Q&A

PERSONAL FINANCE: Your questions answered

Will mortgage arrears wreck my future plans?

Q

I have a mortgage of €160,000 which is in my name only. I have had payment difficulties over the past three years since losing my job in construction with accumulated arrears of approximately €10,000. I am entering into negotiations with my bank.

I’m told that restructuring payments would be the best way to try to repair my damaged credit rating.

My partner and I have a site. Our goal is to build a house and there are no loan repayments on the site. We don’t want to lose sight of our goal to build and need some ideas on how we can plan out the coming years.

We have two young children. My partner is working full-time but has recently been advised that she may lose her job as business has slowed. - Mr JK, e-mail

A

Your position is sadly becoming all too familiar in Ireland these days and, the unfortunate truth is that you may have to compromise on some of your goals.

About the only piece of good news is that you have started talking to your lender about the arrears that have built up on the mortgage account. The bad news is that they probably have less discretion in handling your position now than they would have done three years ago when you started running into problems on the loan.

While lenders are precluded from foreclosing on people immediately, this protection is finite and you could find yourself under pressure.

Any restructuring of your debt would have to be based on a pragmatic assessment of your position. Even though your wife is in full-time employment, arrears are still mounting on the loan, albeit that it is in your sole name. If she is at risk of losing her job, clearly the position becomes even less secure. For yourself, there is unfortunately little prospect of a short-term recovery in the construction sector.

Given the mounting arrears, the bank will almost certainly look at what disposable assets you have and the one that will come immediately to mind is the site. I’m aware that you are looking to build a home there but you don’t really have the funds at the moment to do that; on the other hand you have a debt that the bank will understandably insist on addressing. It may be that you have to choose between selling the site or the house in what is clearly an unpromising market.

You should contact the Money Advice and Budgeting Service (mabs.ie) before agreeing to any solution with your bank.

How safe are Prize Bonds?

Q

I have most of my savings in Prize Bonds. Is this safe? I cannot afford to lose money. - Ms BB, Wexford

A

The money in Prize Bonds is returnable on demand. Its security is covered by the State and, as I have said several times previously, despite the current predicament of Ireland Inc, there is no reason to believe that such guarantees are in any doubt.

The State is working with both the IMF and the EU to manage its debt and the new Government is committed to continuing that. In such circumstances, my view is that your savings in Prize Bonds are safe.

The same applies to savings covered by State guarantees in An Post and the covered banks.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com