Rejecting split mortgage!!

P

prodigy81

Registered User
Messages
69
Hi all,

My sister was offered a split mortgage after paying a new agreement throughout the year. However, she was paying back more than BOI asked and they offered her a Split Mortgage 60/40. She feels she can pay the full monthly mortage repayments back now and wants to know if she can reject the split..Incidentally, their is 30k over all in arrears and was hoping they would just extend the term to equate for this. Does she have a leg to stand on??
 
What interest rate is being charged on the warehoused part of the loan?

What interest rate is being charged on the main part?

Her first priority should be to get rid of the arrears. It would be normal practice to capitalize the arrears when offering a split mortgage. You should check this first.

If they have not been capitalized, she should ask that they be capitalized.

The only downside of a split mortgage is that it will take a bit longer for her ICB record to be cleared. She should clear all other debt first. And then she should probably build up a rainyday fund before making a commitment to higher repayments.

Don't forget that interest rates will rise at some stage.

The worst possible outcome for her is to reject the split mortgage, struggle with the full repayments and end up in arrears again.

Brendan
 

Many thanks for the reply Brendan it is much appreciated. To answer your questions; warehouse part is 2.5% main part 4.25%. Also, they said they would Capitalize the arrears by extending the term. However, she is now able to pay the full mortgage but its just the arrears that are the problem. She had hoped that once the yearly period of paying a restructured amount the option of switching back to full mortgage repayments would be there and the arrears would be capitalized.
Furthermore, I believe it also a psychological issue regarding Split mortgage that she feels that she would not be fully in control or feels the mortgage problem dragging on if that makes sense. Incidentally, you mentioned ICB record etc how would it take longer?

Many thanks for your help
 
I was offered & took a split mortgage option with a different provider over 12 months ago. I think BOI are the only lender charging on the warehoused portion as I'm not being charged on it anyway. I will be reviewed every 3 years to see if I can pay more & switch some of the warehoused portion back over to interest & capital.

Your sister has obviously gone through multiple SFS's & a lead in period of 6 - 12 months where you continue to meet a certain repayment & they restructure the split around that monthly amount. BOI would have based her split on both the SFS & payments being made over the previous 6 - 12 months but as Brendan has said above she doesnt want to see a situation where the amount is too much & she slips back into arrears again.I dont think BOI want to see her to go back or further into arrears either. The other thing is that if her circumstances change or interest rates go up she might not be able to afford the full mortgage again & shes back to square one.

My point of view on it is that theres a few things that can happen during the term of the split;

*if things improve in the next few years I can get some of the warehoused portion transferred back over to capital & interest & pay it off before the end of the term.

* if either myself or her in doors pop our clogs the mortgage is cleared in full anyway as I have a non reducing term policy in place rather than a mortgage protection.

*if all comes to all & I have a certain amount left over when I hit 70ys, then maybe all or one of my kids will pay off whats left on the mortgage. If you look at it theyll be buying a cheap house at that stage.

*at that stage my pension may be able to pay whats o/s on the warehoused section & I renegotiate with the lender but I'd imagine there would be a lot of contact before we'd get to that stage.

* if none of the above have happened I can always sell it & down size.

In relation to the ICB issue, the warehoused portion will show as being restructured on an ICB report which may cause her an issue getting credit in the future. But then you say that shes €30k in arrears so thats going to show on her ICB for 5 years from when its cleared so its unlikely shell be able to do too much for the next 5 years anyway.

In saying the above I dont know if I'd have gone for the split if I was being charged interest on the warehoused section but then again if I had no other option what could I have done about it if i wanted to keep the roof over my head?? When I was offered a split I was about €5k in arrears so i think I was lucky that firstly I was offered it so soon & secondly I had one of the lenders that dont charge interest on the warehoused portion.

I hope this helps.
 
DannyBoy,

Many thanks for all your info and insight it all helps. She said that there are no problems with being able to pay back full mortgage repayments now but I take into consideration Brendan and yourself's argument regarding what ifs? She really does not want ICB bad record to stay and wants the opportunity to be free of that in 5 yrs time. She keeps saying that she is back on track and doesnt need the split just extension to term to equate for arrears. Do you know if there is a process if she rejects the split mortgage on grounds she can pay full mortgage repayments?

Thanks again for all your help
 
no problem prodigy81.

my situation was slightly different in that I was looking for the split rather than looking to pay more - I had been on interest only previously for a while so it was a long enough slog to get me to where I am.

BOI's decision to offer the split was based on the SFS that she submitted so she will probably need to complete a new one as thats what the lender will make their decision on. Just to note, if she has children she needs to have a look at the age profile as she may have college fees etc coming in a few years, the car inst going to last her 20 years either so she may (if she can get finance with her credit rating) have to change that in a year or two etc so there may be a few factors in her decision not to take it.

She always has the option of taking the split & if she feel's she can put say €300 per month aside then do that for 3 years & come back to BOI in 3 years & say "here's €10k can you take that off my mortgage balance". Its going to be taken off the warehoused portion anyway & she has only paid 2.50% on this rather than if 4.25% if it she was paying a full mortgage so shes on a win situation by 1.75% straight away.

I hope that makes sense.

Look everyone has their own reasons for taking or not taking mortgage restructures. The way I look at it is that both I & my family have to live now & this gets me to the next stage. I'll review my situation again in 2 years but people need to realise that mortgages cant be paid off overnight unless you get a windfall. If you are living to try to pay these loans off short term you'll crack up trying to do it. The banks were here before we arrived & they will be around long after were gone so I need to look after myself & my family as best I can while I'm here - you can be sure the banks will look after themselves.

The credit rating wouldnt bother me in the slightest as theres thousands more with the same ICB problem as me & the banks wont survive without lending to people.
 
Danny Boy,

Thank you so much for telling me your experiences, which show much wisdom in your decisions. You have given me food for thought and will pass on your feedback to my sister. As I am sure your aware that when situations with banks and finances arise some people panic and are unable to look at the broader picture, which you so clerly have laid out for me.
I will keep you posted on what happens and if you have any other insight please let me know.
Kindest regards
 

This is very confusing and I am not sure that you understand what is happening.

If BoI capitalizes the arrears, they disappear. I would be surprised if they had offered a split mortgage which did not capitalize the arrears. If she has a split mortgage, there should be no arrears, and therefore they should not be a problem.

So, first you have to look at the offer of the split mortgage. I am sure that it will say that the term is extended and the arrears are capitalized. She should accept this offer. Once the arrears are capitalized and she has a split, she should pay her split for a year or so and see how she gets on. She should pay off any other high interest debts such as credit cards or credit union loans.

She should build up a rainy day fund to provide for emergencies and to help her meet her mortgage payments in the future if interest rates rise.

I think she would be much better off with a rainy day fund than with a clean credit record.

You don't tell us how much is being warehoused. Let's say it's €100,000. €100,000 @4.5% over 20 years is €632 per month. €100,000 @ 2.5% interest only is €200 a month. That is a huge cash flow difference and would enable someone to build up a rainy day fund of €5,000 in only 12 months. That seems like a clear priority to me.

Brendan
 
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