What struck me above is that you are 32 and have a gross salary of €150k which is great going. But assuming you bought prior to 2008, you would have been 27/28 (at most) when you got €1.84m of debt (probably higher back then due to cap and int payments). I'm just interested in the back story.
I think you need to very carefully look at all different options. You've already been given some ideas. Here's another one.
Sell your PPR. Use the 100K to pay down the NE of (870 - 650 = 220) so you're be left with NE of 120K.
Move into the best of the investment properties. You've now rid of the problem of the unmanageable 870K mortgage and also wiped out the problem on one of the investment properties not giving you a return to equal mortgage repayments and it sure frees up a lot of income. If property goes up you gain on the investment properties, if it goes down you have gained by selling the PPR. (We are not allowed to talk on AAM about what way we think it will go)
You did mention that all 3 investment properties are family homes. Now I presume you are living in something even better than that. And it might be a hard sell to your spouse. You would of course have to crunch the numbers.
EBS would have to agree to let you repay the 120K as a loan. You could try and negotiate a good rate and term, they have an incentive as they sure as hell want to get you off the tracker, that's good for negotiation.
Cross secured
Like a lot of people like you are assuming that your properties are not cross secured. Wrong. In Ireland you will be liable if you default on your investments and they will go after your PPR or vice versa. So paying off one and letting the others slide is Never an option.
Just to point out something else, it's better to have loans on the investments as there is more tax relief on the mortgage interest that on your PPR.
Others will argue that one should never give up a tracker. Yes trackers are great. But you have many loans. You must do the numbers and see what makes sense.
It would be great if you would for each of the 4 loans clarify the term remaining. (to see if an extension is a good idea - you are only 32). So please redo up each mortgage with this.
BTW you're very luckly. One lender. Makes it much easier to deal with.
Ok you can ignore this as wishful thinking but if you want to keep all properties and make capital repayments against all then...
Current total monthly repayment 6600
Total monthly capital + interest 9000 *(approx based on estimated term lengths and uncertainity over full repayment amount for inv property 1)
Max affordable monthly repayment 7400 *(net income 10,400 minus monthly living expenses 3,000)
1: Pay off a lump sum of 78400* off PPR leaving term unchanged *(savings minus three months net salary as emergency reserve)
Reduces monthly cap + int to 8650
2: Extend PPR term to 30 years *(considering your youth and solid income)
Reduces monthly cap + int to 8100
This leaves another 700 per month to square the circle which could be achieved in a few ways:
Extending the partial interest only on the first investment property approx 400/month
Increasing income (is it possible to raise rents?)
Supplementing repayments from remaining savings
Asking your lender for an incentive to pay off the lump sum of 78400
Increase term on one or more investment properties
More than likely a combination of all five!
This may result in a lower standard of living for a period, and is probably NOT a prudent investment choice, but it could work out!
(I have estimated the terms as follows, which match the repayments - PPR 24 yrs, INV1 25 years, INV2 25 years and INV3 18 years)
Quite a nosey comment!
If you must know. In 2006 we had considerable positve equity, my salary was higher, rents were stronger, and my wife was working. My earning potential then was far greater than it is now. We bought our family home in the height of the housing boom. No mystery.
Cross secured
Like a lot of people like you are assuming that your properties are not cross secured. Wrong. In Ireland you will be liable if you default on your investments and they will go after your PPR or vice versa. So paying off one and letting the others slide is Never an option.
That's very strange, 2 of the BTL's have 2 loans and one has 3? Did you take out equity?
As you're young you could try extending the terms on some of those to reduce the repayments. I wonder would your bank be agreeable to that. But you should use the 100K to make a reduction somewhere (where it is of most benefit). For example right now you could pay off the 70K and 14K on BTL number 3. How much extra income would that give you?
Why can you not sell the PPR and move into one of the rentals?
You didn't have to answer, of course. Not may 26 year olds earning over €150k. Well done on that front alone. I'd push the loans out for as long as you can, even if you had to give up some of your free cash as a sweetener.
I dont think this is a full picture regarding cross security.
If a loan is secured on a property, the lender can seek to repossess that property if the loan is not being repaid.
However if the loan on your PPR is up to date the EBS cannot seek to exercise their security over the PPR.
If other loans are behind on buy to lets then EBS would have to go through a process on those, i.e. sell the buy to lets and then pursue you for the shortfall before they could get into court on your PPR. And all the family home protection legislation would be in your favour. I dont think that family homes are often repossessed to pay debts which are not secured against them.
Bronte is right that you still owe the money and they can go after your PPR, but it is a much longer road than if there was cross security.
How important is this difference, well I suggest it is the reason that EBS wanted you to go interest only on the PPR instead of the buy to lets.
Regarding the rest of the tread a plan seems to be evolving to improve cashflow and pay off the debt over a longer period.
If you do adopt such a plan, it is up to you to implement it. Make your plan, tell the bank what you are doing and do it, dont think in terms of asking their permission.
I suggest that the first part of the plan is to pay capital and interest on your home. After all saving your home seems to be the main purpose of the plan. Then pay as much capital as you can afford on the buy to lets.
After all the speculations which have got you into huge financial troubles, you are still willing to speculate even further not selling the BTLs? I would have thought that you had learnt a lesson from this whole experience!?
Hi Sprinsteen,
You have a big advantage having all your loans with one lender as this makes any negotiations much easier albeit still very tough!
The way I see your situation is that EBS are most likely VERY happy with you at the moment given that you are paying all your loans as agreed. They will continue to put maximum pressure on you and will be less likely to agree a more long term solution that works best for you as long as you continue to pay all mortgages.
If I were in your shoes I would do 1 of 3 things:
1. Negotiate really hard with EBS (might mean you need to default to put pressure on them) to get all the BTL's on Interest Only for as long as possible (5 to 10 years) in order for the NE to erode away somewhat and then sell if it makes sense to do so. The goal would be to effectively get these to wash their face until you dispose of them. Continue to pay your PPR with Cap & Int with perhaps an extended term. This will give you maximum breathing space and if you are flush with cash you could still use it to pay lump sums off your PPR mortgage.
2. Surrender all the BTL's to EBS and try to negotiate a writedown of between 50% and 100% of the NE of those mortgages. Whatever they don't agree to writedown you could agree to add the balance onto your PPR and then extend the term of your PPR resident mortgage right out so that it is perfectly affordable on Cap & Int. A split mortgage is another option to consider with this too. This would put your life back to normal the quickest!
3. I know your are very reluctant (understandably) to move abroad but given that you could make very good money oversees (I assume the UK would be one of your options?) then perhaps you would consider a 3 to 5 year plan, declare bankruptcy in the UK and then building a very large pot of cash quite quickly and return to Ireland and buy a house for cash completely debt free!
Just my 2 cents but I definitely wouldn't be working your butt off for the next 10 years to be giving every cent to EBS just to arrive at a point where you are at breakeven!
Good luck in your negotiations!
Ciarank,
Thanks for the time and suggestions. On your second point, I have considered a slight variation. Assuming we are 300k in neg equity. If the bank write of 100k, we bring in 100k, and we pay the remaining 100k over 30 years. That'll leave us with just the home loan. The write down of 100k is approx 5% of our total borrowings, I might even ask for 200k (10%) off. The tracker on the PPR of course would have to survive in the deal. We'll see.
Thanks again, happy easter.
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