3 Ways to Protect Your Home in Mortgage Arrears

 

image of a gouseFor many people struggling with mortgage arrears a constant question is whether the problem can be solved and whether that solution will mean their home can be protected.

Over the last while there have been several innovations introduced which, in most cases, mean that homes can be protected.

These include:

  • Bank offered solutions
  • Personal Insolvency
  • Mortgage to Rent  Scheme 

In this article, we’ll look at each way to protect your home  in mortgage arrears in turn.

Bank offered solutions

Despite much misguided commentary neither banks nor funds want to repossess homes.

However, where a borrower does not co-operate or engage with the lender there may be no other option available to the lender,

So, the first step is all about co-operation.

Co-operation means:

  1. Communicating with the lender
  2. Providing the lender with a Standard Financial Statement and supporting documentation
  3. Paying what you reasonably can in a timely and regular manner

Once you are co-operating you are protected and the lender is required to offer a solution – if a solution exists.

Solutions include:

  • Capitalisation of arrears
  • Extension of the term
  • Split Mortgage
Personal Insolvency

Under this statutory scheme, a borrower can be offered a deal once they can at least afford a mortgage based on the current market value of the property, extended over the longest period possible, and based on the lowest reasonable interest rate.

Furthermore, all other debts can be dealt with under this system.

The real strength of the system is that even if the bank or fund refuses the offer, a Court can intervene and impose the deal on the lender.

To recap:

If you can afford a mortgage based:

  • On the current market value of the property,
  • Extended over the longest period possible, and
  • At the lowest reasonable interest rate

Your home can be saved.

 

Mortgage to Rent

The Mortgage to Rent scheme is available for those whose mortgage is unsustainable and who qualify for social housing.

Under Mortgage to Rent a borrower surrenders their home to the lender who then sells the property to an Approved Housing Body or other provider. The former owner then becomes a tenant in the property on a 20 or 30-year term paying an affordable or means tested rent.

The borrower may re-purchase the property in the future if their circumstances change.

 

 

Can I Save My Home in Personal Insolvency?

Can you save your home in Personal Insolvency? The answer is Yes!

Person grimacing with personal insolvency paperwork

A Personal Insolvency Arrangement is a formal deal made between borrowers and lenders which is designed to achieve 2 principal things:

  1. – To protect the family home
  2. – To return the borrower to financial stability

Many people came out of the Great Irish recession with reduced income and huge debts. 

They found themselves unable to meet the financial commitments made during the Celtic Tiger years when banks handed out hundreds of thousands of euro like confetti at a wedding. Property prices tumbled creating unprecedented negative equity for ordinary people. And despite the banks getting bailed out by the tax payer, those same banks pursued ordinary borrowers with venom.

When the Troika came to town in 2010 they instructed the Government to intervene.  This led to the creation of a Personal Insolvency regime designed to help people retain their homes and get back onto a level financial footing.

How does a Personal Insolvency Arrangement work?

A Personal Insolvency Practitioner (PIP) will review a borrower’s circumstances.  They come up with a plan which achieves the desired result of saving the home and restoring the borrower’s financial circumstances.

In almost all cases this will involve substantial debt write down of the mortgage debt and of all other debts.

There is a vote among the lenders and creditors on the proposal. If the lenders vote against the proposal it is open to a borrower to appeal this to the Circuit Court.  The Judge now has power to impose the deal – even against the bank’s wishes.

Let’s look at an Example of a PIA

Background

The borrower is a finance manager with the HSE and resides in Dublin.

The balance due on her mortgage was €333,785 payable over 20 years at a rate of 3.25% – meaning monthly payments of €1.571.

The current market value of the property was €160,000 – leaving negative equity of €173,785.

The borrower also had a credit card debt of €10,000, a Credit Union debt of €3,800 and another debt of €6,200.

The PIP considered the borrowers circumstances and proposed as follows:

The Mortgage Debt be written down to €160,000 with the negative equity piece written off in full. This meant that the monthly mortgage payments were reduced to €924

The other debts would be reduced by 92% paid over 6 years

The bank (Permanent TSB) rejected the proposal and offered a Split Mortgage instead.

The case came before the Circuit Court which rejected PTSB’s objection and confirmed the proposal.

The result is now that the borrower has a long term sustainable mortgage and all of her other debts will be dealt with by affordable payments over 6 years.

She was able to save her home while in a Personal Insolvency Arrangement.

The circumstances will be different for each individual debtor, but the best thing you can do is to take action. Burying your head in the sand only prolongs the inevitable. So, find a Personal Insolvency Practitioner today and find out where you and your home stand.

Thank You

Thanks for reading this article. If you have any questions or related topics you would like to see covered here in the New Beginning blog please feel free to leave a reply below. I love to hear from readers and get new ideas for articles.

If you would like to speak with a New Beginning PIP please feel free to email us here or Call us on 01-5240000. 

Many thanks,

Ross Maguire