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Buy to let coming off Interest only

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  • 25-10-2012 4:28pm
    #1
    castle
    Registered Users Posts: 497 ✭✭


    I bought a buy to let back in 2005 with mortgage of 330K and have been on interest only payment for nearly past 5 yrs which the rent covered, house at best is now worth 130K:eek: so in 3 months I am meant to start paying Capital plus interest which is an non runner as now on social with bleak prospects of work,this mortgage is with an UK bank,
    I have a mortgage for my private home that I share with wife and 4 Children all under 11 yrs, this is mortgage of about 120K and house price at best 250K which we where lucky to have on very cheap ECB rate that we can afford to pay at a push,
    Now I know I will have to ask the bank to continue the interest only for at least another 5 yrs as even if I did get a job I would not be able make up the difference to pay the capital,
    I took the chance and it did not work out this I know, so must do now what is best for future of my family, can anyone advise me on options that are available, I accept responsibility but there is just no way I can pay C+I you cant get blood from a stone, I know moral hazard etc but would really like some good advice, cheers


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    #2
    murphaph
    Registered Users Posts: 19,022 ✭✭✭✭murphaph


    So you've approached the bank already and told them the full story? If so, and they aren't prepared to do anything then contact MABS I suppose as the next logical step. Not a nice position to be in, regardless of whether or not it's your own fault etc. so good luck in whatever avenue you pursue.

    How much is the balance on the BTL?


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    #3
    Victor
    Registered Users Posts: 78,404 ✭✭✭✭Victor


    murphaph wrote: »
    How much is the balance on the BTL?
    Assuming no lump sum payments and that very little capital is paid in the first few years, surely the bulk of the €330,000.


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    #4
    Milk & Honey
    Banned (with Prison Access) Posts: 1,950 ✭✭✭Milk & Honey


    The only option, rather than defaulting completely is just to pay the rent to the bank. In theory they can foreclose but you will be down the queue.


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    #5
    Stheno
    Moderators, Business & Finance Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 51,688 Mod ✭✭✭✭Stheno


    castle wrote: »
    I bought a buy to let back in 2005 with mortgage of 330K and have been on interest only payment for nearly past 5 yrs which the rent covered, house at best is now worth 130K:eek: so in 3 months I am meant to start paying Capital plus interest which is an non runner as now on social with bleak prospects of work,this mortgage is with an UK bank,
    I have a mortgage for my private home that I share with wife and 4 Children all under 11 yrs, this is mortgage of about 120K and house price at best 250K which we where lucky to have on very cheap ECB rate that we can afford to pay at a push,
    Now I know I will have to ask the bank to continue the interest only for at least another 5 yrs as even if I did get a job I would not be able make up the difference to pay the capital,
    I took the chance and it did not work out this I know, so must do now what is best for future of my family, can anyone advise me on options that are available, I accept responsibility but there is just no way I can pay C+I you cant get blood from a stone, I know moral hazard etc but would really like some good advice, cheers

    Why not sell your house for 250k that you live in, clear down the mortgage, that will give you over 100k to pay off against the btl house and you could live there?

    Or if it's too small, then sell your house, use the 130 after you've paid off the mortgage on that to pay off a chunk of the btl mortgage and rent another house?


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    #6
    castle
    Registered Users Posts: 497 ✭✭castle


    Correct balance is still 330K,
    Victor wrote: »
    Assuming no lump sum payments and that very little capital is paid int eh first few years, surely the bulk of the €330,000.


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    #7
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    Good luck - most banks stopped renewing Interest Only on Buy to Let a couple of years ago!


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    #8
    Stheno
    Moderators, Business & Finance Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 51,688 Mod ✭✭✭✭Stheno


    athtrasna wrote: »
    Good luck - most banks stopped renewing Interest Only on Buy to Let a couple of years ago!

    really?


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    #9
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    Stheno wrote: »
    really?

    Our bank did, over 2 years ago and we did some research at the time and found it to be the case with most banks. Capital payments are crippling but it's "short term (ish) pain, long term gain" when it comes to debt reduction.


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    #10
    ronan45
    Registered Users Posts: 1,584 ✭✭✭ronan45


    castle wrote: »
    I bought a buy to let back in 2005 with mortgage of 330K and have been on interest only payment for nearly past 5 yrs which the rent covered, house at best is now worth 130K:eek: so in 3 months I am meant to start paying Capital plus interest which is an non runner as now on social with bleak prospects of work,this mortgage is with an UK bank,
    I have a mortgage for my private home that I share with wife and 4 Children all under 11 yrs, this is mortgage of about 120K and house price at best 250K which we where lucky to have on very cheap ECB rate that we can afford to pay at a push,
    Now I know I will have to ask the bank to continue the interest only for at least another 5 yrs as even if I did get a job I would not be able make up the difference to pay the capital,
    I took the chance and it did not work out this I know, so must do now what is best for future of my family, can anyone advise me on options that are available, I accept responsibility but there is just no way I can pay C+I you cant get blood from a stone, I know moral hazard etc but would really like some good advice, cheers

    My friend has buy to lets on "An Interest Only Tracker" he is delighted with them. Is this what you have or just interest only?


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    #11
    phormium
    Registered Users Posts: 3,340 ✭✭✭phormium


    Check first with the bank if you can extend the interest only, do this before it expires, not sure what bank you are with but one UK owned bank was extending BTL 5yr interest only loans by 2 yrs providing it was requested before the first term ran out, if you left it until after that you had to go through the whole income/expenditure thing. (Now they may have stopped that system by now, I have no very recent experience of it.) Won't help in the long run, just a bit of can kicking, but would give you some more breathing space to try and come up with a better solution.


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    #12
    castle
    Registered Users Posts: 497 ✭✭castle


    The ECB rate I have is for the interest only at the moment but it also will be for C&I when it kicks in, the point is I will not be able pay the Capital no matter what, the bank is UB,
    phormium wrote: »
    Check first with the bank if you can extend the interest only, do this before it expires, not sure what bank you are with but one UK owned bank was extending BTL 5yr interest only loans by 2 yrs providing it was requested before the first term ran out, if you left it until after that you had to go through the whole income/expenditure thing. (Now they may have stopped that system by now, I have no very recent experience of it.) Won't help in the long run, just a bit of can kicking, but would give you some more breathing space to try and come up with a better solution.


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    #13
    phormium
    Registered Users Posts: 3,340 ✭✭✭phormium


    Are you saying there is no point in asking them for further interest only so and that you are never going to be able to pay the capital?

    I can't see what other solution they are going to offer you at this stage, at least it would preserve your credit rating for the time being if you were meeting an arranged interest only plan. If you simply default on the c&i payments then what is to stop them repossessing, selling and putting a judgement on your own home for the balance as you have some equity in that.


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