Mortgage help

LegacyUser

My dad has a big loan out after buying a house for my sister in the UK. The house was got for my sister and her then BF as they couldnt get the mortgage for them selfs. But for various reason they split up and she moved back home. Then the house prices dropped but it wasnt as bad in the UK but the exchange rate really hut my dads loan.

The house is let at the moment and is paying off the interest on the loan + my dads contribution. Today my dad got a letter saying that the the monthly repayments is going up from €600 to €2900 a month.

This is more then my dad earns a month so I was wondering is there anything he can do?

Ickle Magoo

He should contact the bank immediately and try to work out an arrangement with them. If the monthly repayment is jumping it sounds like some kind of discount period is over - check with the bank as to what his options are.

He could also contact MABS and free get financial advice from them.

All the best

Jumbo156

It sounds like he had an interest only mortgage.
Banks are now doing away with these mortgages and are(and can) insist that these be replaced by standard mortgages, hence the rise in repayments.
All he can do is contact the bank and try and renegotiate his Mortgage.
This unfortuantley won't be easy in this day and age.

Good Luck to him.

Permabear

This post has been deleted.

LegacyUser

The ex is out of the picture, they havent spoken to each other in over a year also he is living in the UK. BTW everything is in my dads name.

My sister doesnt have a great wage and cannot really afford to help out my dad.

If he was to sell now he would make a loss of €90k. There is a few other things we can do due to other assists.

I will be starting a new job now soon so I will be able to help my father out some what.

ongarboy

Yes, but unfortunately, in this case it sounds like the Dad did not just act as loan gaurantor here (i.e. if the daughter and BF ran into difficulties with repayments on their mortgage, he would take liability - all the responsibilities of which would have been legally signed and agreed to in writing with solicitor) but the Dad appears here to be the outright owner of the house and therefore just bought it as a gift for them. If there was an intention for them to assist with the mortgage repayments then that should have been agreed to and signed so that the banks would pursue them also in such an eventuality.

The eventuality unfortunately has happened and now the Dad finds himself in this situation. While it might be morally questionable that the daughter/BF are not helping out when the house was intended for them, legally they are not obliged to assist. I don't think any of the current and proposed mortgage arrears protection legislation will protect him either as it is not his prinicipal residence and would be considered an investment property if he is letting it out.

As someone else posted, contact MABS to see what options are available but it is a tricky one and highlights the importance of knowing all the consequences of what you sign yourself into. There must have been some awareness of knowing the mortgage would suddenly hike more than five-fold if this was an initial interest only mortgage and should have been financially planned for. Best of luck.

seamus

Mortgagehelp wrote: »

If he was to sell now he would make a loss of €90k. There is a few other things we can do due to other assists.

Then that's what he'll probably have to do. Sell the UK house and renegotiate the mortgage on his Irish home to cover any shortfall.

aidan24326

Jumbo156 wrote: »

It sounds like he had an interest only mortgage.
Banks are now doing away with these mortgages and are(and can) insist that these be replaced by standard mortgages, hence the rise in repayments.
All he can do is contact the bank and try and renegotiate his Mortgage.
This unfortuantley won't be easy in this day and age.

Good Luck to him.

If anything I think it's the opposite, banks at the moment have to be willing to renegotiate once the person who bought is in a position to pay on the renegotiated terms. It's not in the banks interest to refuse to renegotiate unless you're a lost cause who has no chance of ever paying them back. Repossession will always be the last option, as a bank is guaranteed to lose money in that scenario.

Mortgagehelp wrote: »

My sister doesnt have a great wage and cannot really afford to help out my dad.

Then what on earth was she doing taking on a house with a big mortgage? There was no foresight at all here as to what would happen if your dad lost his job and could no longer pay, or if her and the bf broke up.

Your dad tried to do something kind for his daughter but unfortunately he's been left holding the baby now, and your sister appears to have rightly planted him in the sh1t.

Even with renegotiated terms the mortgage repayments will still probably be too high, so selling up and getting out might be the only option now. And morally your sister will have to take on some share of the losses that come from that. But he definitely needs to seek some professional advice and fast.

Jumbo156

aidan24326 wrote: »

If anything I think it's the opposite, banks at the moment have to be willing to renegotiate once the person who bought is in a position to pay on the renegotiated terms. It's not in the banks interest to refuse to renegotiate unless you're a lost cause who has no chance of ever paying them back. Repossession will always be the last option, as a bank is guaranteed to lose money in that scenario.

Maybe if it was his principle residence and the mortgage has just risen a few hundred Euro.
But not an "investment property", which was interest only and by applying a standard mortgage increases the repayments 5 fold.
Just sounds very unlikely that they could reach a compromise.
I really hope they do for the OP's father sake as he was only doing what he thought was best for his daughter and he must be admired for that.

iguana

Mortgagehelp wrote: »

If he was to sell now he would make a loss of €90k. There is a few other things we can do due to other assists.

I will be starting a new job now soon so I will be able to help my father out some what.

How long do you think you will be doing that for because there is no quick fix to this problem? All you will be doing is throwing good money after bad. The house price crash in the UK was stalled somewhat by the government stimulus package and historically low interest rates but Mervyn King has intimated that there is likely to be 3 quarter percent rate rises between now and the end of 2011. This will see the price drops begin again as credit becomes more expensive. The UK bubble was never as big as ours but it was still quite large and hasn't finished bursting yet.

As a rough guide to the value of the house your dad has a mortgage for multiply the monthly rent by 110 and by 170. The real value of the house will fall somewhere between those 2 figures depending on location/desirability/etc, but most likely closer to the lower figure. (And that is as long as rents remain as high as they currently are, if they lower the house value lowers.)

As Seamus said, sell the house, take the loss and move on. It's also worth remembering that possession orders are granted in the UK a damn sight easier than they are here. If that happens you dad will lose the house and still be liable for any shortfall and all court and sales costs.

LegacyUser

Just a few things I would like to point out.

The mortgage was taken out on another house my dad owns that is in Ireland but not the one he lives in.

When the loan was taken out for every euro you would get 66p (its now 86p) so thats what has really hurt him.

After the break up my sister moved back home to Ireland and isnt on the same wage she was in the UK.

Was talking to my dad earlier he wants to keep the house, his plan is to rent out two other houses he owns (he lost a tenant last year on one and the other hasnt been let out in a few years but he shares the ownership of this house with his sister) but both need a few grand spent on them. He has money saved up to spend on the redevelopment of these houses. Then he would like me and my other two siblings to help out as well which I have no problem with as he paid for me to a private school and funded me though my 4 years at college.