Early redemption on mortgage - penalties

Monsclara

Hi

I have 15 years left on my mortgage and am locked into a fixed interest rate til April 2015. I've had to take early retirement from work on grounds of ill health. I'm thinking of selling my home and clearing my mortgage as I'm worried about defaulting because of significantly reduced income, but the lender won't budge on penalties in excess of €7,500 if I paid off the mortgage now. So then I asked if I could use my lump sum to pay off part of my mortgage now and again they won't budge on penalties.
Does anyone know if there is some way to negotiate with the lender? I would have thought they would at least have a discussion with me given I'm trying my best not to default.

Thanks

handlemaster

Monsclara wrote: »

Hi

I have 15 years left on my mortgage and am locked into a fixed interest rate til April 2015. I've had to take early retirement from work on grounds of ill health. I'm thinking of selling my home and clearing my mortgage as I'm worried about defaulting because of significantly reduced income, but the lender won't budge on penalties in excess of €7,500 if I paid off the mortgage now. So then I asked if I could use my lump sum to pay off part of my mortgage now and again they won't budge on penalties.
Does anyone know if there is some way to negotiate with the lender? I would have thought they would at least have a discussion with me given I'm trying my best not to default.

Thanks

If you have the funds now to pay off the mortgage. why don't you put in in a long term deposit account and they pay of the mortgage when the fixed rate is up. Are you afraid you will spend the money?

Monsclara

handlemaster wrote: »

If you have the funds now to pay off the mortgage. why don't you put in in a long term deposit account and they pay of the mortgage when the fixed rate is up. Are you afraid you will spend the money?

Yes - totally afraid I'll spend the money!! But have been looking at the post office savings accounts and the 3 year a/c. That looks like it could be a sensible option.
Any comments?

phormium

To be fair there is no reason why they would give you a reduction, that's the deal, you signed up for a fixed rate fixed term and you want to break it. Look at it this way, if they had for example allocated the projected income from your repayments over the fixed term to someone else's fixed rate savings account then they are going to be at a loss by allowing you finish early. They can hardly tell the savings account holder tough luck we won't be giving you what we promised on your savings for the fixed term we promised you.

That is part of the reason why there are penalties on fixed rate accounts.

handlemaster

Monsclara wrote: »

Yes - totally afraid I'll spend the money!! But have been looking at the post office savings accounts and the 3 year a/c. That looks like it could be a sensible option.
Any comments?

personally if I was like that. I'd put it where it couldn't be taken out. But most accounts at a push penalties can be broken if you push for it. If it was in the tax free state savings account fixed for 3 years would you still be tempted to take it out with penalities attached ?

chris85

Lock it in a 3 year deposit account and that will be best outcome. No reason to think they would move and they are entitled to charge it.

Monsclara

Thanks everyone. I met them today and it does appear that they won't budge. Given my financial situation, I will have no option but to default on my repayments. I understand it's the rules, but it does seem crazy to me that I would get penalised if I try and prevent defaulting. But I guess I will just have to join the statistic of another bad debt and earn zero credit rating.

dotsman

I have no idea what's going on in this thread. Monsclara, can you be a bit clearer? Because, nobody is going to be able to give you any decent advice based on the little bits of info so far.

Am I right in saying?

• You have a mortgage fixed until April 2015.
• The breakage fee is currently €7,500
• Your mortgage repayments to date are in perfect order.
• You have recently taken early retirement and have received a lump sum of cash.
• As you are now retired, you can't afford the current repayments (if so, by how much?)
• You wish to sell (and move where?, buy somewhere else, you already own another property or rent for the rest of your life?).

Can you give us any more info, such as:

• How much was the lump sum?
• Do you have any other debts?
• Excluding lump sum and debts, can you live comfortably on your retirement annuity(weekly/monthly payments)?
• How much is the outstanding home loan for?
• Realistically, how much would you be able to get for the property?
• How much is the fixed rate for?
• What bank is this with?

Intentionally defaulting is the worst thing anybody can do - trust me.

Monsclara

dotsman wrote: »

I have no idea what's going on in this thread. Monsclara, can you be a bit clearer? Because, nobody is going to be able to give you any decent advice based on the little bits of info so far.

Am I right in saying?

• You have a mortgage fixed until April 2015.
• The breakage fee is currently €7,500
• Your mortgage repayments to date are in perfect order.
• You have recently taken early retirement and have received a lump sum of cash.
• As you are now retired, you can't afford the current repayments (if so, by how much?)
• You wish to sell (and move where?, buy somewhere else, you already own another property or rent for the rest of your life?).

Can you give us any more info, such as:

• How much was the lump sum?
• Do you have any other debts?
• Excluding lump sum and debts, can you live comfortably on your retirement annuity(weekly/monthly payments)?
• How much is the outstanding home loan for?
• Realistically, how much would you be able to get for the property?
• How much is the fixed rate for?
• What bank is this with?

Intentionally defaulting is the worst thing anybody can do - trust me.

The situation is:
I have a fixed rate til 2015
Penalty break fee today is €7,500
Mortgage repayments perfect to date. In fact I was told today by the lender that my profile is excellent
I retired on ill health - it wasn't optional. My take home salary is now one third what it was 3 months ago. Not prepared to release details on a forum.

I wish to sell my home - repay mortgage in full and use the remaining funds to buy something significantly cheaper than what I have at the moment.

As for the rest of the questions, I have paid all other debts, the mortgage is the only one outstanding. I've had (realistic)valuations on my home and selling at the indicated price and paying off the mortgage allows me to purchase a small property in some of the cheaper locations in Dublin. That would allow me to live............. - "comfortably" would be stretching it. I don't any other property.

Defaulting is not "intentional" - it's unavoidable. Even if I were to use my lump sum to offset some of the mortgage (and pay associated penalty), I still would not be able to meet my repayments. I did the sums and I take home €100 less per month than the bills. Medical costs alone account for 1/3 of my current take home salary. And the sums are conservative - no clothes, no holidays, nothing for socialising. Not much fun to be honest.