Is this a typical 'deal' from Bank of Ireland, for forbearance on a mortgage

astarte

A friend of mine has been offered forbearance of 200e/month less, for a period of 3 years. On a loan of 115k (house is in negative equity to the tune of about 15k, original purchase price 200k)

In return he will loose the tracker and the bank will increase the term by another 17 years, bringing the total term to 34 years, ie until he is 81 years old!!

The interest paid if the loan is paid at the current deal is approx 36k, the interest under the new 'deal' is over 600k (assuming an average interest of 5% over the entire new term of the mortage)

clearly an insane deal, but is this what the bank is doing? are these the kinds of terms that the banks are offering?

The_Conductor

It was my understanding they were not supposed to extend the mortgage beyond the statutory age at which the contributory OAP could be drawn (aka currently 68, with the intention of increasing this to 70). It does seem nuts that he is being offered a product he will not be finished paying until he is 81 (or until death clears it- presuming he has mortgage insurance).

Given the size of the mortgage- its probably not worthwhile moving elsewhere- but I would certainly suggest sitting down and re-evaluating options.

We don't know enough about his circumstances to be able to offer you any meaningful suggestions- but he certainly is not being best served with this offer.......

Villa05

Im pretty sure the person in the bank that negotiated that deal will get a bonus if the borrower agrees to it. robbery

The_Morrigan

Get your friend to ring them to discuss as that just doesn't sound right.
I recently received a moratorium on my mortgage while waiting for insurance to kick in. I got numerous letters from BOI about my rates, repayment amount and next DD date and everything was incorrect.

Also, I'd be seeking advice from a solr on that deal. I would not be giving up a tracker for the sake of €200 a month.

sawdoubters

that would be crazy

Alan Shore

Don't know about your figures.

If they are on a tracker for 115k over 17 years then the repayments are around €612 per month (assuming an interest rate of 1.5%)

How could the interest on 115k over 34 years be 600k? If it was interest only at 5% the interest would be 5,750 per year!

I recon 115k over 34 years at 5% is 588 per month.

Perhaps you should go back to your friend and get the full story.

But that is the reason why trackers are so valuable that 3.5% can save 125,000 in interest over the life of a loan repaying the same amount.

ronan45

But that is the reason why trackers are so valuable that 3.5% can save 125,000 in interest over the life of a loan repaying the same amount.[/QUOTE]


But if the ECB rate goes back up to more normal levels (which it will) in the next 4-6 years. He wont really save anything near 125,000 will he? Im thinking a lot less than that. The tracker is really only good while the ECB is at this record low level i would have thought

gaius c

ronan45 wrote: »

But if the ECB rate goes back up to more normal levels (which it will) in the next 4-6 years. He wont really save anything near 125,000 will he? Im thinking a lot less than that. The tracker is really only good while the ECB is at this record low level i would have thought

Not necessarily, variable rates have a huge spread over ECB rates and if that didn't change, they'd be even worse off than tracker folk in the case of interest rate hikes.

astarte

thanks for your comments, they were helpful

it seems like a crazy deal, and I am pretty sure he is not going to take it.

Ray Palmer

Villa05 wrote: »

Im pretty sure the person in the bank that negotiated that deal will get a bonus if the borrower agrees to it. robbery

They obviously got their sums very wrong. You also get that banks don't give their staff bonuses for renegotiating payment on a failing mortgage? They aren't sales people working on commission doing renegotiations.

I get banks are the bad guys but it isn't like every member of staff is evil incarnate

MouseTail

Ray Palmer wrote: »

They obviously got their sums very wrong. You also get that banks don't give their staff bonuses for renegotiating payment on a failing mortgage? They aren't sales people working on commission doing renegotiations.

I get banks are the bad guys but it isn't like every member of staff is evil incarnate

i think something must have gone wrong in the translation here, either he heard them wrong or it was miscommunicated to OP.

astarte

Alan Shore wrote: »

Don't know about your figures.

If they are on a tracker for 115k over 17 years then the repayments are around €612 per month (assuming an interest rate of 1.5%)

How could the interest on 115k over 34 years be 600k? If it was interest only at 5% the interest would be 5,750 per year!

I recon 115k over 34 years at 5% is 588 per month.

yes you are right, it was my subsequent maths were wrong. I put them into an incorrect interest calculator on line.

the details of the deal are correct though, surrender tracker, add 17 years to the term of the mortgage, for a 200e a month forbearance, for a mortgage that has no arrears!