Unsustainable mortgage and positive equity

Desperate for advice about my unsustainable mortgage - below outlines my difficulty


Personal and income details
Net (i.e. after tax) Income self: €18,500
Nature of income: A mixture of part-time work and job seekers benefit.
Income history: Have difficulty securing permanent work - have occasional short-term contracts that are not highly paid.
Status: Single Parent - 60 years of age
3 adult dependent children – they do not have financial means to secure independent accommodation. Two of them in college
I do not have mortgage interest relief – was told my debt is too high.
Home loan
Lender: KBC
Amount outstanding: €183,000 (including arrears)
Value of home: €250,000
Interest rate: SVR
Monthly repayment: €1,600 (approx)
Amount being paid: €200 per month
Amount in arrears: €15,000

Summary of discussions and agreements with the bank:
Have been in MARP since 2010. KBC now refuse another resolution period and are insisting on the family home being sold in order to recoup the mortgage debt. The equity is not enough to buy another property and I am too old to move outside Dublin.

Other loans:
Overdraft - €3,000
Credit Card - €4,000
Personal loan with BOI: €6,000


How important is retaining the family home to you?
I really want to keep my family home, even if it means selling it to a Housing Association as in ‘mortgage to rent scheme’ – I am happy to relinquish the equity also.



What is your preferred realistic outcome?
To either avail of mortgage to rent – but KBC are saying I am not eligible .
OR
That the banks would write-down the arrears and allow me to transfer a small amount of my mortgage (perhaps €30,000) onto another affordable property.

First, is your mortgage sustainable?

€183,000 @ 4.5% = €8235 per annum or €700 per monthin interest
You can only contribute a small part of the interest, so it does look as if your mortgage is unsustainable.

You can't afford to provide free accommodation to your children. Have they considered taking a break from college to help with the costs? If you lose your home, are they going to have to leave college anyway?

What can you propose to KBC?
You have €67,000 equity, so they are not at a huge risk.
You could put a proposal to them that you want to hold onto the house for 5 years until your children are financially independent.
They can roll up the unpaid interest and will get it out of the proceeds of sale.

If they agree, then you get some time to deal with the situation. If your children can earn some money in the meantime and you start again to pay the interest in full, KBC might allow you stay in the house.

After your children are gone, you could take in a lodger who would pay rent.

I am not optimistic
The Central Bank has given the lenders targets to achieve sustainable solutions. Repossessing the home counts as a sustainable solution. By repossessing you, KBC helps achieve its target and loses nothing as you have positive equity.

I am lobbying to change the definition of sustainable mortgage but am making no headway yet.

You should lobby your TD
1) About the Central Bank's stupid definition which is forcing them to repossess your home
2) The way MIS is calculated. It would be much cheaper for the government to pay your mortgage interest than to rehouse you.

Your assets exceed your liabilities to the tune of €54,000, at least. Unfortunately you will have to sell your house and make alternative arrangement for accomodation ( rent?). On a practical level, to help avoid this, could you boost your income ( and repayment ability ) by taking in a lodger - is there space in the house? Could your 3 adult children get a part time job and contribute to the household financially? The bank is within iits rights I think in getting the house sold if you cannot repay the loan. The amount outstanding you say is approx ten times your income so unless you boost your income somehow, I cannot see how you can pay for it. Best of luck anyway, keep the chin up.

Thank you for that advice. I was wondering if it would be worthwhile approaching New Beginnings to help me negotiate with KBC.
Its just that because I'm so strapped for cash I don't want to waste money on their consultation fee if its going to be a waste of time.

I am not sure that New Beginning can do much for you. But how much is their registration fee? It could be well worth talking to them.

It does seem that your mortgage is unsustainable so New Beginning could help you to delay the inevitable. However, maybe you should wait until the bank begins the repossession proceedings.