THE SITUATION
The client approached AM Financial as they were struggling under the weight of their monthly payments. The trigger for the approach was the clients monthly mortgage payment amount increasing after three years at the same level. However, the pressure had been building for a while. In summary :
The client's mortgage rate had been fixed for 3 years, but now, the rate was moving to a variable rate and the client noticed the increase in monthly repayments.
The clients new rate on the mortgage was now 4.5% which was very high relative to the best rates available.
The client had got two personal loans from their bank in recent years. The approval process had been easy. However, now the payments combined with the mortgage payment were weighing heavily.
The personal loans were an expensive financing with borrowing rates at 8%
The different payment dates (weekly on the loans) and monthly on the mortgage were causing cashflow management difficulties. There were nine different loan repayments to be made every month.
The client had actually missed a couple of payments due to the monthly load of payments.
The client had been wanting to carry out refurbishment and improvement work on the home for a while (and had received quotes for the work) but had been unable to save the funds.
The client also had an existing mortgage protection policy with a high premium. The client had made significant health improvements since the initiation of the policy. However, the policy providers declined to reduce the premium.
THE SOLUTION
Aided by a rise in the value of the property, a new mortgage was obtained and the funds were used to repay the older, expensive mortgage in full.
Top-up funds were used to completely pay-off the two personal loans.
Instead of nine different payments every month, there was now one single payment.
Although the client had missed some payments in the past, it was possible to arrange the new mortgage at a rate lower than 3%. This was a saving from the old mortgage rate at 4.5%. It was also a significant saving on the 8% interest being paid on the personal loans.
Further top-up funds were obtained and the client was able to go ahead with works for a new kitchen and new windows for the property.
In spite of getting extra funds for home improvements, the client was able to almost cut the monthly payments in half (actual reduction : 44%).
The bulk of the savings were possible by moving the debt to a lower interest rate cost and spreading them over a longer term.
Finally, on the mortgage protection policy, AM Financial was able to increase the amount of cover by 35% and reduce the cost by 44% !
The monthly saving for the client was over €600