Tuesday 21 November 2017

Going guarantor for my niece got me flagged


I went as a temporary guarantor on my niece's first mortgage eight years ago and completely forgot about it. I have applied for a new mortgage and it was flagged.

My problem is that she has been made unemployed and, although not in arrears, her bank is insisting she prove her income before they take me off. My own bank has a problem with this. What can I do?

Oh dear. "Going guarantor" was a popular way to help young people get on the property ladder during the boom. It suited banks because it spread the risk and fuelled the lending spree.

Frank Conway of IrishFinancialReview.ie explains the process. "The specifics of the guarantor are tricky but should be outlined in the original Letter of Offer. I would advise you to query the bank and get a copy of the original agreement.

"Make the bank prove that they agreed to you going guarantor and for how long. It would be interesting to see what documentation is on hand.

"If the agreement states you as guarantor for a specific period of time, then you have a strong case to have your name removed now.

"However, if it was more open-ended, then unfortunately, the bank is highly unlikely to remove you from the responsibility.

"If you believe your name should be removed and you are getting nowhere with the bank, you have the right to elevate their case to the Financial Services Ombudsman who will judge your case and make a decision on its merits".

My wife and I are living in a two-bedroom apartment since 2008. We have a second child on the way and must move. We are in negative equity by about €40,000. The new negative equity mortgage sounds right for me. Where can I get one?

Hold your horses. The EBS is the latest in a line of banks to introduce so-called negative equity mortgages for those who wish to trade up but are stuck in the mire of owing more than their current property is worth.

The intention might be good, in that by moving, you'll still be in (more) negative equity, but at least living somewhere suitable, but the practice is rather different.

Not only will you have to sell your apartment first, but the hoops to jump through to qualify for the new mortgage are onerous. The take-up on Bank of Ireland's similar offering has been derisory.

Ciaran Phelan of the Irish Brokers' Association says: "Most people in negative equity bought at the height of the boom and are paying significant mortgage repayments as well as suffering from all the austerity measures so it's hard to see who would really qualify.

"The criteria and interest rate applied are likely to be penal so it's imperative that potential buyers ask a specialist broker to set out the long-term costs".

Finally, you'll have to give up your tracker if you have one. Your interest rate could jump from as low as 1.5pc to 5pc.

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