Interest-Only?

Tripledrop

I was made redundant earlier in the year and my wife is working part-time until she finishes her training course, and we're struggling to pay our repayment mortgage with HSBC. We have had a mortgage with them for 5 years, and never missed a payment.

Today (and previously) I have requested to go onto interest-only for the short-term (maybe a year or 2), and have been told that our property isn't worth enough (loan needs to be 75%).

Now, they are looking into it more for us to see if it's worth more, but I'm pretty sure it's worth less than they say, not more, so I don't think this will help.

I asked what we could do if they wouldn't change it, and we couldn't make the payment, and they said that it would be a matter of dealing with the collections department, which to me sounds like going into arrears and screwing up our credit!

Is there anything else that can be done? Can a bank refuse IO?

Thanks

_Andy_

Yes they can refuse IO.
What they will probably offer you, assuming the LTV isn't sufficient to switch to IO, is to make 6 months IO payments - however they will record these on your credit file as missed (great eh!)

Tripledrop

Well that's not great!

I just spoke to them again, and they are getting their money management team to call me, who apparently may have looser criteria regarding LTV for IO.

Fingers crossed!

Cannon_Fodder

check out your options with http://mortgagehelp.direct.gov.uk/

MrCarrot

Strange really, I have an interest only mortgage on quite a small amount. When you think about it, if HSBC switched you over to interest only you're going to be paying the same amount of interest as when you were on repayment. In fact over a 2 year period, you'll be paying a little more interest since nothing will be coming off the capital each month. I would have thought this would be far more adventagous to them than having you default on the mortgage and then they get nothing.

Tripledrop

Stupid, isn't it?

Cannon_Fodder

Except they don't get "nothing". They repossess, sell it and take all that you owe them...

Leaving you the balance, if any.

kinglewis

You could ask to extend the term if it doesnt already take you upto retirement??

MrCarrot

Cannon_Fodder wrote: »

Except they don't get "nothing". They repossess, sell it and take all that you owe them...

Leaving you the balance, if any.

They do that as a last resort and it's not what they really want to happen. Banks make money from interest payments, repossesing property gets their original money back but doesn't make them money. The bank would also be under pressure to ensure repossesion really is a last resort. Therefore they'd be better off switching him to interest only.

_Andy_

HSBC treat term extension as a new application, why, from the sound of the original post (in terms of income) would be a decline.

Tripledrop

Well, I'm still waiting for a call from their money management team