Could NAMA affect the sale of my apartment?
I own an apartment in a complex where Nama has taken over a block. My tenant is coming to the end of her lease and I may have to sell this year. Could I be affected by Nama's new "set aside" mortgage?
The Nama deal is in a pilot phase with 115 sample properties in the scheme, undertaken with Bank of Ireland, PTSB and EBS. Essentially buyers put up a 10pc deposit and repay the balance of the mortgage as usual.
If, after five years their property has dropped in value, that amount of the mortgage will be written off, to a maximum of 20pc. So, a €200,000 house, with a €180,000 loan will now be "re-valued" at €160,000 (less any payments normally made).
This leaves the borrower in a significantly better position equity wise.
Nama has been accused of over-valuing some of the properties which, if so, would make yours look more attractive by comparison and thus, easier to sell potentially. However, your sale price might be pushed downwards because clearly, your property comes without the guarantee.
Karl Deeter of Mortgage Brokers.ie adds: "If you have to sell this year it's assumed you have enough equity to do so. For that reason it may be best to put the property on the market now to see if you get offers prior to the NAMA deal being marketed in your area (the full list is on www.nama.ie).
"Currently the 80:20 mortgage offering is aimed at first-time buyers and owner-occupiers, so having a tenant in situ may be attractive for an investor."
While you can't offer a Nama guarantee your property may attract a lower value than for a comparable Nama unit. However you could get a similar price guarantee by paying for it on the likes of www.homepriceprotection.ie".
I read about a "mortgage freeze" being offered by some banks to those in arrears. How does it work and which banks operate it?
Contrary to popular opinion, banks hate repossessions and certainly don't want to become estate agents of properties in massive negative equity, so are finding creative ways of dealing with debt.
One proposal from the Keane report is the "split mortgage" which, as you say, freezes a portion of the loan without interest piling on to it, to be repaid at a much later stage. It would mean the borrower continues to repay only a portion, reducing repayments considerably - perhaps by up to half, freeing up disposable cash.
The frozen portion could be repaid at retirement, or when the house is sold. Borrowers' circumstances would be reviewed regularly.
It is understood that BoI has already requested permission from the Central Bank for its provider ICS to offer the package, with others developing their own plans.
The deal would potentially be offered to mortgage holders in arrears but who are expected to be financially secure in the future.
With more than 107,000 in arrears, it would be a welcome relief.