Deal on Tracker?

g0g

Anyone got any experience in negotiating paying off a tracker with a bank where the property isn't in negative equity?

Take example if someone had € 100K saved, bought somewhere for € 200K and took out € 100K tracker mortgage. Let's say the property were now worth € 100K and the mortgage was down to € 80K. Would a bank entertain the idea of maybe only being paid off € 70K in return for "escaping" from the tracker mortgage? That way the owner would still take a big hit (€ 30K back from their € 100K deposit) but it seems fair that the bank might consider taking a bit of a hit.

Or is it the case that the bank are unlikely to give a toss and demand full repayment?

And yes I know maybe the person in that case might be better off hanging onto their tracker, I'm just wondering about the concept of negotiation where there is no negative equity.

Oral Surgeon

If you have paid your mortgage no problem and have also been able to save 100k then you are well capable of paying your mortgage in your banks eyes... Why would they give you a deal?
Yes the bank would like the tracker paid off but not by giving a discount.
The benefit to you is greater than the benefit to them as instead of paying 80k plus 20 years of interest amounting to maybe 160k total, you get to pay 80k now...

It would be beneficial to keep your tracker and put the 100k cash to another house if you were in the market to move and wanted to reduce the spend on what would be a higher interest variable rate....

g0g wrote: »

Anyone got any experience in negotiating paying off a tracker with a bank where the property isn't in negative equity?

Take example if someone had € 100K saved, bought somewhere for € 200K and took out € 100K tracker mortgage. Let's say the property were now worth € 100K and the mortgage was down to € 80K. Would a bank entertain the idea of maybe only being paid off € 70K in return for "escaping" from the tracker mortgage? That way the owner would still take a big hit (€ 30K back from their € 100K deposit) but it seems fair that the bank might consider taking a bit of a hit.

Or is it the case that the bank are unlikely to give a toss and demand full repayment?

And yes I know maybe the person in that case might be better off hanging onto their tracker, I'm just wondering about the concept of negotiation where there is no negative equity.

Henry Ford III

If the loan is being serviced you'll not get any write down.

A tracker is a long term loss for a lender, and they'd rather take that than a one off hit.

g0g

Thanks for the replies. The figures are all made up just to illustrate the point.

@Oral Surgeon I was suggesting if the € 100K of savings had been used as 50% funding to buy this property as opposed to having it in the bank. So if € 100K came from bank and € 100K from individual to buy the € 200K property which is now worth € 100K with € 80K of mortgage remaining.

Yeah I get that the bank might like the long-term idea that they'll get a lot back, but I thought maybe some might be interested in off-loading trackers. But I guess if it's someone who has consistently being paying then maybe they wouldn't care.

Oral Surgeon

g0g wrote: »

Thanks for the replies. The figures are all made up just to illustrate the point.

@Oral Surgeon I was suggesting if the € 100K of savings had been used as 50% funding to buy this property as opposed to having it in the bank. So if € 100K came from bank and € 100K from individual to buy the € 200K property which is now worth € 100K with € 80K of mortgage remaining.

Yeah I get that the bank might like the long-term idea that they'll get a lot back, but I thought maybe some might be interested in off-loading trackers. But I guess if it's someone who has consistently being paying then maybe they wouldn't care.

They know that you can and will pay by your history and income.... why give a discount....

Good luck...

daheff

Oral Surgeon wrote: »

They know that you can and will pay by your history and income.... why give a discount....

Good luck...

Why give a discount? Because the cost of those funds to the bank is more than they are receiving back from you. If they can repay the money earlier it would be less of a loss to the bank. So yes OP they may be interested in doing a deal with the holder of a tracker.....but probably less so now than 2-3 years ago (as there is less pressure now to restructure the loan book of the bank)



In general banks dont like to hold accounts long term that are loss making. They rather get them over and out the door sooner than later....but that doesnt mean they are going to do a deal with you to pay it off early.

Having said all that, your tracker is probably only costing you around 1% right now. Its practically free money. If you were to get a car loan or a short term loan you'd probably pay 7%ish. My view would be to hold your mortgage (at least for now) unless the bank is going to give you a decent discount on repayment and try to invest money elsewhere for a reasonable return

Also remember once you pay the money back to the bank they arent going to give it back if you ever need it again (not at the tracker rate in anycase)

Oral Surgeon

daheff wrote: »

Why give a discount? Because the cost of those funds to the bank is more than they are receiving back from you. If they can repay the money earlier it would be less of a loss to the bank. So yes OP they may be interested in doing a deal with the holder of a tracker.....but probably less so now than 2-3 years ago (as there is less pressure now to restructure the loan book of the bank)

Not really.

The bank gave the loan at a time when their cost of funds was x%. If the outstanding amount on the loan was e80K then the bank settling for less is certainly a loss to them. If however, the loan payments continue, the bank get e80K plus years of interest payments… If the ECB goes up (and it can only go up) then the bank get more interest again….

If the loan is in difficulty and the bank are not in receipt of mortgage payments, then yes a write down may be sensible but not where the op can pay….

daheff

Oral Surgeon wrote: »

Not really.

The bank gave the loan at a time when their cost of funds was x%.

that rate is only relevant if the bank borrowed those funds on a fixed rate for the duration of your loan (which we all know they didnt -just ask Anglo)

Oral Surgeon wrote: »

If the outstanding amount on the loan was e80K then the bank settling for less is certainly a loss to them. If however, the loan payments continue, the bank get e80K plus years of interest payments… If the ECB goes up (and it can only go up) then the bank get more interest again….

your example excludes the fact that the bank may be paying 2% on the borrowed funds and mortgage is only paying 1%. Over the course of the loan the bank lose that differential. its not much on one small loan, but you extend it to all the tracker mortgages and suddenly the bank is looking at substantial loans, which it then has to recoup by having higher rates for newer mortgages (eg the high Variable rates we currently have)


but having said all that, I still would think that the bank would be unlikely to give anybody a discount to repay the mortgage early.