UB. End of Int. Only Term, Need Advice On Restructuring Mortgages on (Buy To Lets).

I am looking for advice on what the bank is likely to entertain as an option to restructuring this debt long term, Will they extend the term of the mortgage we are an aver. Age of 47 and 18 years remaining term that brings us to 65, will they extend to 70 or 75? Also are the banks doing Split Mortgages for buy to lets? I have looked at keeping some of the Mortgages in contract when the full repayment starts in March 2013 and some interest only which could work at the Tracker rates I have now, but have been told that interest only on any new arrangement would be at a SVR 4/5% which would cost more than Full repayment on the tracker rate. Full repayment on the (6) UB Loans is going to be more than four times what they are now to aprox €8,600 per mth plus O/H’s of a min. €1,000 per mth = €9,600 outgoing verses rental of €6,000 incoming leaves a shortfall of €3,600 per Month and that is at this low ECB Rate now.

Personal and income details
Income self: None at present I am a Student (ACCA) (finished in June 2013) Then I hope to get a Job and be in a position to add my income to the loan repayments.
Income history: e.g. "I was self-employed for 19 years, closed down in 2009, when rent doubled and income fell into losses”
Income spouse: €20,000 per year.
Income history: Self-employed Trade Contractor last 20 years, His business is 30% of what it was, very little work out there, due to the recession.
Number of children 2, age 9/12. Child Benefit €260. Per mth.

Home loan: N/A
Value of home: €220,000

Investment Property: 2006. Six buy to lets (Five houses and one section 23. apartment) UB. €1.620,000. Tracker ECB + .75% for 25 Years, 1st (5 years int. only), 2011 extended int. only for two years to 2013. Meeting with Bank March 2013. All Mortgages are separate Loans.

Investment property – (6 Properties)
Lender: Ulster Bank
Amount outstanding: €1.620,000
Value of home: €940,000
Interest rate: ECB +.75%
Monthly repayment: €2,100 + €1,000 O/H’s = €3,100
Monthly rent received: €6,000


Investment property – (1 Property)
Lender: BOSI
Amount outstanding: €150,000
Value of home: €110,000
Interest rate: ECB +.85% (25 years Int. only)
Monthly repayment: €180 + O/H’s €170 = €350
Monthly rent received: €600

How important is retaining the family home to you? Our PPR was bought and paid for before our buy to let loans and was not used to secure any of the loans, But we do know it is at risk. We want to keep our family home, if at all possible. (Two Young Children)

First, you need to assess the profitability of these investments

The Bank of Scotland property is only breaking even, so it's not worth the hassle of keeping it. BoSI wants out of the Irish market. You should put a proposal to them that you will sell the property and that they will write off the shortfall in exchange for the full proceeds. If they refuse, then keep the property.

The Ulster Bank investments are very profitable because of the low tracker rate. You must try to keep these and you must keep the tracker rate. They will become loss making if you have to pay the SVR.

I presume all the properties are in your joint names?

I very much doubt if UB would extend the mortgage. Why should they? They are losing a huge amount on you. They will require you to pay the agreed repayments in full and if you don't, they will seek to repossess them. They will then have a judgment which they could enforce against your home.

I don't think that they have any right to increase to withdraw the tracker rate. Check the loan agreement to see if they have.

You could try for a Personal Insolvency Arrangement
Under the new law, you could try for a PIA. Under the Act, the plan must not endanger your family home, unless it is not suitable for you. However, the lender is under no obligation to approve of the PIA. And again, I don't see why they would do so. Your bankruptcy would be more attractive to them.

You could sell the family home and use the proceeds to keep up the full repayments
You would have to rent a home or you would have to occupy one of your rental properties.

This would buy you around 4 years. At that stage you will have reduced your loans by around €300,000. Property prices would have to increase by around 40% to eliminate the negative equity.

It seems unlikely that your income will have increased enough to make a dent on the negative equity.

You could offer to sell the family home now in full and final settlement of any mortgage shortfall
As you have almost €700,000 in negative equity you are insolvent. It is not in anyone's interest that you go bankrupt.

I think a fair solution would be for UB to agree to the sale of all your properties including your family home but that they would also write off the shortfall. They might go for this rather than face a PIA or bankruptcy.

You lose the family home, but you would lose all your debts as well.

Whatever way you look at this, you will have to give up the family home.

I think you should put your home on the market now. Having €200k cash will give you a fair bit of flexibility in dealing with UB. If I was in their shoes I would take these proceeds now rather than risk seeing them being frittered away over the next few years.

You need to edit that first paragraph-its almost all one sentence, therefore hard to read/follow.
The banks are not likely to extend repayment beyond age 65. I fear your only hope is getting a concession on the interest rate after tracker ends, but that's only likely after you get behind on the rate offered -banks don't do deals for people that are paying in full.
Short to medium term you are going to have to look at selling some of these whether you get a deal on interest rate or not. The BOSI mortgaged property looks like the best place to start.
Long term, you may come under pressure to sell your PPR to fund the repayments. That may not be what you want to hear but the banks will see it as a source of repayment capacity as it's not encumbered (mortgaged).
Outside that, the various measures everyone is waiting for may be of some assistance to you in clearing debts and keeping the home. I am sure someone else with more knowledge of these options will post about that aspect.
Best of luck.

Thank you, for your honest and constructive advice. Sorry I had to take a few hours to digest it. I did think it would come to selling our family home, and I did think of selling it would buy me a few years of paying the shortfall on the full repayments. But talked to a few people and they all thought I was mad and that it would not come to that. They said that we were not even on the banks radar because we were managing to pay the interest only and the bank may even offer us another two years interest only and continue reducing the remaining term to 14 years. I thought it was too good to be true, but I wanted to believe that we could somehow work our way out of this and not lose our family home. To answer Brendan's question all properties are in join names.



Also I did read somewhere on AAM that bank's would apply a notional 5% of the loan's total and if repayments could be met at that level they would consider a medium to long-term solution. UB LOAN: €1,620,000*5% Notional =€81,000 per yr /12mths =€6,750 + €1,000 o/h's= €7,750 Repay - €6,000 Rent =€1,750*12= €21,000 shortfall per year - €8,600 profit from (1 Property)=€12,400 Shortfall a year.
(1 Property) overheads are only €2,000 so profit there is €2,600 a year, there is also a self contained flat at the side of this property that we are hoping to rent out in the coming weeks, sorry I did not mention this before, my husband has been fitting it out bit by bit on a budget and what ever he could find in his garage. This could bring in an extra €6,000 a year for the flat + €2,600 profit on the house = €8,600. The shortfall €21,000-€8,600 profit on (1 property)= €12,400 shortfall and this would be much more achievable if I could get a job.



We have been living on the 20K my husband earns and since with were with the bank two years ago in 2011 and filled out the SFS form. We have paid off €35k in unsecured debt clearing (five overdraft facilities and one personal loan and a mbna credit card) we have used the difference between the rent minus the mortgages + overheads to pay off our €35k in unsecured debt. The properties are never left unoccupied we run a tight ship and my husband does all the maintenance and I do all the letting to keep the costs to a minimum. We have a section 23 so no rent goes to pay taxes. Maybe I am grabbing at straws but surely the bank has to come to some sort of arrangement with people, as I cannot see many being in a position to meet full repayments in this financial climate. Open to all solutions, if anyone has any other options, all help is much appreciated. Thanks again.

Debress welcome to AAM. I must say I've finding your posts a bit hard to follow.

Basically your story is that you're on very low interest only payments with your banks and this will end at some stage but your rent will never cover full repayments and at a minimum you forsee a shortfall of a minimum of 3600 Euro.

Is there any realistic chance of both your incomes ever producing an extra 3600 a month?

If I'm not mistaken you have a high tax bill as you're making about 3K a month 'profit'? This cannot even be reduced down due to the self maintenance and you doing the lettings. Are you tax compliant on the properties and PRTB registered?

Wouldn't you better off giving up everything even the family home? Sounds drastic but unless we have another celtic tiger property prices are not going to sort you out any time soon. In any case is it drastic if you are able to walk away from the NE of about 700K. You'd also walk away from the stress of dealing with all the properties. If your OH business comes back and you get a well paying job there's no reason based on current house prices that you couldn't start off again.

Time to talk to the bank and see their thinking on this. I wouldn't initially be offering the family home to them, let them do the talking.

I did think it would come to selling our family home, and I did think of selling it would buy me a few years of paying the shortfall on the full repayments. But talked to a few people and they all thought I was mad and that it would not come to that.

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Let's be clear about this. If you decide to hold onto the family home, there is a good chance that you will be able to manage to do so. You would be a low priority for UB as you are paying the interest, even if you are going to be in serious arrears.

But, in time, they will seek a repossession order on the investment properties.
They will be sold at a big shortfall.
They will get a judgment against you for the shortfall.
They will register it against your home.

So you will end up keeping your family home, but with a €700,000 mortgage.

I think you would be in a much stronger position to negotiate a deal now which would involve giving up the family home in exchange for writing off the shortfall. Of course, UB may reject this as well.

The alternative is to limp on and watch the arrears increase and wait to see what UB will do. There are some benefits to this alternative. It is likely that UB will be more flexible if you do build up arrears.

Hi Bronte and Brendan,
Thank you both for your replies,

I am sorry my posts are not very clear, I am finding it hard to explain the crazy situation I find myself in. We have a great tracker loan on €1,620,000 ECB + .75% with UB on (6 Properties) buy to lets and I wish we could meet the full repayments which are due to start in March 2013 for the remaining term of 18 years, but that is not going to be the case. (€8,600 Repay + €1,000 O/H’s = €9,600- €6,000 Rent= €3,600 Shortfall *12mths = €43,200 a year shortfall). This is my main concern and I am trying to figure out if there is someway I could come to another repayment arrangement with the bank? I have heard that the bank may entertain the following options:

OPP. A
€405,000 (25%) Warehoused for 10yr Term @ Int Rate?
€1,215,000 (75%) Repay @ 1.5% (18 yrs)= €6,400 Repay per Mth.
PER MTH:
Rent: 6,000
Repayment: 6,400
Overheads : 1,000
Shortfall : 1,400 (1,400*12=16,800 per yr)

OPP. B
€1,620,000*5% Notional Repay = €81,000 per yr
€81,000/12= €6,750 Repay per Mth.
PER MTH:
Rent: 6,000
Repayment: 6,750
Overheads : 1,000
Shortfall : 1,750 (1,750*12= 21,000 per yr)

I know Both OPP A. and B. have shortfalls, but with the other buy to let with
BOSI (25yr int only) has a profit of €2,600 a yr now.
It is a was a house with a garage at the side, my husband has spent the
Last 2 yrs converting it into a one bed flat which he is just finished and we are hoping to bring in addition €6,000 a year profit (2,600+6,000) which will give us a profit of €8.600 a year on this property, which will help pay some of the shortfall on UB
OPP A.€16,800-€8,600= €8,200 New Shortfall UB per yr. (cover with extra income)
OPP B.€21,000- €8,600=€12,400 New Shortfall UB per yr. (cover with extra income)
“The extra Income” is when I finish my ACCA in the summer 2013 and get a job.

Just to clarify the profit of €3k a mth *12 mths =€36,000* for the last 2yrs=€72,000 has paid off €35K unsecured Debt we had when the bank reviewed us in 2011 (SFS Form) so I am hoping it will help our situation with the bank, that we have sorted out that aspect of our financial affairs. The remaining balance is €37,000 which has been spent on the new Flat’s building materials/ fit out ect. The labour content of the job was all done by my husband so we could keep the costs down. Also hoping that the extra rent would be seen positively by the bank. We are fully tax compliant on all properties and prtb registered, my earlier comment was that the section 23. apartment which is in the loans with UB would be seen as an advantage to our repayment ability.

Be careful about the options they offer. If it involves a higher interest rate, warehoused or not, reject it.

€1,215,000 (75%) Repay @ 1.5% (18 yrs)= €6,400 Repay per Mth.

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The interest on this would be around €1,500 per month.

It makes no sense to me to be repaying €5,000 a month capital while interest is accruing on the warehoused part. If they freeze the interest on the warehoused part, then this would be a fantastic deal. It is effectively reducing the interest from 1.5% to 1.125%.

If they accept a repayment = 5% of your loan, that would also be a fair deal. However, you must ensure that the interest remains at ecb + 0.75%.

Be extremely careful that if you sign up to some deal, that there isn't a clause whereby you can be knocked off your tracker after 5 years.

Discuss everything with them. If I were in their shoes, I would accept the family home and write off the shortfall. But the banks are not being generous/clever these days.

Brendan

Debtress said:

I am sorry my posts are not very clear, I am finding it hard to explain the crazy situation I find myself in. .

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What I meant is that it was hard to read it they way you laid it out and in addition the font is strange but that's ok. Must say even now I still do a double take on the amounts certain people were able to borrow on relatively modest wages, but I don't think anything surprises me anymore. Would be very interested in how you came to invest in 6 properties if you want to share own personal tale of the celtic tiger madness with us. It can get a bit mundane sometimes without a bit of background.

It seems to me you could look at this from a better perspective. Your original post and the replies to it come from an " I'm worried" , "what will the bank do" point of view.

My suggestion is to start like this.

Income; sufficient for living expenses and will improve when you qualify and get a job. Thats all good.

Home; no mortgage. Thats excellent.

BOSI property. When the apartment is ready this will contribute €1,200 cash per month. Very nice.

UB Properties. Rental income €6,000 after costs income is €5,000. (Am I reading that correctly). Interest expense €2,000. These properties can repay capital at a rate of €3,000 per month. Not ideal but better than many people.

I think you have panicked yourself and the comments you have got here have accepted that panic as well founded.

You are running options in your head before you have even met the bank.

I suggest that you say to the bank, now the interest only period has come to an end you are delighted, delighted !! to inform them that you are in a position to make some capital repayments on your loan.

Offer them less than the €4,200 per month I believe you could pay, I suggest offering them €1,000 per month capital repayments. Let them feel they have a result by pushing you to €1,500.

I have first hand knowledge of someone in a similar position to yours, not with UB. Who received a letter from the bank saying that the IO period was over and demanding capital and interest payments each month.

He wrote back to say that the IO loan they had given him was to be repaid from the sale of the property. (This was the original concept of IO loans). As the property was now in negative equity this was not possible. In the meantime he would continue to pay the interest on the loans.

He was unwilling to repay any capital as the tracker rate was so good. He didn't tell the bank that obviously.

That was 18 months ago and so far nothing has happened. The bank are getting IO and sending threatening letters. When/if they issue proceedings to repossess the properties he intends to offer some capital payments.

I think creme egg's perspective is interesting. UB may indeed accept such an offer. There are many other borrowers who are paying nothing, so they should prioritise those

And I think creme egg's opening approach is about right.

However, there is a chance that you could exchange your home for €700k negative equity and get a fresh start. I think that this should be your target.

If UB did such a deal, could you move into the BoS property as your home? It might not be ideal, but it would cost you only €180 per month in repayments. This would give you a good chance to build up some savings with which to get back into the property market at a later stage.

I am sure that there are all sorts of reasons why the the BoSI property is not ideal. But could you manage it for a few years? Even if it was squashed.

Thanks for the replies, sorry for not getting back to you yesterday.

Cremeegg,
I think you are right “ I have Panicked myself” just find it hard coming up to the end of the interest only term and all the uncertainty. T he banks with their (case by case) approach, keep everything shrowed in secrecy so no-one knows what a good deal even looks like. That is why I am finding AAM, such a lifeline.
I should look at the positives and grow a thicker skin and not let the banks intimidate me. Thanks your comments, they cheered me up!

Brendan,
"I got a Deal with the Bank Thread " would be great for people to go and compare.


Bronte, “Our Celtic Tiger Madness”

We are unlikely property developers, we bought a bit of family land to build a house. H ad plans drawn up and all, when my husband asked an architect that was on a job he was working on for a bit of advice, when the architect seen our site he said “ we had a prime piece of land for developing and he was sure you would get a few houses on it” and the rest as they say is history. We got planning for 5 houses and the value of the land shoot up. We when down to the bank and got the loan on the value of the land and They give us a 12 months moratorium on repayments to do the build. Nine month later the builder had them all build. My husband and a crew of friends plumbers, carpenters, electrical contractors, tillers you name it, they all worked around the clock. (Well that’s what he told me, there may have been the odd trip to the pub.) By the time we got back to the bank 12 months later they were finished and rented. After that we were on a massive learning curve trying to keep up with the rent / accounts/ prtb/ nppr/ dealing with tenants ect. At this stage our heads firmly in the clouds and we bought a section 23 apartment and a holiday house, sure why not! Before all this madness I had bought my first home at the tender age of 21, worried I said to my Nan “Oh my God 30K and 20 years how will I sleep at night, and she said some day that will be nothing”. I often think of my poor Nan looking down on me now and I am sure she would say “1.8 million my dear that will never be nothing.”

cremeegg said:

I suggest that you say to the bank, now the interest only period has come to an end you are delighted, delighted !! to inform them that you are in a position to make some capital repayments on your loan.

.

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I like this. Very interesting approach Cremeegg.

Now Debtress you need to decide what approach you are going to take. I presume you're going to have a meeting with them. Have all your figures written out clearly. And all your options. Listen to them and see what it is they want and then negotiate from there. You don't have to agree there and then, if necessary take time out, go for a coffee or lunch if need be. Don't be put under pressure to agree something you're not happy with. Most important is that you take notes and that you have someone with you for back up.

(And thanks for sharing your own personal Celtic Tiger tale).

Thanks for all the replies, (I am hoping for the best, but preparing for the worst.)

Had a chat with my husband, who we will call Bill.
Bill is very black and white so he said the main question is if we worked really hard for the remaining term of 18 years and paid (interest only) on some loans and paid (capital and interest) on other loans, What would the out come likely to be?
Will we manage to eventually own any of the houses? and will some of the houses on int. only ever increased enough in value to be sold and pay the mortgage off in full?

SO we tried to work this out: (Paying full mortg. 2 hses and int. only 4 hses= 6.UB)
No: Mortg: Value: Repay pm:
1. : 340K: 160K 1,800
2 : 330K: 160K 1,750
Bal:670K 320K 3,550


Int Only pm:
3 : 300K: 160K 380
4 : 250K: 160K 320
5 : 250K: 160K 320
6 : 150K: 140K 200
Bal:950K: 620K 1,220

Bal::1.620K: 940K


Total Per Mth:
Mortg : 4,770 (3,550+1,220)
O/H’s : 1,000
Bal : 5,770
Rent : 6,000
Bal : 230

Conclusion: 18 years later : 2030.
670K paid off own 2 houses.
950K still owed UB (Hses: 620K, if value increased by 35%? = 950K) pay mortg!
2% a yr * 18 years =36%.?

So it could work, if you were sure UB would not be able to roll up arrears on the
Difference between the full repay in your contract and the interest only you are paying

Full repay 950K @ 1.5% (18 yrs): 5,006 per mth
Int. Only 950K @ 1.5% (18 yrs): 1,220 per mth
Difference per mth : 3,786 per mth (Shortfall on full Repay)
Difference per year :45,432 per yr (Shortfall on full Repay)

FOUND this in my contract and it seems to saying in point 3. c. that they can charge an extra 5% on top of your normal interest rate on the aggregate of unpaid sums ???
“Interest may be charged at a rate equal to five per centum in excess of the appropriate interest rate on the aggregate of all unpaid sums due by the Borrower including periodic payments, interest, insurance or assurance premiums, legal costs, expenses or other sums paid or incurred by the lender pursuant to these Mortgage Clause for every month or part of a month beginning on the date upon which the said sum became due and ending on the date of its receipt in full by the Lender”………….
WOULD ANYONE HAVE ANY INSIGHT OR SUGESSTIONS ON THE ABOVE?