Buy to let ultimatium

mozattack

Hi,

Friend has a buy to let.

She is on interest only for 5 years now, extension after extension but never missed a payment. She can't pay capital 'cos she only works 2 days a week but manages to pay the interest.

AIB writes to her saying unless she pays capital within 2 weeks or appoints a letting agent to sell the property in that time, they will take possession and sell it. No indication on what they will do the balance owing which could be €100k depending on what they sell it for. Fairly demoralising hitting someone with €100k bill when she earns €200 per week working!!!

Fairly heavy handed stuff against a PAYE worker but such is life.

Question is, can they do that? I asked her to get her original mortgage letter of offer but I doubt that will help.

Any ideas?

Nino Brown

Is waiting until she gets hit with a bill for the balance and filing for bankruptcy an option? Does she have other assets to lose?

chris85

They are more or less positioning themselves to get all the property. By demanding the money back they have made it clear of their intentions and this would indicate court proceedings would be initiated soon.

Realistically its going on 5 years now and the bank will be concerned if things will ever change so why prolong the situation. If the mortgage is not going to be sustainable then the bank would be right to move and get the property sold.

Unfortunately the homeowner will be liable for any balance outstanding following sale of property if it comes to that.

godtabh

mozattack wrote: »

Hi,

Friend has a buy to let.

She is on interest only for 5 years now, extension after extension but never missed a payment. She can't pay capital 'cos she only works 2 days a week but manages to pay the interest.

AIB writes to her saying unless she pays capital within 2 weeks or appoints a letting agent to sell the property in that time, they will take possession and sell it. No indication on what they will do the balance owing which could be €100k depending on what they sell it for. Fairly demoralising hitting someone with €100k bill when she earns €200 per week working!!!

Fairly heavy handed stuff against a PAYE worker but such is life.

Question is, can they do that? I asked her to get her original mortgage letter of offer but I doubt that will help.

Any ideas?

Buy to let would imply that is rented or is available to rent. No mention of whether the place is rented or not. Either way contact MABS.

TiGeR KiNgS

I am a tax payer and wholeheartedly agree with the bank's position.

If she cant pay back her mortgage why should I ?

Nino Brown

TiGeR KiNgS wrote: »

I am a tax payer and wholeheartedly agree with the bank's position.

If she cant pay back her mortgage why should I ?

I agree with you, but that's not what the guy is asking, he's asking what her best course of action is.

clear thinking

The obvious thing is for her to appoint a letting agent - but as mentioned talk to MABS.

She should send a registered letter to the bank stating she has met all interst payments etc and that she is talking to mabs about appointing an agent and she'll get back to them shortly.

If it was me i'd get a local agent to give her a letter saying they've been hired and send on to the bank.

She can then string the bank along for a few months before sending in a valuation from the agent.

Chances are the house wont sell so if he/she goes with the flow the end of the process would be status quo.

mozattack

TiGeR KiNgS wrote: »

I am a tax payer and wholeheartedly agree with the bank's position.

If she cant pay back her mortgage why should I ?

Stupidest comment ever.

As a tax payer who should I pay some ex teacher €40k pension to sit at home, pay civil servants sick pay, pay ex firemen getting €125k termination payment from their job at 50. Why should I?

mozattack

mozattack wrote: »

Stupidest comment ever.

As a tax payer who should I pay some ex teacher €40k pension to sit at home, pay civil servants sick pay, pay ex firemen getting €125k termination payment from their job at 50. Why should I?

The place is rented, she pays around €400 per month to the bank and clears €200 (rent is €600). That €200 is swallowed up with costs of the house though.

Back to the above comment, fairly naive to think that you wont pay for this in any case. If she is made bankrupt the government will essentially pick up the tab when the debt is written off - there is no way she can afford €100k loan when she has nothing. Simple maths, not morals.

BuffyBot

As a moderator I shouldn't have to remind people to keep on topic and not get personal...yada, yada...

homer911

This is clearly an unsustainable loan. She is living in cloud cuckoo land if she thinks she can hang on to the property.

She should do a deal with the bank and hand back the keys

Anyone who is only earning 200 a week, and the rental income is not paying the full mortgage, has no business to be holding a BTL property

Sell it or hand over the keys - it will be a weight off her mind..

Bullseye1

It would be better if the owner sold the property themselves than let the Bank sell it at a huge discount.

mozattack

Bullseye1 wrote: »

It would be better if the owner sold the property themselves than let the Bank sell it at a huge discount.

Fair point but is she engages an auctioneer to sell it, she is stumping the auctioneer's fees and legals fees. Say that is €4k - how can she pay for that? If she had €4k the bank would ask for it against the mortgage.

Railroaded into having no choice but let the bank take it - least if they engage the auctioneers and solicitor, it is their cost. Yes it will come out of the net proceeds but she won't be paying the balance anyway - anyone with experience of receiverships will know how that pans out.

I am just asking is it legal; remember she is not strictly in default unlike many others who are >90 days in default.

Nino Brown

If it was illegal to re-possess a house where somebody was only paying interest, why would anybody want to pay the principle? Of course it's legal.
It's the banks business who they re-possess and when, BTL will always be first to fall, and probably places the bank think they can shift first. If somebody is >90 days and paying in dribs and drabs, or still paying interest on a place the bank know they can't sell, it makes more sense to keep taking what they can get from the owner rather than re-possess.

clear thinking

If she has not defaulted - even on a demand loan - the bank are on thin ice if she has met all required interest payments.

A judge would have to decide if she was reasonable - eg meeting the interest only term offered -vs the bank being reasonable.

The cheapest first step is still the reg'd letter to the bank explaining her exact position, her willingness to engage meaningfully etc. and to continue paying interest and try to get only one person to deal with - even offer in writing to go in and meet them.

again mabs should be able to help on advising how to approach that.

The wum on this thread isn't helpful - and ignorant of the fact that the banks were already partially capitalised years ago to cover mortgage losses so that horse is long gone. Additionally if the loan was offered interest only thats the banks tough if payments are being met.

hfallada

Your friend tells the bank politely **** you. If they go to court to repossess the apartment it will cost a lot in legal fees and plus I cant imagine a judge saying ok to a repossession on a mortgage someone hasnt defaulted on. If I were your friend tell the bank they can have it back under the condition they write off the balance of the sale and the mortgage.

Are you sure your friend hasnt defaulted?They are thousands of BTL mortgages in several months arrears and the banks hadnt done anything on them yet

dotsman

clear thinking wrote: »

If she has not defaulted - even on a demand loan - the bank are on thin ice if she has met all required interest payments.

A judge would have to decide if she was reasonable - eg meeting the interest only term offered -vs the bank being reasonable.

The cheapest first step is still the reg'd letter to the bank explaining her exact position, her willingness to engage meaningfully etc. and to continue paying interest and try to get only one person to deal with - even offer in writing to go in and meet them.

again mabs should be able to help on advising how to approach that.

The wum on this thread isn't helpful - and ignorant of the fact that the banks were already partially capitalised years ago to cover mortgage losses so that horse is long gone. Additionally if the loan was offered interest only thats the banks tough if payments are being met.

hfallada wrote: »

Your friend tells the bank politely **** you. If they go to court to repossess the apartment it will cost a lot in legal fees and plus I cant imagine a judge saying ok to a repossession on a mortgage someone hasnt defaulted on. If I were your friend tell the bank they can have it back under the condition they write off the balance of the sale and the mortgage.

Are you sure your friend hasnt defaulted?They are thousands of BTL mortgages in several months arrears and the banks hadnt done anything on them yet

But, according to the OP, she will be defaulting. The bank have continuously granted her extensions in the hope that her situation improves. After 5 years, they are now asking her to make the normal capital & interest repayments she was supposed to be paying all along. According to the OP, she won't be able to afford that. therefore she will default. All the bank is doing is informing her of what happens if she defaults.

mozattack wrote: »

She is on interest only for 5 years now, extension after extension

I don't see what the issue is here. She made an investment, it went bad. The bank have done everything they can to help her, but to no avail. They are now calling it a day. I'm surprised it managed to go on for 5 years before it got to this stage.

chris85

Ok so the friend works two days a week, where does the friend live? Do they have a mortgage on their own place?

mozattack

Hi there,

Can confirm that she never missed a mortgage payment - that is a fact.

She lives in her own home, the current buy to let was previously her home and her own home is on interest only (but capital was paid for around 3 or 4 years).

Accept the bank can't accept interest only forever but forcing someone to sell with 2 weeks notice is a bit rich and they never will promise a write off post sale so they are really bullying this person.

chris85

mozattack wrote: »

Hi there,

Can confirm that she never missed a mortgage payment - that is a fact.

She lives in her own home, the current buy to let was previously her home and her own home is on interest only (but capital was paid for around 3 or 4 years).

Accept the bank can't accept interest only forever but forcing someone to sell with 2 weeks notice is a bit rich and they never will promise a write off post sale so they are really bullying this person.

The bank know it wont be sold with 2 weeks notice. They just now have on record a demand for balance to be paid. This gets their ducks all in a row for when pursuing for repossession through court if required.

just do it

mozattack wrote: »

Hi,

Friend has a buy to let.

She is on interest only for 5 years now, extension after extension but never missed a payment. She can't pay capital 'cos she only works 2 days a week but manages to pay the interest.

AIB writes to her saying unless she pays capital within 2 weeks or appoints a letting agent to sell the property in that time, they will take possession and sell it. No indication on what they will do the balance owing which could be €100k depending on what they sell it for. Fairly demoralising hitting someone with €100k bill when she earns €200 per week working!!!

Fairly heavy handed stuff against a PAYE worker but such is life.

Question is, can they do that? I asked her to get her original mortgage letter of offer but I doubt that will help.

Any ideas?

Go to MABS, financial services ombudsman, New Beginnings to see what they have to say. Finally pay a solicitor.

This is her second property and therefore is treated as an investment. The State is protecting her primary principle residence. Hard to expect much more from the State than that. Therefore this has to be treated as a business transaction and keep emotion out of it.

She putting 66% of her rent received which I gather only covers interest?Is she on a tracker? Going by the timeframe, type of property etc I presume it was at the tail end of the good times. Therefore she probably got a tracker that has an interest rate of 2% or less. Lets say it's 2% and the monthly interest is €400 that means the capital outstanding is €240k. For an investment property she surely had a 10% deposit meaning the purchase price was around €265k. €600pm is the current rent. That's an annual rate of return of 2.7% on her highly leaveraged investment!

Lets look at it from the lenders point of view. She is on interest only on her PPR as well. Should she go back to 5 days a week most of the extra income will be eaten up by capital for her primary residence. Then take the fact we are in an age of historically low interest rates. Once some growth comes back into the economy her monthly interest bill could quite quickly double or triple.

Has she looked at all means of decreasing outgoings and increasing income? e.g. lease out her primary residence and rent something a lot cheaper, lease out a room in her primary residence, no holidays, no car etc. The recent household monthly budget recently released makes for scary reading. This is the amount banks will allow people who apply for insolvency in order to have the outstanding sum after sale written off. If she really wants to hold onto what is now a non-viable investment she'll have to shoulder the pain. Whilst it seems an awful outcome, the bank repossing it is possibly the best thing for her on the long term.