What to do? Interest only mortage on investment property maturing in 10 years

N

Notsavy

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Hi there,

Advise needed pls.
The bank has notified us that we need to come off interest only tracker very soon on our BTL property.10 years left on mortgage.
We owe approx €216k, property may now be worth 250k maybe 270k. Interest only is €190 per mth , rental income €1450. Bank wants €1880 for interest and capital repayments per mth ! This we could not afford as this rental income is used to currently pay bills each month.

We cannot afford to make repayment outlined above and only other options would be either to stay on interest only or make some kind of capital repayment + interest.
Our monthly salaries are low and so would back this up! We always intended to sell this property anyway in a few years time.
We do save €300 each month into a fund for kids education and have maybe €20k already in it. We would need access to this in 5/6 years.. WE have some other savings for rainy day etc , not huge !

We need to tick a box as to what option to choose with the bank ...Can anybody pls give sound financial advise as to what we should do ..Should we ask for interest only to remain in place and we intend to sell house anyway in maybe 4/5 years time or should we pay the €300 a month extra on capital into this instead of education fund .............?

Advise much appreciated ,thanks.
 
deisechic said:
The bank has notified us that we need to come off interest only tracker very soon on our BTL property.10 years left on mortgage.
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This has come up a few times recently.

I believe that the Central Bank requires lenders to write to people with interest only mortgages alerting them to the fact that they will have to pay off the mortgage in 10 years.

Who is the lender? I would guess it's ptsb.

Check the mortgage. If it is interest-only for the full term of the mortgage, just write back to the bank and inform them accordingly. Tell them that you will be selling the property at the end of the term.

If the interest-only was for 5 years as I suspect, then ptsb has a legal right to demand full capital and interest. However, many people have disputed this claiming that the marketing material led them to expect it to be interest-only for the full term. PTSB has backed down on these. So just tick the box for interest-only to continue and tell them that the property will be sold in 10 years.

Brendan
 
deisechic said:
Bank wants €1880 for interest and capital repayments per mth ! This we could not afford as this rental income is used to currently pay bills each month.
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This is a fundamental problem for you. You are living beyond your means.

Your income is artificially high due the rent and the low interest rate.

When you sell the property, you are going to be in real trouble. You should cut back now so that it won't be a shock to you then.

deisechic said:
We do save €300 each month into a fund for kids education
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If your mortgage contract obliges you to make capital and interest, then it's not the role of the lender to provide you with a cheap loan so that you can save money for your kids' education.
 
deisechic said:
Bank wants €1880 for interest and capital repayments per mth ! This we could not afford as this rental income is used to currently pay bills each month.
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If this comes to a head and the bank reasonably insist on you paying €1,880 per month instead of €190 per month, then you should run down the education fund to do so.

You should not sell the property at this stage as it's a very profitable investment.

Of the €1,880, €1,700 is repaying capital. So you are just transferring savings from one fund, the kids' education fund to another, the property investment fund. So the €20,000 will keep you going for about 18 months.

When you then sell the property, your mortgage will be €20,000 less.

Brendan
 
deisechic said:
Interest only is €190 per mth , rental income €1450. Bank wants €1880 for interest and capital repayments per mth ! This we could not afford as this rental income is used to currently pay bills each month.
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When you purchased the property, did you not put some sort of payment vehicle in place to pay off the capital?

In these uncertain times I would be of the opinion to sell this property asap.
 
I disagree. This person/family are living beyond their means. They are relying on high rent, low interest to supplement their monthly. Yes they are saving something, but if they aren't saving at least the full "profit" from the rental property then when the rental property is gone, they will have outgoings each month that exceed incomings.

Also, what happens if property prices fall/crash. This person/family are in serious trouble. SERIOUS TROUBLE. Walking away now with 34-54,000 isn't a bad safe play.
 
A surplus of properties coming on to the market next year may see rents falling, foreign workers losing their jobs especially in the tourist industry returning home. There's too much uncertainty at the moment. Rents are currently sky high, that may not continue.
 
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