REDUCE MORTGAGE REPAYMENTS
AVOIDING REPOSSESSION
HOUSE DEBT FOR EQUITY SCHEME
Are you in arrears in your mortgage payments or in danger of having your house repossessed during 2014?
One proposal to sort out the negative equity crisis
is called the debt for equity plan, which has
worked well in the US over the last few years.
This scheme, if properly implemented, may allow property
owners currently facing repossession to stay living in
their
houses. It also eliminates the embarrassment of
having the home owners name listed on the Personal
Insolvency Register, as well as improving
the banks
tattered public image by avoiding the bad publicity
surrounding repossessions.
The idea behind the debt for equity scheme is as follows:
Assume you currently have a mortgage of € 400,000,
costing you say, € 2,000 per month. In reality however,
on your present
income, you are only able to afford
mortgage repayments of say, € 1,500 per month.
The debt for equity scheme proposes that you
agree a deal
with your mortgage lender to swap (permanently) a
quarter of the mortgage value back to the bank and, in return, your
mortgage is reduced to the level of mortgage repayments that you can afford to pay.
You then continue to pay the reduced monthly repayments until the revised mortgage amount is fully paid off. Although you now only own 3/4 of your house, with the bank or lending institution owning the remaining 1/4, the debt for equity arrangement allows you to stay in your house for as long as you want, or alternatively you can sell your house (hopefully the housing market will have recovered by then) and keep 3/4 of the sale price. Another option is that a family member can buy out the mortgage lenders' equity interest.
If you decide to sell your house before your mortgage is fully paid off, under the debt for equity plan you are allowed to sell, but the mortgage lender will be entitled to their 1/4 of the value of the house plus the balance of the mortgage not yet repaid.
This plan faces legal clarifications and possible law reform before it could be fully implemented, but it does offer some hope for all parties involved in the ongoing mortgage crisis.
This summary is based on a recent article in the Sunday Business Post.
PERMANENT TSB | BANK OF IRELAND & AIB | ULSTER BANK | MORTGAGE WRITEDOWN POLICIES
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