Mortage negotiations - BTL negative equity

[ksmith169]

Income details

Main Net monthly Self Employed. Net Monthly income €4,000 to €5,000 per month. Average €4,500

Current living expenses €4,500 per month includes everything.

Partner Net monthly None works in Home.

3 x €130 = €390

No MIS.


Personal circumstances

Need car for transporting children to school.

Use public transport for work.

3 x children aged 4 to 11.

All children and adults have asthma. Approximately €120 per month on inhalers.



Home loan

Lender: PTSB

Amount €377,000

Value of home: €350,000

Interest rate: Tracker (0.9)

Monthly repayment Full payments approx €1,450. Current payments €1,285

Amount in arrears None.


Have completed SFS 3 years ago (May 2014). In this instance we got 100K of primary residence mortgage put aside with no interest and interest only on investment property.


Investment property -

Lender: PTSB

Amount outstanding: €409,000 total.

2 mortgages

€327,000 tracker at 0.8%

€81,5000 RIP at 5.8%

Value of home: €200,000 to €250,000

Interest rate:

€327,000 tracker at 0.8%

€81,5000 RIP at 5.8%


Monthly repayment:

Interest Only €327,000 Interest only €281. Interest and capital over 15 years @0.8 = €1930.

Interest Only €81,500 Interest only €393. €81,500 over 16 years @5.8 = €640.


Amount in arrears

All arrears from sometime ago are written into amounts above. Have been on interest only on rental property for approximately 3 years. Review of situation is coming soon.


Monthly rent received

€1,4000





Other savings and investments


Do you expect any lump sums in the medium term future?

May get 100K inheritance in 5 years but not sure.



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. Our 3 children are in local school and this is where our life is.
What is your preferred realistic outcome?

I will never be able to repay the rental property mortgage and would sell it if I could come to an arrangement with the bank for the difference.


My questions for discussion:


We have kept up payments under all arrangements with the bank. Summary of arrangements rental interest only, primary residence 100k parked.


How protected is the family home if mortgage is being paid under current arrangements?


There seems to be very little room for rental property debt being dealt with? Has anyone had a portion of rental property mortgage written down or forgiven?


I would surrender rental property but the LTV is 180 to 200%. Is there a possibility of splitting the rental property mortgages and parking half with no interest?


What is considered a sustainable rental property mortgage by central bank now? Is interest only on the BTL property?

Any information much appreciated.

 

[Brendan Burgess]

OK, let's look at the investment property on it own first.

Mortgage: €408k
Value: €200k - to be conservative.

Interest cost: €8k
Rent received: €15k

As you are on interest only, this is cash flow positive for you. While it is cash flow positive, you probably don't need to do much about it.

You have a great deal on your family home. You are paying interest on only €277k @ tracker rates.

That means that you are cutting down the mortgage very quickly while you have a €100k interest-free loan.

I don't see ptsb agreeing to write down the BTL mortgage or writing off any shortfall.

They are getting the interest in full. They will have to be happy with this as you can't afford any more.

You could consider a Personal Insolvency Arrangement
This might be worth considering.
You would get rid of your investment property and associated debt.
You would keep your home.
ptsb could refuse it on the grounds that you have a sustainable deal at the moment.
You could go to the Court to have it imposed.

I don't know the courts attitude to imposing settlements on lenders which have already been extremely generous.

You could try bankruptcy
Your home would vest in the Official Assignee. While ptsb is getting paid the mortgage in full, they probably would be happy.

At some later stage, you could buy the house back from the Official Assignee.

This is risky though.

In short, your next step should be to consult a Personal Insolvency Practitioner to get their advice.

 

[ksmith169]

Thanks very much for your prompt and informative reply.

Obviously there are no easy solutions here but whilst I can meet the interest only payments I am worried that the term to pay back the full mortgage on rental is getting shorter.

I am also worried that the central bank may have rules / guidelines that say you cannot go on interest only for a prolonged period of time on rental property. Is this a known at this stage? I think there must be a number of BTL mortgages in similar situation to mine. Summary large negative equity and on Interest Only payments.

I have researched the PIA and it does look like a potential solution. Do they always go to court or is this a case by case basis?