Key Post PTSB launch new split mortage

Brendan Burgess

Brendan Burgess

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  • [FONT=&quot]This is ptsb's new Split Mortgage brochure as sent to a borrower recently [/FONT]
[FONT=&quot]
What is a Split Mortgage[/FONT]?

[FONT=&quot]A Split Mortgage is a long term solution for customers in mortgage arrears. It is only available to customers the bank identifies as being suitable for the arrangement.[/FONT]

[FONT=&quot]With a Split mortgage, essentially your mortgage is split into two amounts[/FONT]
[FONT=&quot]1 [/FONT][FONT=&quot]Your Main Mortgage Account, [/FONT][FONT=&quot]and [/FONT]
[FONT=&quot]2 [/FONT][FONT=&quot]Your Warehouse Account[/FONT]

[FONT=&quot]While you continue to make capital and interest payments on the Main Mortgage Account, you only pay the interest on your Warehouse Account. This means you pay less each month, in line with what you can afford to pay. However, you are required to repay the full Warehouse balance at the end of the mortgage term.[/FONT]

[FONT=&quot]Warning : The entire Amount you have borrowed will be outstanding at the end of the interest-only period [/FONT]


[FONT=&quot]How does It [/FONT][FONT=&quot]work?[/FONT]
[FONT=&quot]A [/FONT][FONT=&quot]step by step guide[/FONT]

[FONT=&quot]1[/FONT][FONT=&quot]Firstly if you have arrears owing on your mortgage, we will capitalise these. This means that we add the arrears amount that you owe onto your outstanding mortgage balance.[/FONT]

[FONT=&quot]2[/FONT] [FONT=&quot]Then we extend the term of your mortgage where we [/FONT][FONT=&quot]can. [/FONT][FONT=&quot]This lowers your monthly repayments as you pay your mortgage over[/FONT] [FONT=&quot]a longer period. Your new term will be based on your individual circumstances. However, extending the term of the mortgage[/FONT] [FONT=&quot]increases the amount of interest you pay as the debt is being repaid over a longer period of time.[/FONT]

[FONT=&quot]3[/FONT] [FONT=&quot]Finally, we split your mortgage balance into two accounts - a Main Mortgage and a Warehouse.[/FONT]

[FONT=&quot]Main Mortgage Account[/FONT]
[FONT=&quot]Your monthly repayments will call for the capital and interest due at the interest rate applicable to your existing mortgage [/FONT]

[FONT=&quot]Warehouse Account [/FONT]
[FONT=&quot]Your monthly repayments will call for the interest only amount that is due and this will be charged at the lower variable rate of 1% APR. This rate may change in the future. [/FONT]

[FONT=&quot]Warning: The cost of your monthly repayments may increase[/FONT]

[FONT=&quot]You don’t need to make payments towards the capital until the end of the term until your repayment capacity improves[/FONT]

[FONT=&quot]We will call for each payment by separate Direct Debit – so you make two repayments each month[/FONT]

[FONT=&quot]We will review your case annually and if your repayment capacity improves at any stage during the term, we will move a portion of the funds from your Warehouse Account to your Main Mortgage. This means that you will be left with less capital to repay at the end of the term of the Warehouse Accounts. [/FONT]


[FONT=&quot]What happens at the end of the term? [/FONT]

[FONT=&quot]If you keep up with the agreed repayments your Main Mortgage Account will have been repaid at the end of your mortgage term. However, you still owe any remaining capital amount on your Warehouse Account as you have paid the interest only.[/FONT]

[FONT=&quot]We will contact you before the end of the term of the Warehouse Account toexplain the options that are available to you to pay off this capital amount.
These may include
[/FONT]
  • [FONT=&quot]you selling your home[/FONT]
  • [FONT=&quot] trading down to a smaller property
    [/FONT]
  • [FONT=&quot] agreeing ta repayment plan. [/FONT]

[FONT=&quot]If you are unable to pay the outstanding balance and unwilling to co-operate then we may repossess your home

[/FONT] [FONT=&quot]Splint Mortgage Example [/FONT]
[FONT=&quot]Here is an example of how a Split Mortgage would work. It is intended for demonstration only. Each case will vary. If you are offered a Split Mortgage, we will send you a Letter of Offer outlining how a Split Mortgage will work in your case.[/FONT]

[FONT=&quot]In this example we capitalised the arrears and extended the term before we split the account. The example does not take insurance and TRS (Tax Relief at Source) into consideration.[/FONT]

|Before Split|After Split{br}Main mortgage|After Split{br}Warehouse|After Split{br}Total
Balance owing{br}excluding arrears|€230,000
Arrears due|€20,000
Total owing|€250,000|€158,746|€91,254|€250,000
Rate|4.34%|4.34%|1%
Term|30 years|40 years|40 years|40 years|
Monthly repayment|€1,144
Monthly repayment{br}after arrears are capitalised|€1,243|€607|€76|€773

[FONT=&quot]Who is eligible for a[/FONT] [FONT=&quot]Split [/FONT][FONT=&quot]Mortgage?[/FONT]


[FONT=&quot]A Split Mortgage is only available to certain customers who have been identified[/FONT] [FONT=&quot]as being eligible. We will determine if a customer is eligible following a thorough assessment of their financial circumstances (which we will have from their completed Standard Financial Statement). We look at a number of factors including how much they are in arrears and how much they can afford[/FONT] [FONT=&quot]to pay each month.[/FONT]

[FONT=&quot]If [/FONT][FONT=&quot]you have received a Letter of Offer from us then we have identified that this is the best option for your circumstances.[/FONT]

Irish Credit Bureau (ICB)
Missed mortgage repayments may be recorded on your ICB profile and affect your future ability to borrow. This agreement will be reported to the ICB as a change to the terms of your mortgage and this may affect your future ability to borrow.

[FONT=&quot]As this has taken me ages to scan, correct and type - I have omitted other notices about legal and financial advice - Brendan[/FONT]
 
I think that this is a very good solution for some people.

|before|after
Interest paid|€10,850|€6,982
Effective rate|4.34%|2.8%

So ptsb are reducing the effective rate of interest for this borrower to 2.8% which saves them around €4,000 interest per year for the initial stages of the loan. Or look at it another way, this is costing ptsb €4,000 a year.

They are saving €470 per month in repayments

Someone who should have been paying €1,243 but can only afford €773 per month, gets to keep their home.[total]Annual repayments|€9,276
Interest element|€6,982
Capital element|€2,294[/table]

Under the old loan, this person was struggling to pay €10,850 per annum in interest.

Under this arrangement, they will be paying €1,600 less in total
and
they will be paying capital off their loan.
 
It does look as if PTSB are being pragmatic and realistic in coming up with a solution that does take some of the burden off mortgage holders in difficulty in return for their co-operation. It brings the old contagation arguement up again. i.e. Client A who is struggling hard but managing to meet his monthly payamnts and client B in similar financial circumstances who is substantially in arrears! Would this be an incentive to client A to stop paying his mortgage? I agree that the eligibility criteria is likely to separate the can't pay from the won't pay brigade. It's a start and hopefully others will follow.
 
What effect will it have on someone's credit rating?

What is the % of net income that is considered affordable?

I think that for the 1% saving on the warehoused portion, borrowers should agree to a short-term debt reduction plan to clear any outstanding credit cards and/or personal loans as a show of good faith. It makes sense for them too after all.
 
Hi,

Is this available on but to let mortgages ?

Currently on interest only tracker, soon to finish, would the bank agree amount rent payments would cover as the main mortgage and put the balance of mortgage in warehouse.
Fear peile
 
plant43 said:
I presume that if you are in arrears then your credit rating is shot anyway.
Click to expand...

True but as this is a long-term thing it matters from the point of view, does it hinder you rebuilding a shot credit rating over say the course of 5 years?
 
fear peile said:
Hi,

Is this available on buy to let mortgages ?

Currently on interest only tracker, soon to finish, would the bank agree amount rent payments would cover as the main mortgage and put the balance of mortgage in warehouse.
Fear peile
Click to expand...

Very unlikely.

They might do a deal, but it would involve you losing your tracker.

Brendan
 
manninp2 said:
What effect will it have on someone's credit rating?
Click to expand...

The only impact a negative credit rating has on you is that it makes it less easy for you to borrow in the future? If you are able to service new borrowing, you should resume full repayments on the warehoused portion instead of taking on new borrowings.


I think that for the 1% saving on the warehoused portion, borrowers should agree to a short-term debt reduction plan to clear any outstanding credit cards and/or personal loans as a show of good faith. It makes sense for them too after all.
Click to expand...

I don't follow this. The reduction on the warehoused portion is 3.45%, not 1%.

In a sense, the unsecured creditors should write off some of their debt as well. But it's hard to get a coordinated response from creditors.
 
Are other banks likely to follow this example, say EBS, certainly would throw me a lifeline.
 
mprsv1000 said:
Are other banks likely to follow this example, say EBS, certainly would throw me a lifeline.
Click to expand...

AIB also has a split mortgage, so I presume that EBS has well. They charge no interest on the split part.

No bank has published the conditions under which they are offering split mortgages. Ask them for one and see what happens.

They are probably reluctant to offer them to people with cheap trackers.

Brendan
 
Brendan Burgess said:
AIB also has a split mortgage, so I presume that EBS has well. They charge no interest on the split part.

No bank has published the conditions under which they are offering split mortgages. Ask them for one and see what happens.

They are probably reluctant to offer them to people with cheap trackers.

Brendan
Click to expand...

I'm due to apply for 4th six month only period so will be contacting them tomorrow. Not on a tracker, be interesting to see what they say. Should I ask them what their guidelines are for offering a spilt mortgage? Or just express my interest in this option and seek a meeting on that basis?
 
A friend of mine got offered the split package. He met some invisible criteria in the 'system'.
Let us know what they say if you ask for one without being offered first.
 
itsallwrong said:
A friend of mine got offered the split package. He met some invisible criteria in the 'system'.
Let us know what they say if you ask for one without being offered first.
Click to expand...


well asked today and was told that on the face of it I seem to ba a strong candidate as I have no other loand, just the mortgage, have making payments i.e my instrest only agreed payments and i've in this arrangement for some time already. While this is not a guarntee I will be accepted I'm to send in my financial statement again and they'll get back with a decision...... so we'll
see
My bank statements will show I live a basic lifestyle all incommings and outgoings accounted for. No holidays etc and a very old car for what thats worth, so basically I've nothing worth a fart. Not to mention the los of pay since 2008..
 
I have been offered a split mortgage by ptsb

Brendan Burgess said:
They are probably reluctant to offer them to people with cheap trackers.

Brendan
Click to expand...

Brendan, I have a tracker of ECB & 1.1% and have been offered a split mortgage (ptsb), all be it after an initial 6 month assessment.

However the restructured amount they are looking for is more then i can afford in addition to all my other outgoings.

What other options are out there do you know?
 
Brendan, I have a tracker of ECB & 1.1% and have been offered a split mortgage (ptsb)
Click to expand...

That is great news but it surprises me. I would have thought that it would be strongly in ptsb's interest to repossess and relend the money at 4.5%. Obviously, they see it differently.

I have replied in more detail your Case Study thread
 
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