Key Post Summary of AIB/EBS/Haven Negative equity and tracker mover product

Brendan Burgess

Brendan Burgess

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http://personal.aib.ie/our-products/mortgages/tracker-interest-rate-mortgage

Key features
Additional margin of 1%
For the full remaining period of the loan (compared to 5 years for Ulster and BoI)
Maximum LTV for negative equity 175% ( Compared to 125% for ptsb)
Normal affordability criteria apply - If you qualify for a mortgage based on affordability and other criteria, you will get the tracker mover product
Sanction in principle lasts for 6 months, but will be renewed assuming no material change in earnings or circumstances.
If you don't buy within 6 months of selling, you must renew within one month or you will lose it
Maximum combined mortgage after trade-up: €700k
No maximum loan after trade-down

Procedure
Apply for Sanction in Principle through the Mortgage Direct channel
If you meet the normal affordability criteria, you will be given Sanction in Principle
If you haven't enough earnings, or if you are in arrears, or if you have just started a new job, you won't be given Sanction.
Sell your own house and pay the full proceeds against the mortgage
When you buy a new house, you will be given the new mortgage which will include an amount equal to the tracker amount at the increased tracker rate

You transfer your full tracker mortgage as of date of Sanction in Principle
Let's say you apply today.
You get Sanction in Principle next week when your mortgage balance is €200k
You sell your home and buy another one in 6 months' time when your mortgage is reduced to €190k
The tracker element transferred will actually be €200k.
 
Revised criteria - noticed on 27 May 2016

Up to 80% LTV finance is available to you towards the purchase price of your new property with a max LTV 75% for one-bedroom apartments.




Original criteria
AIB's normal lending criteria will apply

Maximum LTV: 92%, but reduced in the following cases

  • Max LTV for loans over €400,000: 85%
  • Max LTV for one-bed apartments: 75%
 
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Example of positive equity


Current mortgage
current mortgage| €200k
Property value| €300k
Positive equity |€100k
Interest rate ECB + 1.4%|1.55%

Sell the new house and have €100k cash

The customer wants to buy a house for €400,000

Buying the new house
purchase price|€400k
Less deposit|€40k
Keep existing mortgage @ECB + 2.4% |€200k
New mortgage @SVR|€160k

Surplus cash available: €60k which could be used to borrow less.
 
Case study of tracker mortgage and negative equity trade up


Current mortgage
Current mortgage|€300,000
Current value|€200,000
Negative equity|€100,000
Term remaining|20 years
Interest rate ECB +1%|1.15%
Sell the existing house which will leave you with an unsecured loan of €100,000.
You will sign a separate contract and will continue to repay this unsecured loan while you are waiting to buy your new house


Buying the new house
Purchase price| €300,000|
Less deposit|€24,000|8 % minimum deposit required
Mortgage required|€276,000
Add negative equity|€100,000
Total mortgage required| €376,000
Transfer of tracker |€300,000| ECB +2%
New SVR mortgage|€76,000|
New LTV: 125% ( €376/€300k) Would qualify with AIB, but not with ptsb

A key point is that you must have €24,000 for the deposit. So make sure not to overpay your tracker.
 
Case study of tracker mortgage and negative equity Trade down


Current mortgage
Current mortgage|€300,000
Current value|€200,000
Negative equity|€100,000
Term remaining|20 years
Interest rate ECB +1%|1.15%
Sell the existing house which will leave you with an unsecured loan of €100,000.
You will sign a separate contract and will continue to repay this unsecured loan while you are waiting to buy your new house


Buying the new house
Purchase price| €150,000|
Less deposit|0|no deposit required for trade down
Mortgage required|€150,000
Add negative equity|€100,000
Total mortgage required| €250,000
Transfer of tracker |€250,000| ECB +2%
New LTV: 166% ( €250/€150) Would qualify as less than 175%

If you are trading down, you do not need a deposit

If you trade down while in the MARP, you keep the original tracker rate

If your lender offers you a trade-down solution as part of the Mortgage Arrears Resolution Process, the resulting mortgage will be at the original tracker rate. They are not allowed to increase the rate under the Mortgage Arrears Code.
 
A single mortgage holder can transfer their tracker to a joint mortgage

Mary has a cheap tracker of €200k in her own name.
If she sells her home and buys a house jointly with Johnny, she can transfer the tracker to the new home.


Joint mortgage holders who are splitting up can split their tracker

If Johnny and Mary have a €200k tracker between them and sell their home. They can each take €100k to their new home. Or Johnny can sign his right over to Mary.

If your original mortgage was for your home, but you have since let it, you will still qualify
While investment properties do not qualify for the product, if the mortgage was taken out for your home and you subsequently let it, then you will qualify.
 
It applies to self-builds as well
AIB don't lend for the acquisition of a site, but they will allow you to transfer the cheap tracker to the building costs

If you have already sold your home in negative equity and have residual debt...
You can transfer the residual debt to a new home and keep the tracker element at the increased tracker rate
 
Brendan Burgess said:

Joint mortgage holders who are splitting up can split their tracker

If Johnny and Mary have a €200k tracker between them and sell their home. They can each take €100k to their new home. Or Johnny can sign his right over to Mary.

If your original mortgage was for your home, but you have since let it, you will still qualify
While investment properties do not qualify for the product, if the mortgage was taken out for your home and you subsequently let it, then you will qualify.
Click to expand...

Hi Brendan, long time lurker on here, it's a fantastic resource. If I'm posting in wrong place feel free to move it on.
This sounds like a very promising product from my point of view. Neg equity Trade Down and the quotes above especially. I have a Joint Mortgage with a friend in approx 100k negative equity. I've contacted the bank in the past about splitting negative equity in two and transferring my 50k onto new mortgage with my wife but they didn't entertain it for a second. Do you think this deal will allow that or is the splitting of the tracker only allowed for positive equity? thanks
 
Hi Brendan. Long time lurker here too. I had assumed when reading about the Tracker Interest Rate Retention produce, that the initial monthly repayments would be the current repayments @ the Tracker rate + 1%, but after reading the brochure it looks like the initial repayment would be the current repayment @ the Tracker rate + 1% + the monthly repayments for the remainder of the mortgage at SVR. Is that your understanding as well? Does that mean that when the tracker portion of the mortgage is paid off, the monthly repayments drop to just the monthly repayments of the SVR portion of the mortgage?
For people on trackers, this revised monthly payment would be quite a hit. Would there be any way of spreading the pain over the life of the mortgage?
Any insights are much appreciated!
 
I spoke to someone recently who has bought a house before selling their own home, which had a tracker mortgage.

AIB initially refused to allow them to port the tracker as they had not sold their own house first.

He argued that the terms and conditions require that the initial tracker be paid off before it's ported. He had the cash to pay off his tracker and has now been approved for a revised tracker on his new home.

Brendan
 
Hi
I have tracker mortgage with AIB, I am not in negative equity. I am thinking of moving house and applied for a mortgage and was given approval. I also said I wanted to apply to move the tracker. I was told by AIB that you can only move your tracker if you are in negative equity . Does anyone else have any experience of this?
 
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