Mortgages

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Mortgages

Guide to Mortgage Arrears

Your Guide to Dealing with Mortgage Repayment Difficulties

Introduction All of the country’s principal mortgage lenders, who are represented by the Irish Banking Federation (IBF), are fully committed to working with borrowers who face genuine difficulties in maintaining their mortgage repayments on their homes because of changed economic circumstances. The following information is offered as practical guidance to borrowers who findthemselves in that situation.

What you should do

1. Contact your mortgage lender as soon as possible if you’re having trouble with yourmortgage repayments or you are concerned that this might be likely to happen. Don’t ignore the problem – that’s the worst thing you can do.

2. Look at your financial situation to make sure that you’re maximising your income and draw up a budget based on your most important spending commitments. Assistance is available fromMABS - see point 8 below for contact details.

3. Respond to letters or phone calls from your mortgage lender or their legal representative. They have to keep in contact with you to see if a solution can be found for any problem you are having with repaying your mortgage.

4. If you are genuinely unable to make your mortgage repayments, ask your mortgage lender to explore with you one or more of the following options in line with the statutory Code of Conduct on Mortgage Arrears:

• Putting off for a period of time all or part of your monthly mortgage repayment in orderto ease the immediate pressure on you• Reducing your monthly mortgage repayment by extending the number of years for which your mortgage runs• Reducing your monthly mortgage repayment by changing the type of mortgage you have• Tackling any arrears by reducing the amount of your monthly repayment• Adding some of the arrears and interest onto the total amount borrowed so that they can be paid at a later date - known as ‘capitalising’ the arrears and interest. Note: In exploring these options with you, your lender will have to take your particularcircumstances into account – as each situation is different. Also, any action taken toreduce your monthly mortgage repayments today is likely to add to the overall cost of your mortgage in the future. You should ensure that you understand the implications of any new arrangement discussed – if necessary by obtaining independent financial advice.Full details of this Code can be found on the website of the Financial Regulator at:http://www.financialregulator.ie/processes/consumer-protection-code/Pages/codes-of-conduct.aspx “Don’t ignore letters or phone calls...”

What your lender will do

5. Your lender must wait a minimum period of time from the time arrears first arise before starting legal proceeding in the courts to repossess your home. This minimum period of time is 12 months for all mortgage lenders under the Code of Conduct on Mortgage Arrears.Note: This 12-month period does not apply where you are deliberately not engaging with your lender.

6. If, after this 12-month period, you still have genuine difficulty in making yourmortgage repayments, your lender will further assist you by trying to agree anarrangement with you – one that is acceptable to both you and your lender. Provided you maintain that arrangement, your lender will not start legal action against you and will review the arrangement with you on a regular basis after that. This commitment to you arises under the IBF Pledge to Homeowners which was published in Nov’09 – full details are on the IBF website athttp://bit.ly/5oIAg8

7. Your lender may be able to help you to assess and manage your income and expenditure and to draw up a budget to reflect your changed economic circumstances.

Help and information

8. You may need information on managing your money and dealing with debt. You’ll find it at www.mabs.ie, the website of the independent Money Advice and Budgeting Service (MABS).If you need help, you should call the MABS Helpline 1890 283 438 (Mon-Fri, 9am to 8pm) for advice or a self-help pack.

9. Remember to contact your lender at the earliest opportunity if repayment difficulties arise. It is only through engagement with your lender that you can hope to find an arrangement that will work for everyone.

This Guide is issued on behalf of the following mortgage lenders:ACC Bank Irish Nationwide Building Society AIB Bank KBC Bank IrelandBank of Ireland Leeds Building Society Bank of Scotland (Irl) National Irish Bank EBS Building Society Permanent tsb Ulster BankThe Irish Banking Federation (IBF) is the leading representative body for the bankingand financial services sector in Ireland, representing over 70 member institutions andassociates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here. Reproduced from the Financial Regulator website

Short guide to mortgages

Short guide to mortgages There are a number of different types of mortgages, the standard being the annuity mortgage where capital and interest are paid off each month, interest only, pension and sub prime mortgages are also available. Interest rates can be fixed i.e. fixed rate for a number of years, variable i.e. bank varies the rate, tracker i.e. varies in line with ECB rates or discounted i.e. cheaper rate for the first year and then reverts back to the variable rate. Keep in mind that there are a number of Additional Costs: Stamp Duty: is a tax paid as a % of the purchase price. Differing rates for first time buyers, owner occupiers and investors. Insurance: House insurance for the rebuilding value of the house. Mortgage Protection Policy at least to the value of the loan. Valuer: Valuation report to independently asses the value of the house. Surveyor: A surveyor provides an independent report on the structure of the property. Solicitor: Solicitors checks purchase and mortgage contracts and verifies the title of the property.

Regulatory warnings

Regulatory Warnings Consumer Credit Act Notice: Your home is at risk if you do not keep up repayments on a mortgage or loan secured on it. If your mortgage is at any time a variable rate, the payment rate on your housing loan may be adjusted by the lender from time to time. Fixed rate mortgage: Warning: The cost of your monthly repayments may increase at the end of a fixed rate period. You may have to pay charges if you repay a fixed loan early. If you do not keep up the repayments you may lose your home. Variable Rate Mortgage: Warning: The cost of your monthly repayments may increase. If you do not keep up your repayments you may lose your home. Debt Consolidation Mortgage: Warning: This new loan may take longer to pay than your previous loans. This means you may pay more than if you paid over a shorter term. Interest Only Mortgage: Warning: The entire amount that you have borrowed will still be outstanding at the end of the interest only period.

Mortgage tax relief

Mortgage tax Relief You can claim tax relief on interest you pay on your primary residence mortgage. Tax relief is given at source by your lender either by reducing your monthly payment or by crediting your bank account. 2009: First-time buyers - the rate of mortgage interest relief is increased from 20% to 25% in years 1 and 2 and to 22.5% in years 3, 4 and 5. The relief remains unchanged at 20% for years 6 and 7 of the mortgage. Non-first time buyers - the rate of mortgage relief is reduced from 20% to 15%. The higher limits for first-time buyers apply to the tax year in which the mortgage is taken out plus 6 following years. Ceilings 2008 and 2009 Personal Circumstances First Time Buyers All Others Single €10,000 €3,000 Married/Widowed €20,000 €6,000

Using your home to get a cash sum

Using your home to get a cash sum Equity release schemes are different to topping up or increasing your mortgage. They are aimed at homeowners over 60 who need to raise a cash lump sum or a regular income in retirement. They allow you to release some of the value of your home without having to move out or sell it on the open market or make repayments during your life time. Equity is the difference between the current value of your house and the amount you owe on it. For example, if your home is worth €600,000 and your mortgage is €100,000, then you have 'equity' in your property of €500,000. Equity release plans are not suitable for everyone, but if you need money, they may be worth considering if you: * don’t want to sell your home and live elsewhere or * are not concerned about passing on the value of your home to your family or other beneficiaries on your death. However, choosing an equity release scheme is not something you should enter into lightly. There is always the risk that you might need the equity in your home later, to pay for nursing home care, for example. In addition, if you release some of the equity from your home, you will not be able to leave its full value to your dependants.

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