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Mortgage on a commercial property being sold - what can I do?

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  • 03-04-2015 5:36am
    #1
    LoanTermUp
    Registered Users Posts: 2 ✭


    If someone can help me about my loan on a commercial property. My loan term is up, the bank is going to sell my loan to another finance company. I just want to know in what way they will deal with me? Is there anything else I could possibly do in this matter?


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    #2
    davo10
    Closed Accounts Posts: 6,926 ✭✭✭davo10


    LoanTermUp wrote: »
    If someone can help me about my loan on a commercial property. My loan term is up, the bank is going to sell my loan to another finance company. I just want to know in what way they will deal with me? Is there anything else I could possibly do in this matter?

    How is the loan term up? Has it been paid off by you or are you no longer paying it? Is it a mortgage on the property or a business loan?


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    #3
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,280 Mod ✭✭✭✭The_Conductor


    Providing you have kept with the terms and conditions of the mortgage (which obviously includes making the mandated repayments of principal and interest)- there is nothing that anyone can do. If the loan is delinquent, or not being discharged, as agreed- the company can seize and dispose of the property to satisfy the debt.

    Unlike a residential property- the outstanding debt probably resides in a commercial entity- what normally happens in a case like this is- you come to an arrangement with the new Financial Company to pay off whatever they are seeking. You don't play hard-ball, they hold the cards. Or- if you're not happy to do this- the commercial company folds, it looses its assets (and its liabilities)- and you move on. If you choose option 2- and the CRO determines you to have been trading recklessly (which is very possible if you are folding on your mortgage)- you may be prescribed from being a director of a company for a period from 2 years to a possible maximum of life.

    You have to decide. Is the business viable. Are you in a position repay your debts. Can you come to an arrangement (some lenders were open to discussing write-downs- whether yours is, or not- remains to be seen). If the business is not viable- and not likely to be in future- you have some hard decisions to make.


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    #4
    LoanTermUp
    Registered Users Posts: 2 ✭LoanTermUp


    @davo10
    I purchased a commercial property in July 2007 and borrowed some money from the bank via broker. When the loan was approved I misinterpreted that the loan term is for 20 years and it is a mortgage like home Mortgage. I also misinterpreted that first three years I have to pay only interest as quarterly installment, after three years I have to pay quarterly installment as interest plus some capital. I thought it’s OKAY, I was receiving the statement letter from the bank every quarter and I was paying quarterly installments. In 2010 I received a letter from the bank stating that my loan facility has been expired and now the bank demanded the loan payment in full. Here again I misinterpreted and thought because the first three years only interest payment facility is expired and now bank want I should pay quarterly installment with some capital as well. With this understanding I went to the bank and requested, the economy is very bad and I need more time to raise the quarterly installment. I carried on paying interest only till early 2012 and since 2012 to January 2015 I was paying interest as stating on the bank statement plus some capital. I have raised the capital more now. In November 2014 I received a letter from the bank stating that the bank is agreed to sell my loan facility to finance company. I requested the bank but the bank has refused it and demanded the payment in full otherwise the bank is going to sell the loan account to finance company. Basically bank has closed all its branches from Ireland. Now I asked the broker to send me the bank loan agreement. I read the agreement and find, basically bank loan term was for 36 months only. I am very much worried now. I will appreciate if one could help me in this situation and regarding the following queries. 1. Will the finance company accept the installments and what will be the interest rate? 2. Is there any other possibilities apart from paying in full?


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    #5
    davo10
    Closed Accounts Posts: 6,926 ✭✭✭davo10


    LoanTermUp wrote: »
    @davo10
    I purchased a commercial property in July 2007 and borrowed some money from the bank via broker. When the loan was approved I misinterpreted that the loan term is for 20 years and it is a mortgage like home Mortgage. I also misinterpreted that first three years I have to pay only interest as quarterly installment, after three years I have to pay quarterly installment as interest plus some capital. I thought it’s OKAY, I was receiving the statement letter from the bank every quarter and I was paying quarterly installments. In 2010 I received a letter from the bank stating that my loan facility has been expired and now the bank demanded the loan payment in full. Here again I misinterpreted and thought because the first three years only interest payment facility is expired and now bank want I should pay quarterly installment with some capital as well. With this understanding I went to the bank and requested, the economy is very bad and I need more time to raise the quarterly installment. I carried on paying interest only till early 2012 and since 2012 to January 2015 I was paying interest as stating on the bank statement plus some capital. I have raised the capital more now. In November 2014 I received a letter from the bank stating that the bank is agreed to sell my loan facility to finance company. I requested the bank but the bank has refused it and demanded the payment in full otherwise the bank is going to sell the loan account to finance company. Basically bank has closed all its branches from Ireland. Now I asked the broker to send me the bank loan agreement. I read the agreement and find, basically bank loan term was for 36 months only. I am very much worried now. I will appreciate if one could help me in this situation and regarding the following queries. 1. Will the finance company accept the installments and what will be the interest rate? 2. Is there any other possibilities apart from paying in full?

    Unfortunately the answer to both questions is most probably no. I assume it is Bank of Scotland you are talking about? They are moving all under performing loans off their books and to be honest it is difficult to blame them, they got badly burned in the irish market. The new finance company are buying your loan because it was taken out on a property which they consider a good asset. Op unless you make the required repayments you are at risk of losing the property no matter who the loan is with but the finance company I suspect will be less understanding towards your situation.

    Right now you need to sit down with your broker and/or solicitor and go through your mortgage agreement until you clearly understand it. There is a very big difference between a 20 year and three year mortgage and it would be inconceivable that a bank would give you a loan for 36 months on interest only. Something is very wrong with that part of your post.

    It was common for banks to give commercial loans on an interest only basis for 2-5 years while business was establishing and then revert to capital repayments for the remainder of the loan. The benefit being that you paid less for the first couple of years when you need your cash most but the downside being that when the capital repayments started, they are higher because the are spread over a shorter period of the loan term.

    Also, when you come off interest only, the bank writes to you in advance outlining the date this facility is ending and the start date for capital repayments. They will also tell you the capital instalment amount based on the rate agreed at signing or the current commercial rate. Did you recieve this letter?


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    #6
    The_Morrigan
    Moderators Posts: 9,368 ✭✭✭The_Morrigan


    All mortgage documents state that the mortgage is for a short period like three years. That is standard practice to allow them declare default after a few months of arrears, otherwise they can't touch you till the final payment in year 20/25/30/35 is due.


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    #7
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,280 Mod ✭✭✭✭The_Conductor


    Also- a loan facility for a business- is different to a mortgage.
    You can have a secured loan facility (i.e. a business loan with an asset- such as a property- put up as collateral).
    You mention a loan facility expiring.
    It really sounds like you either didn't read the documentation at all- and/or relied on the broker to procure a product for you that you neither understood, or did not intend to sign up to........

    Is the broker still in business?
    They have some explaining to do.
    So too do you though- I don't understand how/why you have such a misunderstanding as to the product you were availing of from the lender........


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    #8
    antoinolachtnai
    Registered Users Posts: 9,778 ✭✭✭antoinolachtnai


    You need to talk to a solicitor, and fast.

    This can be resolved in your favour, but you are going to have to refinance (i.e., borrow or otherwise raise money) to pay back the loan.

    The problem you face is that your loan is probably now in positive equity. It is very attractive for the finance company to sell your property and so recover its position.


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