. This could take a long time and the price becomes lower and lower. You would need to use your savings to fund the shortfall. And no, Pepper would not do a deal with you.

And, of course, every month you delay is costing you extra and risking the risk of you defaulting on your mortgage.

Brendan
 
Hi meath man,

You need to start cutting your debts ASAP. Waiting 4-5 years is just postponing dealing with your problems and you would be taking a big risk in the interim. You are already too old to have this high a debt burden and you say yourself that you might not be able to keep the business income up indefinitely.

Is the family business in a cyclical industry, where trade might suffer badly in a recession? This would make your situation even more difficult. Add to that higher interest rates or house price declines and you would be completely insolvent. You are really, really vulnerable and need to address this immediately rather than waiting.

Does the business have debts? Have you given any personal guarantees on these debts? Have you borrowed any money from the business? Could the business be sold, now or when you hit retirement age?

The fact that you have trackers and the very high LTVs suggest that you might have been in repayment difficulty before. If this is the case, then you might have difficulty securing a new mortgage. Even if you credit record is clean, you are still old applicants and will be older still in 4-5 years. The bottom line is that you cannot afford to live in a €900k house given your age and your very high debt burden. Other posters suggest moving to one of the BTLs and you should consider that as a relatively clean option.

meath man said:
Live like hermits.
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I doubt it. Perhaps you are just trying to portray your case in a positive light. But make sure you're not trying to fool yourself. €4k per month after the mortgage is paid is a very high income by any standard. If you are still struggling to save, then you might have a spending problem as well as a debt problem.

meath man said:
Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? Circa €5k rolling
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Use your cash to pay off the credit bill immediately.
 
I wouldn't be waiting to sell the family home, given the global slow down. I would be putting it up for sale immediately.
 
He can't as has to give 7 months notice to the tennents in one which is a real bummer for him. And with the eviction moratorium now in place, will he even be able to get the tennents out of the second investment property.
 
Another option might be to go bankrupt.
Lose all the debt and the 2 buy to let's probably.
Hold your principle residence hopefully.
Get any sort of a job and live your life.
 
RichInSpirit said:
Another option might be to go bankrupt.
Lose all the debt and the 2 buy to let's probably.
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OP is is not balance sheet insolvent, at least yet, and has capacity to service debts from income for the time being.

So I don't see how insolvency is even possible.

Even if that changes the business probably comes into play which is not desirable.
 
You're in a very precarious position and it's because you are overleveraged. Your wife and children need to know (if not already) that money is tight and that you need their help to reduce outgoings..
You need to get rid of your debt. It's looking very likely that Recession is coming so you need to start acting while you can or it could be taken out of your control.
You need to get very real very quick.

If it was me I would sell the car and buy a cheap run around with cash. That will free up ~ 480 euro per month.
I would pay off the credit card in full with your savings and not use it again. That will save you another 70-100 per month on interest.

At least two of the properties will need to be sold as you cannot afford to keep all three.
 
Laughahalla said:
If it was me I would sell the car and buy a cheap run around with cash.
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While normally this would be the right idea, I don't agree with it in this situation.

The OP's problem is that he is living in a €900k house, not that he is driving a €30k car.

So focus on the big issue which is getting rid of the house. That is going to be traumatic enough.

Trading down the car is neither here nor there and might give the impression that he is addressing the problem.

Brendan
 
It's difficult to comment without knowing why you can't shore up your outgoings right now. If you are spending 50% of your wages on bank borrowings then you have 4k and children allowance in cash every months so when you say you have no spare cash that really means that you can't see where that 4K cash flowing through your hands is going. While its not sexy you really do need to go back to itemising everything you spend outside of the bank loans and start being frugal, shopping around and foregoing the "nice to haves" for the "do it need it right now". Pay off the credit card and put it away - you can't afford it.

I suspect that a large portion of your outgoings may be attributed to your two teenaged brought up to believe that they are "well off" and they act, spend and cost accordingly. You probably need to sit down to discuss their college plans and realign many expectations they might have. They may well believe that in 10 months they are going to be living on campus in a city university because they worked hard and that may need to be reset. It's as good a year as any for them to learn frugality ( forgo grinds, nights out, holidays etc., for the greater good).

The " what will people think when i switch out cars, wear the same dress twice, don't have holiday this year…" will weigh heavy on everyone in the household - but honestly nobody knows the reality behind closed doors so let 'em look while you do the hard yards getting yourselves back on track.
 
BoscoTalking said:
I suspect that a large portion of your outgoings may be attributed to your two teenaged brought up to believe that they are "well off" and they act, spend and cost accordingly.
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That's a massive assumption based on zero evidence!
 
How does one get an 850k mortgage with a 50k downpayment, given the lending rules. Even with an exemption on an income of 170k, the maths don't work out. I guess it was due to the equity in the apartments? Or in a time before current lending rules? If so, it would be strange not to have paid off more of the mortgage
 
settlement said:
it says
'Family home worth €900K with an €850K mortgage'
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They may have got into arrears at some point which got capitalised thus inflating the capital balance of the loan.
No lender would advance €850k on a €50k down payment or be allowed to.
 
First thing and I am not being patronising you need to breath. You have to decide what you want to do. Keep going as you are or do something about it. You need a clear head to make a decision on this. You all have to agree on how to fix this.
Have you just been paying interest only on all the mortgages? Have you been putting money in your business and that is where the money has gone? The money has been used somewhere. You have very little equity on the properties? Are you covering the interest on the mortgages and have the bank allowed you do this? when you know where the money goes you can then try to fix it. If this is going on for many years you will run out of time.

Sit down and work out your income and your outgoings that you know of such as mortgage insurance, car payments food etc. Then it is the other expenses that you don’t know where it is going.
The shopping for clothes, entertainment meeting friends that can add up. Expenses on children add up also.

If you have been using the income from btl 1 to pay towards your home then money definately is not added up.
Then set a budget and stick to it. If you find you are in a negative situation then you need to start removing debt. Sell things you do not need or use. Increase wages.
From tomorrow every penny you spend, write it down. Take receipts for everything. You do not realise how many coffee and take outs add up when you do not watch. Even go back to paying with cash Better than tapping and find out money has gone without you knowing it. The two of you should follow this.
You say your jobs are labour intensive so get yourself some insurance if you are out sick your wages will be covered for a time. Can pm you a company we use. ( not connected to them) Also start taking lunches with you and bring a coffee with you on the way to work. Little savings can add up.

You have two children that are 18. They can get a part time job now and while studying. During holidays thay can work more hours. I had many part time jobs while studying to pay fees and keep myself afloat. Cleaning houses and offices in between classes. I paid money to my parents. Your children can help towards the bills. I am sure you did this yourself many years ago.

Your company. If you are doing well then rethink your wages and out that towards your mortgage. If you are paye in your company then hopefully the paye and prsi is paid as you earn each month. If you are self employed and you pay the tax at the end of the year you need to start putting money away for the tax bill as well. Hopefully you are in a good position with Revenue.

Ask your accountant for advice on travel expenses and other expenses that are allowed. What ever you get pay off your credit card and stop using it. If you have employees in your business and you normally given them a small gift exemption which was €500 per year. This year and next you can give them up to €1000 without tax implications. You can apply for this yourself but instead of spending it on clothing and treats put towards food bills etc. Is a small amount in the scheme of things but it is money towards your bills. does not have to be a one 4 all card. Can be store card but through corporate section.

there is a uk website that has a template you can use to work out your budget and it shows the areas you need to work on. Has great tips. Can pm you as do not want to spam the site.
 
ClubMan said:
They may have got into arrears at some point which got capitalised thus inflating the capital balance of the loan.
No lender would advance €850k on a €50k down payment or be allowed to.
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Possibly only paying interest only or not paying the mortgage resulting in late payment fees and charges or interest only. We do not know how long they have the property or properties.
 
If you plan to sell the btl sell then in the right order. e.g. btl bought so you can carry the loss across to the next one so less or no capital gains tax. If you have not increased the rent follow the correct procedure on rtb site even if you have given your tenants notice. Low rents will affect the resale price.
 
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