Interest Only Mortgage Query

VIGILANT22

Deleted_User wrote: »

They are given the full costs in the 'key facts' document sent to them by the lender!

Ye...but doesnt mean a scooby if they haven't got their heads around finances...........I think people have to take an exam before being approved for a mortgage........;)

Thrugelmir

Deleted_User wrote: »

They are given the full costs in the 'key facts' document sent to them by the lender!

How many people read them though? Then seek compensation or redress when they realise they've made an error of judgement.

The_White_Horse

people should be able to do what they like, if they don't understand something when they take out a 200k loan, that is there problem. they shouldn't be spoon fed, they should feel the consequences of their actions.

maybe if more people did, we wouldn't be in this state.

VIGILANT22

Maybe they shouldn't be allowed to in the first place!...prevention is better than cure......

surreybased

Agreed its on full facts illustration however people seem only to see the headline monthly figure (which if you're IO, low interest rate then the monthly amount looks cheap)

Boozer

surreybased wrote: »

Hi,

Can this level of understanding be real?.

Yes i am afraid it can be, smaller example but same kind of thing:

Working in the supermarket many years ago, girl wanted to buy a scooter to get to work and back, this is exactly what she told me "It is either £1000 paid up front or £5 a week for 2 years", that is really what she thought, did not even cross her mind to add the numbers up and see that there was no way in the world it could be true.

I wished her well and went back to work shaking my head.

[Deleted User]

Reminds me of this:

http://www.theregister.co.uk/2008/04/11/cab_innit/

beecher2

I really hope this is a wind up because it is seriously scary if it isn't.

megarchie

Deleted_User wrote: »

The OP thinks - as far as I can tell - that he's paid off all the interest he's ever going to pay on the capital sum in those 4 years

Well I'm not that daft!!!!
I do know that an Interest only mortgage means that I'm paying the interest for 15yrs.
My original payments were about £1000 a year. Four years ago I changed the repayment percentage. I now pay about £1800 per month.In other words I've started paying off some of the capital. Now after 15 yrs at the current rate I would have £99,000 left to pay at the end of the term instead of £200,000+. I could even over the next few years make some overpayments to reduce the £99,000 even further. So far I've only made one overpayment of £100 which is nothing.

The_White_Horse

megarchie wrote: »

Well I'm not that daft!!!!
I do know that an Interest only mortgage means that I'm paying the interest for 15yrs.
My original payments were about £1000 a year. Four years ago I changed the repayment percentage. I now pay about £1800 per month.In other words I've started paying off some of the capital. Now after 15 yrs at the current rate I would have £99,000 left to pay at the end of the term instead of £200,000+. I could even over the next few years make some overpayments to reduce the £99,000 even further. So far I've only made one overpayment of £100 which is nothing.

so you have had the 15 year IO mortgage for 4 years so far?

you have paid, for 4 years, just the interest. However you have made one capital repayment of 100 - meaning 199,900 remains outstanding.

you have now increased your payment to 1800, which presumably means 800 will be knocked off the capital each month. how long have you done this for?

If you have been paying 1000 a month interest, for 4 years ie 48,000 it means nothing. that 48,000 is gone. for every day you owe the bank 200k they calculate interest on it. so it doesn't matter how long you have the money - 1 day or 1000 years, each day you will owe the same. this will only change when the actual capital starts to reduce (or the interest rate changes).