Tuesday 23 January 2018

Write-down deal offers fresh start for some homeowners

Charlie Weston

Charlie Weston

ON the face of it, the new debt write-down deal offered by Permanent TSB should be a quick, clean and good way for dealing with problem debts.

For those trying to buy a home, it should mean that more properties come on the market, which would be beneficial for the mortgage market.

But it is likely to only be suitable for a small number of people, mostly those who have buy-to-lets they can't afford to meet repayments on.

Buyers' regret is a condition that many are suffering from at the moment. They borrowed big during the boom, and even though they are likely on a cheap tracker mortgage, and paying interest only, they now find they are over extended.

Here is a chance to be rid of a property, and do a deal on paying off the residual owed on the mortgage once the sale has been completed.

If a deal is done to pay off as much as a balance owed on the mortgage, once the property is sold, then a chunk of the debt will be written off. The borrower will be able to move on and start afresh.

The pain of bankruptcy can be avoided.

So, too, the expense and five to six-year term of a personal insolvency arrangement (PIA), with the living expense limits imposed as part of that.

The bank avoids a drawn-out repossession process.

The downside, and it is a massive one, is that the home or investment property is given up.

This means the new debt deal is very unlikely to be attractive to families with just a residential property.

And financial advisers have major reservations about deals like this.

The offer will only deal with the Permanent TSB mortgage debt, leaving other borrowings out of the equation.

If the home is given up, money for rent will still have to be found, in addition to repaying the shortfall on the original Permanent TSB mortgage.

The details of each deal offered will be different, Permanent TSB stressed.

All of this means anyone considering one of these offers would be well advised to seek independent financial advice.

Irish Independent

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