I am trying to get my bank to restructure my mortgage as I'm having difficulty making the repayments. I've already completed a long form and they appear willing to do something. However, I'm nervous that they'll attempt to switch me from my tracker to a variable product. Could they do this?
The form you completed was a Standard Financial Statement (SFS), which lists your income and outgoings in order to gauge your ability to repay, and it is mandatory.
Under Clause 12 (b) of the Code of Conduct on Mortgage Arrears, they are not allowed to take you off a tracker. However, there is anecdotal evidence that it's forming part of discussions with arrears customers anyway, and the troika has signalled it's not happy with the banks not being allowed explore this avenue.
However, switching from a tracker may not be altogether a bad thing. According to Ciaran Phelan, of the Irish Brokers' Association, the Central Bank is considering whether there is merit in allowing a lender to move a borrower in arrears off a tracker rate, where the lender has offered a loan modification which may lead to a debt write-off.
"Tracker Mortgages now carry a substantial capital value regardless of whether the mortgage-holder is intent on retaining it, renegotiating it, repaying it, or switching to a Standard Variable Rate (SVR) mortgage. You should hang on to a tracker until the lender offers a significant financial incentive to switch", he advises. If there is, say, an outstanding mortgage of €300,000 on a house currently worth €200,000, with 20 years left to run, the borrower's decision to exit from the tracker would probably benefit the bank somewhere between €40,000 and €50,000 in future interest cost savings.
Therefore, the tracker should only be revoked if there is a debt write-down of 20-30pc of the debt in such cases.
Phelan adds: "Any mortgage-holder considering doing a deal with their bank under any of the new insolvency measures should consider the absolute value of the tracker to the bank before accepting any deal". Talk to your bank.
Can you explain how the partial deferral on the Local Property Tax works? I have a substantial mortgage but my earnings have halved in the last year and I believe I am eligible. It sounds complicated.
The deferral scheme is only available for owner-occupiers where there is an inability to pay under certain conditions.
The partial deferral applies to 50pc of the tax liability and you must pay the other half when it is due.
The deferred amount attracts interest at 4pc p.a. and is available until 2017 only. For those with a mortgage, the calculation of eligibility is as follows:
Gross income under €25,000 (single) or €35,000 (couple). This is increased by 80pc of the gross mortgage interest payments for the year.
So, if you are a single person earning €25,000 and paying €4,000 in interest payments, your income is assessed as €28,200 p.a. to apply for a partial deferral. Complete the LPT forms and indicate the deferral option. You may have to prove your circumstances.