As many will know when we begun the AIB initiative, we stated that if any better product became available that anyone we did a deal for and who was eligible would be offered this. I’ve tried to explain how it will work and please note that this is an example only and that its not an ala carte selection, but based on affordability.
The below example is for illustration purposes. The mechanics of any split mortgage will depend entirely on individual circumstances and affordability
If you have a higher affordability then your Tranche A will be greater than the €160,000 in this example and your Tranche B will be lower.
Mary and Tom have a mortgage of €300,000. The property, on the basis of a valuation of a bank appointed valuer, is worth €200,00. In this circumstance and based on affordability of at least 80% of the open market value,a split loan may work as follows:
Tranche A: €160,000 (80% of OMV – minimum criteria required to apply for a split) – what is the minimum affordable for the borrower to pay
Tranche B: €100,000
Write Off: immediate €40,000 off tranche B
In after 5 years all monthly payments are made relating to Tranche A the following will occur:
5% of Tranche B will be written off reducing it from €100,000 to €95,000.
In after 10 years all monthly payments are made relating to Tranche A the following will occur:
a further 5 % write off of Tranche B which will reduce this sum from €95,000 to €90,250.
Furthermore, if a lump sum is received during the next 10 years and is applied by Mary and Tom to tranche B in full settlement of tranche B, a further write off may occur.
The below example assumes, as above, that Tranche B is €100,000. A lump sum payment to the account needs to be sufficient, taking into account AIB’s write off outlined below, to clear Tranche B in full. Otherwise any lump sum payment reduces the balance by the amount paid in only.
If a lump sum is received in years 0-5 this is how it will be dealt with: €70,000 paid to the bank off tranche B, this will result in tranche B being reduced by the full amount of €100,000. This is write off of €30,000.
If a lump sum is received in years 5-10, €80,000 is paid to the bank off tranche B this will result in tranche b being reduced by €100,000. This is a write off of €20,000.
If lump sum is received after 10 years no additional write off is given.
On the expiry of the mortgage security of tenure in the property is provided irrespective of the amount of Tranche B remaining. However if ability to make payments in respect of Tranche B is available, given normal lending criteria (and not ISI guideline expenditure criteria) a payment for life will be arranged.
Any client of The Irish Mortgage Holders Organisation who has already been offered a split will be offer this new product.
Any AIB customer already offered a split will also be offered this new product. I suggest having some patience as this might take some time to get around to.
For more information or to contact the Irish Mortgage Holders Organisation at http://www.mortgageholders.ie