split mortgage terms

Split mortgages – for when nothing else might work

We have said in the past that split mortgages are not all they are cracked up to be, but they do have a place. We even made a nifty calculator to help people see what the results of doing this might be.

The problem with them is two fold, first of all they don’t necessarily work, second is that it is going to be refused unless you can’t even service the interest. Splitting a mortgage requires that the non-warehoused bit is on full repayment, so in 20 years time you might owe half of the original loan (assuming you never ‘un-warehouse any of it), but if you can service interest and keep going then you won’t get one.

Doing this can make sense though, even if the other part of the loan isn’t amortizing because in this situation at least your future debt isn’t stagnant, it’s reducing. The banks are blocking these though, because they have no ‘borrower solvency agenda’ they have only the ‘collect to the point of the person going bang’ agenda.

See …

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Credit history - you may as well have robbed a bank

The credit bureau they don’t tell you about, an ‘internal’ ICB at Irish banks

Something which isn’t widely known is the way that banks keep internal credit scores. This isn’t the bit they report to the ICB which is well regulated and has various rules regarding how it is dealt with, this it the kind of thing they do for themselves which is not shared information.

Recently we had a client declined from a bank for something on their credit history, we searched and came up with nothing then found out via another route that there had been something with this bank 13 years ago when the person was still a student.

This person had taken out mortgages since then and had a perfect credit history, nothing went awry (the only issue was back when they were in college), but that old event came back to haunt them.

Big deal? Probably not, but then think about the potential fallout for people who opt for personal insolvency? What if the banks do the same to them? Where they are not locked out officially from financial services but they are in fact an un-creditworthy client in …

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Housing slump over?

Charlie Weston ran a story about an S&P report in the Independent stating that the housing slump is over. The thrust of it is that house prices are reasonable compared with wages and rents but that recovery is still some way off.

There are different interpretations of recovery, some people say stability is recovery or that it can be counted in terms of transactions, personally I think that rising prices is part of the definition, otherwise you simply have stagnation with more transactions which is a dynamic that tends not to last.

Our belief remains as it has for many years, the property market is a boom bust prone area with a cycle that lasts between 18 and 20 years. This leads to structural issues that repeat themselves every time and despite the pattern being known nobody has ever rectified it.

S&P say that reduced mortgage lending is holding the market back, if this is true it is surprising that banks don’t find some way to ramp up lending as it would reduce their capital …

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The Deeter Plan

My best laid plans have often blown up in my face, so chances are the idea I had which I mentioned to Pat Kenny last week has lots of snags built in; but today it was discussed on the Pat Kenny show (I wasn’t there for it) and given some additional context.

The thrust of the idea is that having something that is more process or practice based rather than principles based would work better in terms of fast and efficient negotiation.

You can listen to the concept in the link above which has the audio clip, but I’ll lay it out here too. When banks lend money they underwrite a person based on their affordability. My idea is that you re-establish a persons disposable income in their new financial circumstances and use the banks own calculations (albeit this time against them) to ‘re-underwrite’ the loan and in that respect reverse their own criteria against them.

This way if banks are conservative on lending they get conservative payments back …

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The mortgage crisis

We were asked to speak at the Fianna Fail ard fheis in a panel on the mortgage crisis, our contribution was as an independent opinion on the topic, we were there with other independent experts to give context to the crisis which was a focus in the event. We would stress that in the arena of financial advice that politics doesn’t come into it and that while members of our firm exercise their right to vote, we don’t align ourselves with any particular party.

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