Blog, Galway Talks, 29th November 2012

Question:  I have an interest only mortgage on an investment property and the bank now wants me to revert to capital and interest.  I do not have the ability to make these payments but can continue with interest only arrangements.  What would you advise me to do?

Answer:  The problem you are encountering is quite a common one.  Banks are pressurizing borrowers to make capital repayments, which if you have the ability to do so, then it is in your best interest.  However, most people find they can only meet the interest only repayments and are relying on a recovery in the property market at some stage in the future to repay the capital, when they sell the property.  The danger with this is that you are relying on an uncertain future event which may or not occur.  You need to engage in a constructive way with your bank regarding an extension of the interest only arrangement you currently have in place.

Question:  Do you know if the ELG Scheme for Deposits will end on 31st December next?

Answer:  This is the Eligible Liability Guarantee Scheme which was brought in to cover the debts of our banks.  With regard to depositors it covers amounts in excess of €100,000 per account holder per institution and today it has been announced that this scheme will be extended until the end of June 2013.

Question:  I have heard you mention a number of times about people getting Financial Health Checks carried out.  Please explain what is involved in this?

Answer:  This process involves reviewing all elements of your finances including Borrowings, Deposits, Pensions, Life Assurance etc.  As you would experience when you go to a “doctor” for a check up, this process is a financial equivalent. 

Obviously there is a cost in carrying out a Financial Health Check, but taking account of the complexity of the financial world it is important that you undertake this review every 7 or 8 years, assuming your circumstances have not changed in the interim.