Advice please on horrible mortgage :(

curadh

Hi all,
My parents are in a bit of a pickle with a house they bought to let out during the boom. Its an interest only mortgage . They are retired with no income, the idea was to cover the payments with the rental income and have enough on top to have a little extra each month. The payments are €1300 and at the time the house was letting at €2000, it is now let to students for €1250per month, who will leave at the end of this month, so it will be vacant for a while more than likely, and will probably have to be redecorated.
My dad is always over there trying to fix things and redecorating, and generally by the sounds of it being taken for a ride by the tenants.
I have tried to explain that they are basically never going to own the house and are just paying for the bank managers first class holidays.
The only advice I can think of is to throw the keys back at the bank manager, or to negotiate for a different more manageable mortgage that gives some kind of flexibility.
Can anyone offer any kind of advice as I am stumped and its breaking my heart. Should I try to involve an independent financial advisor to negotiate with them.

MagicMarker

No such thing as throwing the keys back, they borrowed the money, they have to pay it back regardless.

If they can get new (and better) tenants for 1250 per month then they'll be doing well.

dearg lady

Are your parents not in receipt of the state pension?

the mind boggles that they were given this mortgage at that age, expecially interest only, I just can't fathom it.
Forgive me I'm missing something, but how were they ever going to repay it, ifif they've been paying interest only
tbh, I can't see a lot they can do, if they return the keys, they'll still be pursued for the debt.

Where are they living now, in the family home? Could they downsize and use any money they make to pay a chunk off the mortgage on their rental?

noxqs

how were they ever going to repay it

Same story as the rest. The prices can only go up, up and up. And rents too.

It's a sad story, but, unfortunately I don't see how this situation can be sorted. They are already on interest only, probably in NE, and there is no way the bank will renegotiate that.

The reality is there's probably thousands of properties for rent in that price range which is similar or even better. Which means the tenants will be able to negotiate the price down further or risk not being able to let at all.

It's a bad situation but unfortunately the poster above is correct, the issue is they got the mortgage in the first place. At that age, and in that situation there's really almost nothing that can be done as there's nothing to use as leverage in a negotiation with the bank.

Handing back the keys is not possible in Ireland as the house will be sold, and the balance outstanding will be converted to personal debt at a higher interest (as there is no collateral).

In any event, talk to MABS. They're the best to ask about this.

Solair

Well, unless they were willing to take a test case against the bank in question on the basis that they were mis-sold a mortgage, I don't think there's a lot they can do.

They're not in a position to negotiate at all. The bank holds all the cards.

The only thing that I would say is that the courts are being a lot more reasonable these days and that there's new debt-management law on the way which should make life easier for people who have landed themselves in situations like this.

Talk to MABS, get legal advice etc etc..

dearg lady

noxqs wrote: »

Same story as the rest. The prices can only go up, up and up. And rents too.

I'm still a bit confused, if you're on interest only from the start you're always chasing your tail...but yeah, maybe the intention was to sell in a few years, clear mortgage and make a tidy profit.

i think it was poorly sold but I have a limited amount of sympathy for them, it's a business venture that went wrong. But with better advice they possible would have been more cautious.

Balmed Out

Would I be correct in assuming that they only got the mortgage because they put something up as security? Presumably the family home?
Prob best to try to sell both properties and see what they can afoard with whats left.

Ray Palmer

That really isn't a little pickle. By the sounds of the figures mentioned they weren't even making legal money at the time. Very unlikely they looked into this correctly. Forget about the idea that they thought they could sell for a profit in the future or rents would go up from the start they would have been loosing money.

Best advices is to sell and to clear the debt by probably downsizing from the family home. If anybody in the bank or such advised them of this plan sue them. Buyer beware but if if it was an action based on advice the adviser is partially responsible.

At 2K a month interest only it must have been a relatively expensive investment property.

curadh

Thanks so much for the replies.

I asked my mother, she has told me the mortgage was given based on itsself? I dont understand it. She says the idea at the time was to sell it 6 months or a year later and make a small profit, but now has been left with a debt that is not aimed at any gain ie. they will never own the property, only prop up the banks.

With regard to mis selling a mortgage, has anyone heard of instances where this was followed up?

My other question is : How could the banks have lost? For them there was no gamble, even though they played the market: in essence they were playing the people. Am I right

What happens if people say no to paying these interest only mortgages? After all they are based on the BANKs valuation at the time of purchase.

Blackjack

curadh wrote: »

Thanks so much for the replies.

I asked my mother, she has told me the mortgage was given based on itsself? I dont understand it. She says the idea at the time was to sell it 6 months or a year later and make a small profit, but now has been left with a debt that is not aimed at any gain ie. they will never own the property, only prop up the banks.

With regard to mis selling a mortgage, has anyone heard of instances where this was followed up?

My other question is : How could the banks have lost? For them there was no gamble, even though they played the market: in essence they were playing the people. Am I right

What happens if people say no to paying these interest only mortgages? After all they are based on the BANKs valuation at the time of purchase.

Did your parents buy the house, or did the bank buy the house?.

You seem to be suggesting that your Parents were duped into this. They weren't.

As you said:
"She says the idea at the time was to sell it 6 months or a year later and make a small profit".

Seems to me they knew what they were at, and have been caught out (like many others) by the severe downturn in the Market.
There was always a downside to the Gamble, that being that the value of the property would decrease before they sold.

It's unfortunate for them, however they entered into an arrangement with the Bank that if they don't honour, it's the taxpayer that foots the bill.

Senna

I get the feeling you're blaming the banks and your parents were only innocent bystanders. Your parents were looking to make a quick buck and flip the house within a year, it didn't work out and they lost their gamble.
There are thousands of people out there in a similar position to your parents, but most have mortgages on their own homes, multiple investment properties, wage cuts and maybe job losses.
I would hope your parents have no mortgage on their own home so maybe they could sell it, pay off the NE on the investment, get it sold and hopefully have enough money left over to buy a smaller home.
There's no magic answer thats going to get them off the hook, they took out the mortgage and they have to deal with it.

Ray Palmer

As people have pointed out your parents made this decision not the bank. Their solicitor would have told them exactly what would happen in the event of a failure to pay the loan. Nobody duped them unless somebody came to them with the idea as a bank official and said you should buy this house or any house

By all accounts it sounds like they didn't research the issue correctly anyway let alone the warnings they would have got when they went to sign the dotted line. Effectively they gambled a large amount of somebody else's money and planned to take the winnings but the gamble didn't pay off. They now have to pay back the original gamble.

They might not be in serious trouble but they are going to have to make some changes and the quicker the better. It amazes me that people who may never have gambled in their lives took massive gambles without considering the possibility of losing. They need to get some financial advice now as the answers they get here might be right but not detailed enough.

Kosseegan

Ray Palmer wrote: »

At 2K a month interest only it must have been a relatively expensive investment property.

It wasn't 2k interest a month tho'.

Ray Palmer

Kosseegan wrote: »

It wasn't 2k interest a month tho'.

My mistake:o

antiskeptic

curadh wrote: »

My parents are in a bit of a pickle with a house they bought to let out during the boom. Its an interest only mortgage . They are retired with no income

Am I right in understanding that:

- your parents have no income (other than presumably, a state pension)
- they own their own house
- the investment mortgage loan isn't secured on their house.

What would happen if they did "throw the keys back". In practice I mean?

- would their house be taken from them?
- would their pension be affected?
- what possible practical effect would a judgment against them have?


You'd have to check out whether their estate could be claimed against down the line - in which case throwing the keys back mightn't be a cost-offective option.

Ray Palmer

antiskeptic wrote: »

You'd have to check out whether their estate could be claimed against down the line - in which case throwing the keys back mightn't be a cost-offective option.

I don't think you need to check that out it is very simply yes. In fact the interest keeps ticking so they could every asset they ever had in their life time could be swallowed up. The mortgage is against the individual in this country so giving the keys back doesn't work like it does in other countries

antiskeptic

Ray Palmer wrote: »

I don't think you need to check that out it is very simply yes. In fact the interest keeps ticking so they could every asset they ever had in their life time could be swallowed up. The mortgage is against the individual in this country so giving the keys back doesn't work like it does in other countries

I wonder could they take a leaf out of the bankers books: at some suitable time prior to handing the keys back they could sell up their own house, transfer all their saleworthy assets to their children and rent a nice property to the end of their days - supported by their children.

3DataModem

antiskeptic wrote: »

I wonder could they take a leaf out of the bankers books: at some suitable time prior to handing the keys back they could sell up their own house, transfer all their saleworthy assets to their children and rent a nice property to the end of their days - supported by their children.

This is morally questionable, but may in fact be the best way out of it.

antoinolachtnai

I think the bank would then have them declared bankrupt and ask the Garda to pursue the family for fraud. But it might work.

CiaranC

antoinolachtnai wrote: »

I think the bank would then have them declared bankrupt and ask the Garda to pursue the family for fraud.

They havent done anything in the most blatant cases, which have been all over the media and involved up to tens and hundreds of millions of euros. The precedent is there.

Treehouse72

One option is to sell both houses and buy a new home for your parents or, conceivably, rent if that suits or if the interest on their equity would pay the rent. After that, live on state pension which is doable if you claim all benefits for heating, TV licence, bus pass, mobile phone concessions etc. It's a way out and much better than stressing themselves out of their minds.

Apartments are actually excellent for retirees, with no garden to tend or stairs to navigate and everything close at hand. My retired dad lived in a modern apartment and loved it.

StillWaters

Foolish as the banks were, I doubt they gave a mortgage to a couple nearing retirement age with no private pension or other assets against which it was secured.

Before advising them you would need the full picture of pensions, savings, cross securement.

If they are on state pension only with no savings, it may be trying to walk away and taking the gamble the bank won't pursue penurious oaps through the courts..

Ray Palmer

StillWaters wrote: »

the bank won't pursue penurious oaps through the courts..

Yes they will as they would be attempting fraud. They gambled and lost time to pay up.

I very much doubt the bank have given the mortgage on the rental property even though the mother has said that. It just doesn't ring true. No lawyer will do this transaction for them either.

antiskeptic

3DataModem wrote: »

This is morally questionable, but may in fact be the best way out of it.

There's no doubt they've an element of moral culpability in this - what with having decided to take a gamble in the face of a lifetimes exposure to the warning that "the value of your investment may go up or down"

The trouble is that many others were involved in the extraordinary scene-setting that has produced the calamity that now overwhelms them. Yet they are the only ones carrying the can at the moment.


If they did do as I suggest, there is nothing stopping them their children making a contribution to the bank so as to offset their parents share of the totality of moral responsiblity.


I believe in paying Caesar what he is due. Not what he isn't.