Is your lender coming after your IO mortgage?

michaels

As long as the Mrs doesn't pay tax...yes. If it gets to the point where this is no longer the case then I will manage my finances differently but of course I am building up the cash isa pot every year.

In the last 10 years even though the funds have been instant access they have always earned more than the mortgage cost.

But my point is that if I am not putting the banks money at risk then it is my business if I choose to pay of the mortgage with savings / other funds on expiry or by selling the asset. I am not a child who needs to be told how to save up my pennies.

nearlynew

The majority of people that take out IO mortgages don't do so because they are "financially savvy"


They do it because it lowers the monthly payment enough to enable them to "buy" (and move into) a house they couldn't otherwise afford.

treliac

nearlynew wrote: »

The majority of people that take out IO mortgages don't do so because they are "financially savvy"

They do it because it lowers the monthly payment enough to enable them to "buy" (and move into) a house they couldn't otherwise afford.

"Buy" being the operative word... replace it with 'rent' I think you mean, but without any of the benefits of a tenant and all of the responsibilities (and more) of a house owner!

(But I will say this only once.. )

nembot

treliac wrote: »

"Buy" being the operative word... replace it with 'rent' I think you mean, but without any of the benefits of a tenant and all of the responsibilities (and more) of a house owner!

(But I will say this only once.. )

I've been told on more than one occaision by a home owner on an IO mortgage "that renting is dead money" always makes me chuckle.

Usually refrain from telling them I rent out of convenience and my own place will be paid off in just a few short years.

Seriously though, some people are going to be totally stuffed, it'll make endowment issues of the past look like a xmas party in comparison.

new_home_owner_3

nembot wrote: »

I've been told on more than one occaision by a home owner on an IO mortgage "that renting is dead money" always makes me chuckle.

Usually refrain from telling them I rent out of convenience and my own place will be paid off in just a few short years.

Seriously though, some people are going to be totally stuffed, it'll make endowment issues of the past look like a xmas party in comparison.

interest only mortgages are ok if you have a repayment vehicle, but it doesnt really have to work like that.

The other way you can look at is this, the average mortgage is for 25 years.

now the average house price now is about 169000 pounds now, 25 years ago the average house was 31000 pounds.

if someone would have had a interest only mortgage then it would have been 129 pound a month, thats working on a average of 5% for 25 years.

now if they would have saved 50 pound a month for the 25 years it would be enough to pay the mortgage off.

now you people are saying interest only is like renting, when it clearly isnt in a normal market.

House prices usually double every 10 years, so say someone bought a house 10 years ago interest only for 70,000 pounds in 1999.

They would still own the house in 2010 and they would still only owe 70,000 pounds.

Now if someone rented the same house in 1999 and then rented it for 10 years and decided to buy they would be buying at 2009 prices, which would nearly be treble the amount they could have bought in 1999.

so from what history tell us renting is dead money, especially if you do it long term.

@nembot your post is a bit confusing you say and your own place will be paid off in a few years?

I see from your previous post's you sold your own house in january 2009, and then you rented a bungalow, have you bought another house since and rented it out?

new_home_owner_3

nembot wrote: »

Property has been up for approx three months, around twelve viewings and three offers.

Two of the offers failed when the potential buyers couldn't get a mortgage, hopefully completing on the 9th Jan (fingers crossed).
Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.

posted the 2nd january 2009

https://forums.moneysavingexpert.com/discussion/comment/17221041#Comment_17221041

like the signature but by looking at your post's i dont think you know the truth yourself:o

Generali

michaels wrote: »

if I am not putting the banks money at risk then it is my business if I choose to pay of the mortgage with savings / other funds on expiry or by selling the asset. I am not a child who needs to be told how to save up my pennies.

Perfectly true. However if the bank has lent money to you on the basis that you have a separate savings vehicle in place to repay them then you would be in breach of contract if you don't. I have no idea about what you have or have not signed but AFAIK, many (most? all?) IO mortgages have a clause in the T&Cs about saving to repay the loan at the end of the term.

If someone is in breach of the mortgage contract then presumably the bank can insist on immediate repayment of the loan. If someone could have been shown to have taken out a loan with no intention of setting up the repayment vehicle then I guess that's fraud* (NDG/other legal bods care to clarify or confirm?).





*fraud = gaining pecuniary advantage by deception. If one deliberately doesn't set up a repayment vehicle knowing one has to then that is deception. If someone tells Lloyds on the phone they have done so and they haven't that is certainly deception.

julieq

Always amuses me when the bears start offering advice on what savvy people should do, given their lamentable track record on calling any aspect of the housing market. I'm sorry, but the bears are the last group I'd be taking lectures on financial acumen from.

There's nothing at all wrong with IO mortgages. Worst case you have relative costs decreasing year on year because of general wage inflation and wage inflation from promotion. At the end of the 25 years you have an asset which has increased in value compounding nicely in the opposite direction. If there's no repayment vehicle, then the house gets sold (the house becomes the repayment vehicle in this scenario). Most people will have sorted this out though with savings and investments, if they don't it's their lookout but it hurts no-one but themselves.

Overpaying a mortgage or buying a house outright is a very poor strategy too, because it ties cash into an illiquid asset. Given that even a moderate risk investment will beat mortgage rates easily, and you can get close to mortgage rates even with instant access savings, there is zero benefit and a lot of lost opportunity cost. Standard bear operating procedure, obviously, and correspondingly dumb.

The most likely reason for this move is to blackmail bank customers into taking a poorly performing investment vehicle from the bank, using residual concern from the credit crunch as a lever. The banks get the first sales call to the customer, and they'll get a lot of the business as a result. It's pretty cynical really. No bank is at risk of default because of IO mortgages, there is therefore no risk to the financial system from IO mortgages. It's a marketing ploy.

Spartacus_Mills

Graham_Devon wrote: »

Couldn't on a mortgage thats already running and being paid etc, surely?

Can't simply force something onto an agreement.

Depends on the wording of the agreement and if it allows you to do it.

julieq

It's moot whether a bank can force something, they have the advantage of being regarded as an "official" voice, and an optional recommendation can come across as mandatory if expresssed in a particular way.

If you look at what the banks will be wanting to do at this point it's about transferring people from lossmaking low trackers onto higher cost mortgages on which they can make more money. Hence the hard sell and implied threats other posters have been referring to. Some call centre person is on targets for this, that tells its own tale.