Our Advice

Mortgage Arrears

Advantages and Disadvantages of ARAs

1st September 2017 @ 10:54 AM by Rosylnn Doherty

There are a lot of options available to our customers in terms of repayment schemes, and there are numerous advantages and disadvantages to these. So let us guide you through some of the Alternative Repayment Arrangements (ARAs).

Term Extension

This is where the term on your mortgage account is extended. This reduces the amount of your monthly repayments by spreading the repayments over a longer period of time.

  • Advantage: The reduced repayment amounts are affordable based on your current financial circumstances.
  • Disadvantage: As you have extended the term on your mortgage agreement you will be liable for making repayments over a longer period of time.

Long term interest only

You only pay the interest on your mortgage for an agreed period longer than 12 months.

  • Advantage: Temporarily reduces your overall mortgage repayments for the period of the arrangement.
  • Disadvantage: As you have not made any capital repayments during the term of the arrangement your monthly repayments on the remaining term of the mortgage will increase.

Long term interest and part capital

You only pay the interest on your mortgage and part capital for an agreed period greater than 12 months.

  • Advantage: Temporarily reduces your overall mortgage repayments for the period of the arrangement.
  • Disadvantage: As you have made reduced capital repayments during the term of the arrangement your monthly repayments on the remaining term of the mortgage will increase.

Interest rate reduction

The repayments on your mortgage are set at an affordable level and the interest rate is reduced for a period of up to five years. At the end of the arrangement the interest rate returns to the prevailing variable rate as per your original terms and full capital and interest repayments resume.

  • Advantage: This accelerates the amount of capital you repay over the period of the arrangement, meaning you will reduce the mortgage balance more quickly, to a level where future capital and interest repayments are affordable.
  • Disadvantage: As your interest rate is reduced during the term of the arrangement, your monthly repayments on the remaining term of the mortgage may increase.

Capitalising Arrears

 

The outstanding arrears are added to the remaining capital balance of your mortgage and repaid over the remaining term.

  • Advantage: You will no longer be in arrears.
  • Disadvantage: Your repayments will increase if your mortgage end date remains unchanged.

Split Mortgage

The ultimate goal is for you to repay your mortgage in full. Your mortgage is ‘split’ into two portions based on your current financial affordability levels. The first portion will be repaid via capital and interest repayments over the term of the mortgage (“main mortgage portion”). The second portion of the mortgage is deferred and in some cases, this may be until maturity of the mortgage (“deferred portion”) or where your financial situation improves.

  • Advantage: Reduces the overall mortgage repayments for the period of the arrangement – whilst repayments of capital and interest on the ‘main mortgage portion’ of your arrangement will ensure that this portion of the mortgage is paid over the remaining term. The arrangement will be reviewed at regular intervals and where your affordability levels improve, an affordable element of ‘the deferred portion’ will be transferred back to the ‘main mortgage portion’.
  • Disadvantage: If you do not have alternative arrangements in place to repay the remaining capital balance of ‘the deferred portion’ on maturity of the mortgage it may be necessary to sell your property at that point.

Some Recent Restrucutres

Check below for some of our most recent restructures for clients.

The examples of Restructures given on our Website are indicative of some of the resolutions being offered by our clients’ lenders. Each file is assessed on a case-by-case basis some of the given examples may not apply in your current situation

WARNING: YOU MAY STILL HAVE DEBT OUTSTANDING AFTER COMPLETING THE DEBT MANAGEMENT PROCESS

Image of a family

"Our clients owed an overall amount of €220,000 with arrears of €68,426 on their family home. Having restructured their account, their lender has warehoused €84,500 and customer is making repayments on €135,500. Their lender will reduce the warehoused amount by 5% for every 5 years that the customer stays in the arrangement and will potentially be reduced by approximately €29,575 at the end of the mortgage term."

PM, Louth - November 2016
SPLIT MORTGAGE RESTRUCTURE AND LUMP SUM WAREHOUSED
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"Our client owed an overall amount of €175,000 on their family home. Having restructured their account, their lender has warehoused €73,000 and customer is making repayments on €102,000. Their lender will reduce the warehoused amount by 5% for every 5 years that the customer stays in the arrangement and will potentially be reduced by about €22,000 at the end of the mortgage term."

GB, Drogheda - October 2016
SPLIT MORTGAGE RESTRUCTURE AND LUMP SUM WAREHOUSED
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"Our client came to us with only a small level of Arrears of €5k but his bank had been threatening Legal Proceedings. Today, we had what we feel, was a breakthrough with the notoriously difficult to deal with, PEPPER MORTGAGES/SHORELINE. They were seeking a monthly repayment of €768 and agreed today to accept a more affordable €540 per month.

NC, Louth - May 2017
SPLIT MORTGAGE RESTRUCTURE AND LUMP SUM WAREHOUSED
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"Our client came to us having not paid her mortgage in almost six years. Due to a change in circumstances, she is now in a position to start making repayments and following the submission of her SFS by The Financial Foundation to her lender, they have accepted her offer, capitalising her arrears and she can move forward with a monthly repayment that is working out less than paying rent!"

TM, Louth - January 2017
6 YEARS OF NON-PAYMENT OF MORTGAGE & RESTRUCTURE OFFERED
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"Our clients came to us with Arrears of €65k and facing constant court adjournments. Before the account was restructured, the bank was looking for a monthly payment of €1377 per month. Following an interest rate reduction and term extension, this family of 6 are now safe in their home with a monthly repayment of €652. We're also expecting this case to be struck off by the courts."

DM, Louth - November 2016
MORTGAGE RESTRUCTURE & REPOSSESSION PROCEEDINGS CEASED FOR FAMILY OF 6
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"Our client came to us as he was €21k in arrears and facing repossession of his home. The bank was seeking a payment of €610 per month which our client could not afford. Mortgage has now been restructured to a monthly repayment of €395 and his case is to be struck off with no more pending court dates."

AMcC, Louth - October 2016
MORTGAGE RESTRUCTURE