Times up, Zero interest mortgage.

[The Running Man]

I mean they do explain mortgage types properly when you apply. They are just pleading the fifth to try and avoid paying out what they will owe.

Basically everyone should have taken out interest only mortgages 20 years ago on multiple properties and the profited by selling them in today's market and making bank.

 

[kindai]

I have a mate in this exact situation.

Was told a couple of years ago his endowment policies were going to leave him 150k short or something.

Basically now hes having to find an extra grand a month to keep the house at the end of it all.

 

[muon]

I bet most of the interest only mortgages are buy-to-let and so there is no ticking time bomb. They will just be sold and are likely in massive positive equity as well.

 

[dowie]

thread title is confusing/wrong - she'll have been paying interest!

So apparently one fifth of all mortgages are interest only, which is 1.9 million people seemingly and a lot of them aren't touching their debt at all...

Looks to me that repossessions are back in order soon, there's also other debt ridden issues looming, like car rental (though it seems to be more of an American problem, i'm sure it's similar levels here).

So we've really hit the jackpot on screwing ourselves, hope people enjoy this wild ride.

What does this have to do with 'we' as in the rest of us? I don't even think it is much of an issue, rather harder to get interest only mortgages these days and these idiots will have been written to by their lenders well ahead of the end of the mortgage to prompt them re: having some sort of plan to pay it off.

As most of these were taken out quite a few years ago the people who have them will generally have substantial equity in their homes (or quite often BTL investments), doesn't really matter if they get evicted, the banks will get the money back + recover costs etc.. so the only people getting burned are the individuals who frankly deserve it and should have taken a bit more personal responsibility for their situation... they can still relocate/downsize to another property with their remaining equity.

I mean basically the story is "Single pensioner can no longer afford to live in a half million pound house in London and her son 'only' has 300k-ish in inheritance now" as far as the rest of us are concerned - so what?


Unfortunately yes a % of these people who aren't BTL investors or people who found themselves in dire financial straits for a bit are likely just very stupid people - see this Tom Crawford guy in Nottingham:

http://www.bbc.co.uk/news/uk-england-nottinghamshire-33368398

instead of facing the music re: his poor financial planning he got into a load of internet conspiracy nonsense and decided to resist the eviction, while he could have probably sold the house himself and used the remaining equity to buy a smaller property mortgage free elsewhere in his city he's like instead accrued thousands of pounds of additional charges for legal fees and the small army of bailiffs the lender needed to use to finally get him out.

 

[muon]

The equity she does have in her property, £368k, would get her plenty of suitably sized places in London.

Don't see why the article or some posters assume she's done anything bad. She's spent £182k on herself (with plenty leftover) which isn't exactly shameful.

 

[dowie]

The equity she does have in her property, £368k, would get her plenty of suitably sized places in London.

Don't see why the article or some posters assume she's done anything bad. She's spent £182k on herself (with plenty leftover) which isn't exactly shameful.

Depends what you mean by 'suitably sized' if she's got a house full of possessions, pets, likes gardening etc.. then it is likely she'd need to look outside London for something suitably sized, though if you just mean suitable in size for a single person and/or their son then sure, she could downsize to a flat, sell/dispose of some of her stuff and get to stay locally.

the 'bad' thing is that she doesn't want to lose 'her' home yet she's set herself up in a position where that is inevitable... obviously financially she's hardly in a 'bad' position relative to plenty of other people in the country. Very much '1st world problems'.

 

[StriderX]

thread title is confusing/wrong - she'll have been paying interest!

Hmm... oops. Oh well, it's not that bad.

Anyway, like i said, it's just another financial pressure no one needs in the run up to other perhaps more pertinent financial pressures. Like butter at £1.18, just shocking tbh.

 

[dowie]

Hmm... oops. Oh well, it's not that bad.

Anyway, like i said, it's just another financial pressure no one needs in the run up to other perhaps more pertinent financial pressures. Like butter at £1.18, just shocking tbh.

I disagree it is an entirely self inflicted one, this is a financial pressure that people need to have if they're reckless, there are consequences to your financial decisions.

 

[StriderX]

I disagree it is an entirely self inflicted one, this is a financial pressure that people need to have if they're reckless, there are consequences to your financial decisions.

I dunno, if you don't care about staying in one place for too long, it's probably a good mortgage as long as the economy doesnt crash or house prices stagnate/retreat.

 

[dowie]

I dunno, if you don't care about staying in one place for too long, it's probably a good mortgage as long as the economy doesnt crash or house prices stagnate/retreat.

I'm not criticising the mortgage per say I'm criticising the woman and your statement that it is a financial pressure that no one needs to have.

 

[Angilion]

I have a mate in this exact situation.

Was told a couple of years ago his endowment policies were going to leave him 150k short or something.

Basically now hes having to find an extra grand a month to keep the house at the end of it all.

I had an endowment mortgage, which was sold to me as the best thing ever, blah blah. Not true, but I didn't claim it was mis-sold because the financial advisor did mention it might not mount up to the amount required to pay off the loan at the end of the term. Very briefly and as something that was extremely unlikely to happen, but they did mention it.

Besides, I knew what I was buying because it was explained. Very clearly. In writing. It was part of the contract I signed. The assumptions made in preparing the projections were provided. The assumptions turned out to be completely wrong, but I don't think I was deliberately fed false information. I think they just made incorrect assumptions about what was going to happen.

The mortgage company also wrote to me when it became clear that the assumptions were utterly untrue to warn me. I had to sell the endowment policies for less than I had already paid in and switch to a repayment mortgage. I had ~16 years warning and had carefully not over-extended myself on the mortgage, so it could have been much worse.

They didn't just hand these mortgages out and say "No worries mate, you'll never have to pay it back".

Back to the person in this case...

A quick poke at an online calculator for £182K over 10 years at 4.29% gives £650.65 for interest only and £1897 for repayment.

So she's been saving £1246.35 per month for the last 10 years. That's £149,562. So even ignoring the issue of equity entirely, she's £32,438 worse off than she would have been if she had repaid the mortgage. That's a relatively small amount considering a property of that value. Even if the mortgage company had lied to her (and I'm sure they didn't), she's only out by £32K and that wouldn't cover the £182K she borrowed anyway.

EDIT: Also, how much is her endowment policy worth? It won't be £182K, but it will be something. So she'll have that too. Unless she was spectacularly thoughtless and didn't bother getting one, but surely nobody who's legally competent to enter into a contract would do that.

 

[dowie]

I don't think she had an endowment - she literally took out an interest only mortgage she knew she'd need to pay back and then presumably never made any provision to repay it.

Maybe she thought she was going to switch to repayment or start making ad hoc capital repayments after she got herself out of the rut she was in. Maybe she just ignored it and let it all catch up with her. She could have taken in a couple of lodgers, perhaps changed her spending habits, worked more etc...

 

[Rifte]

a lot of people choose interest only mortgages knowing the implications full well. They have zero interest in paying the capital at all and just flip the property after a few years and walk away with a nice lump sum in equity gained from the housing boom.

If you can mentally free yourself from the concept of a 'home' and see it as a bricks and mortar investment vehicle it works damn well in the current market.

 

[sHo0sH]

My father is in this situation. He's absolutely useless with money and life in general. My sister and I are not now having to buy his house for him so he can remain living there. If we don't do it there's no inheritance for us and he's on the street, as he'd blow through the equity from a sale without even breaking a sweat.
Annoying for us as we now have to pay a mortgage on top of our rent each.

 

[dowie]

My father is in this situation. He's absolutely useless with money and life in general. My sister and I are not now having to buy his house for him so he can remain living there. If we don't do it there's no inheritance for us and he's on the street, as he'd blow through the equity from a sale without even breaking a sweat.
Annoying for us as we now have to pay a mortgage on top of our rent each.

I hope you officially own the share of equity you're paying for and aren't just acting as guarantors/paying his mortgage for him.

 

[Destination]

I hope you officially own the share of equity you're paying for and aren't just acting as guarantors/paying his mortgage for him.

Agree with this, insure your inheritance by owning it at this stage.
Get it legally done, you both become owners, as he sells/gifts or undersells his portion to you.

 

[Psycho Sonny]

My father is in this situation. He's absolutely useless with money and life in general. My sister and I are not now having to buy his house for him so he can remain living there. If we don't do it there's no inheritance for us and he's on the street, as he'd blow through the equity from a sale without even breaking a sweat.
Annoying for us as we now have to pay a mortgage on top of our rent each.

Both you and your sister should buy it from him for the amount he owes to the bank. Therefore you now own the house and he owes nothing to the bank. Then tell him he can live in it rent free until he goes.

 

[kindai]

I had an endowment mortgage, which was sold to me as the best thing ever, blah blah. Not true, but I didn't claim it was mis-sold because the financial advisor did mention it might not mount up to the amount required to pay off the loan at the end of the term. Very briefly and as something that was extremely unlikely to happen, but they did mention it.

Oh hes not claiming it was mis-sold or anything, he likewise knew it wasn't guaranteed, but, when sold most people were expecting the endowments to mature, pay off the mortgage and be left with a huge chunk of change also. Obviously its come as a bit of a shock that not only is he going to be short, hes short into 6 figures.

 

[Caracus2k]

Every contract should have one, Latin, phrase at the top if it 'caveat emptor'.

Quite why anyone should have any sympathy for a person who has accrued a large, unearned, sum of money via housing price inflation of the back of a low cost interest only mortgage is beyond me. No one has a right to live on a certain area and large sections of London like lots of western cities are now very expensive. The person in the article should sell up and move to a cheaper area or downsize and thank their blessings that they were able to coast into relative prosperity due to the vagaries of the housing market working out in their favour.

 

[dowie]

No one has a right to live on a certain area and large sections of London like lots of western cities are now very expensive. The person in the article should sell up and move to a cheaper area or downsize and thank their blessings that they were able to coast into relative prosperity due to the vagaries of the housing market working out in their favour.

Indeed though try telling that to people living in council estates in London boroughs in zone 1 and 2 - councils get accused of 'social cleansing' for not providing enough social housing in these areas but it isn't as though ordinary people can afford a family home in say Islington or Westminster either and it is hardly an efficient use of money/resources to provide expensive accommodation to a subset of people who are often economically inactive simply because they have lived in the area for a bit.