Unsustainable BOI mortgage, baby due

D

Danmo

Registered User
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Personal and income details
Net (i.e. after tax) Public servant. Takehome pay is €519 weekly after deductions.
Income history: Net income partner/spouse: 0
Income history: In public service 8 years. Used to take home €650 per week. Took out mortgage with BOI in 2009 following divorce and bought house for €250K plus stamp duty. Borrowed €225K and put in 25K proceeds from marital home.
Number of children: One due in August
Amount of Mortgage Interest Supplement received: 17e TRS per week
Home loan
Lender: BOI
Amount outstanding: 213K approx
Value of home: 150-160K
Interest rate: specify whether tracker or SVR or fixed rate: Variable Rate – 4% approx
Monthly repayment: I actually pay weekly - €260 per week less €17 TRS so total is €243 weekly
Amount in arrears: None.
Summary of discussions and agreements with the bank: Have had one six month interest only period and one six month reduced payment period. I applied for a third time but BOI told me to ‘do something about my personal debt’.

Other loans and creditors
Overdraft: 1000 (always in the red)
Credit Card BOI €4500 (have agreement to pay 40 a week). AIB €460
Bank Loan AIB Bankloan of €1300 – pay €10 weekly
Car loan None

Other savings and investments
Savings
€70 BOI
€250 Credit union for emergencies


How important is retaining the family home to you?
Which of the following best describes your situation?
Either of these apply to me but ideally I would like option 2
1. I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.
2. I really want to keep the family home even if it means having a large mortgage and negative equity for years to come but would like some quality of life too.


Any other relevant information
Petrol and car expenses take a big hole out of my salary. It costs €60 a week in petrol alone to get to work and back. This is even with car pooling twice week to save on fuel and there is no public transport where I live. I cannot change to a more economical car as I have no savings. My current car is a loan from a friend – my car engine blew last year and I hadn’t the money to get it fixed so it was scrapped for 1K which went into my overdraft at the time.

What is your preferred realistic outcome?
I am due a baby in August 2013. The father’s financial (or other) input is uncertain. I cannot sustain this level of debt and pay for childcare come March 2014 when my maternity leave ends. I would like to address this situation before I get into arrears. However, I realise that the bank are unlikely to entertain me (say in terms of a split mortgage, which I am not sure is a good idea anyway) since I have been managing to make payments up until now.
There’s not much else I can cut back on. Has anyone got any bright ideas? I would be grateful for any helpful (and non judgemental!) input.
 
Sorry to hear about your difficult situation Danmo.

With an income of €519 and mortgage payments of €243 life cannot be easy, there isn't much you can cut back. And with a child your costs are going to increase significantly.

I do not understand what the bank mean by ‘do something about my personal debt’. Do they want you to cease making payments altogether. Either way €50 a week doesn't change much.

Your mortgage appears unsustainable, in fact I don't understand how you have managed to avoid going into arrears so far.

Perhaps you should write to the bank telling them how much you can afford to pay weekly, and pointing out that this will reduce when you return to work. Then ask them for a proposal as to how they want to deal with your unsustainable mortgage.

Then reduce your payments to this amount. At present if you are paying the bank each week, from their point of view the mortgage is working fine.

I dont know what will happen in the long term, you may loose your house, but at least you will have some quality of life in the meantime and that could be a long meantime. In the end you may loose your home anyway. I dont know where you live, but unless it is central Dublin you could probably rent for less than the €243 a week you are paying now

Sorry I have no better advice
 
Hi Cremeeg
Thanks for your response. I imagine BOI saying 'do something about your personal debt' means that they assume the problem is not the mortgage but my CC debt which I cannot really address with no savings and no borrowing power (as in to consolidate/pay them off).

The most I would get rent-wise if I rented the house out would be €725 a month which would still leave me paying €325 a month (plus household charge/property tax/life assurance etc) plus rent plus servicing tenants (repairs etc) so that's not really a runner either.

I will try talking to BOI but like I said, since they are getting paid I don't think they will take much notice......
 
Can you not rent a room or two out where you are living, how many bedrooms does it have?

I think you need to learn to budget, keep a spending diary and see how you've gone into a viscious circle of relying on the overdraft which costs a lot of money to service.
 
Bronte, I have done all that. There is nothing else left to cut back on unless I get rid of Sky TV (basic package) and given that i am going to go on maternity leave I may go completely gaga. You are forgetting I am pregnant - therefore have zero social life (I didn't have much of one before either), I don't buy clothes. Don't go out. I get my hair cut for €20. I colour my hair myself. I compost and recycle as much waste as possible. I got a gas meter installed (and am v frugal with gas and heating). I live in a rural area and did have a lodger for a while (which was difficult to find) but he moved in with his parents when he was put on a three day week. I bring lunch to work from home. I menu plan before I shop and cook meals from scratch (no ready made meals or rubbish like that). There is simply nothing else to cut back on. My salary has been decimated since I took out the mortgage and things have been gradually getting worse over last four years...
 
Bronte said:
I think you need to learn to budget
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Harsh, she is managing on, what, less than 200 euro net a week? Has been keeping up her mortgage, has a baby due.

OP it sounds difficult, I don’t know what else I could add as it sounds like your costs are low and income is relatively fixed. The best place to look would be to deliberately reduce your repayment on the house. The bank will talk to you then and they certainly won’t throw you out of it with a young baby. It’s very important for you not to stress over this though – baby is more important.
 
Hi again Danmo,

Unfortunately it seems to me that you are going to loose your home, a working woman with a child cannot get by on €200 a week. Even if you can get free childcare.

My point about renting was that you could probably find a place for yourself to live in and pay less in rent than you are paying at the moment on the mortgage.

If you accept that you are going to loose your home, your next decision is how you are going to manage that process.

If you simply stop paying anything to the bank or just a minimal amount each month, you can probably continue to live in your home for at least 2 years before you are put out.

There will be lots of nasty letters and phone calls, but you know sticks and stones.

This route will have a lot of negative implications but I do not see that you have a choice.
 
Get some professional advice. Suggest Frost Debt 0749364000 karen or ryan. It costs nothing to talk to them.

If we are to be believed I just can,t see you thrown out of your home.

Take the advice and take care of you + child .
 
First off, best of luck with the child. Its interests come first before BOI

You'll definitely need professional assistance.

With an income of 519 and set costs for 1 Adult + Infant of 302 you have only 217 to pay debts.

With the child due in August, you'll be paying childcare from Jan/Feb 2014 and that'll take most of the 217

I'd forget about paying any of the unsecured debt and save the cash

On first pass it looks like a Mortgage-To-Rent option maybe best with a DSA on the unsecured but as I said get professional advice.
 
flattea2 said:
Harsh, she is managing on, what, less than 200 euro net a week? Has been keeping up her mortgage, has a baby due.

.
Click to expand...

Very sorry if I came across harsh. Agreed that with 200 Euro it would be nearly impossible to do anymore. Not sure with an income like that whether it's a good time to have a child but we are where we are.

A few things are strange though. Very big drop in salary, of 20%. Just shows how the increased taxes are having an effect.

Don't understand how a property purchased in 2009 for 250K has dropped 40% to 150K. That's an amazing drop in those years. Did the mortgage ever make sense, even on the salary of 650 a week. Surely in 2009 it was stress tested for mortgage interest increases. 243 Euro a week for one person on a salary of 650, is about 30% of income. Of course one wouldn't have expected tax increases, extra costs etc.

How can OP pay for childcare and pay the mortgage, that's nearly impossible, in fact I don't see how it can be done. Would probably be better off defaulting and renting.
 
Bronte - yes, the mortgage made sense at the time and was vigorously stress tested by BOI. You are forgetting an interest hike which added on about €70. Plus the rise in cost of living, cost of petrol, household charge (property tax will start coming out of salary soon), bin service charge introduced, utilities rising (and a couple of harsh winters), banking charges rising. Plus pension levy, USC deductions, plus PRSI hike. Wages going down with cost of living constantly going up. It's that simple.

Thank you all of you for your replies.
 
If you are living alone after the birth of your baby, would the One Parent Family Parent tax credit make any difference to your income? Will your tax liability be decreased by the increased credits? Not sure if it would make much of a difference given the amount of income involved but something to consider.

Good luck.
 
Danmo said:
. Wages going down with cost of living constantly going up. It's that simple.

.
Click to expand...

And indeed it has been drastic in your situation. It's also a warning to others, make sure you do a really good stress test.
 
Personally I think you have done well budgeting thus far. I don't think paying 50% of that salary to mortgage is sustainable, never mind when baby comes. I think your best option is the mortgage to rent scheme, and MABSnegotiating on your behalf to creditors.

Will you get paid on your maternity leave? Is there a community crèche near you?
 
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