Halifax demanding to move us from Int Only to Repayment - £2300 pcm hike!

Umbertide

So we took out a large re-mortgage in early 2009 for 389k at 1.25% over BoE base on 75% LTV. Our income multiples were OK as then we were on good money. It's an amazing deal and we were very lucky to get it. It was done over a 15 year term with redemption penalties until Jan 2014 of 3%. We had an endowment set up to pay back the loan at £500 a month on top of payments - we'd had it running for a while and was meant to pay 400k off in 25 years when we took it out 10 years ago. (It was done through a broker, who is no longer around it would seem)

Just after we completed, our business failed. Leaving us with little income, however we managed to get lower paid jobs and have always paid our mortgage and the dropping rates really helped. We had had to cash in our endowment for survival money - which had badly underperformed anyway so probably wouldnt have paid it back.

Recently - last month - Halifax wrote to us out of the blue saying they have overcharged us on our REPAYMENT mortgage, but they were sending details of any refund "in a few weeks".

I knew this was wrong so called them to check. The woman on the line checked and said it was a mistake we were on Int only and should be paying REPAYMENT, so payments would be £2870 a month, linked to bank base rate!! This is £2300 more than we pay a month now!

I told her to send me confirmation in the post of why this was a mistake. She just sent me the original mortgage offer (actually confirming the Int only) but with a letter saying if we didn't tell them within 28 days how we would be paying off the mortgage it would automatically go to a Repayment basis and the higher variable payment

I called them again last night and was asked how we plan to pay the loan back. I said that we have always planned to sell our house or remortgage at the end of the term (after the Redemption penalty period). This wasn't acceptable for them. I then said that we were considering selling our house now, as we cannot afford the higher payment. This seemed to work but the advisor confirmed that if we did we will still be liable for redemption penalties of over £11,000.

We don't have a great credit record thanks to our business going bust and entering into repayment arrangements with other creditors.

Can Halifax do this? They are effectively forcing us to sell up and move out of our house and also induce redemption penalties. My wife and children are aghast and we don't really know what to do. I know we have a good deal and are now facing the effect of a risky deal from a few years ago, but any constructive advice would be very much appreciated.

dunstonh

Can Halifax do this?

Can they force you to return to repayment mortgage? Yes if you were only allowed to be on it for a certain period or have killed the repayment vehicle that you told them was being used to repay the mortgage when you entered in to the mortgage contract.

Can they force you to meet your repayments? no. However, the you then face the consequences of that if you dont.

The FSA have told lenders that interest only is not to be used as a means to make mortgages affordable. Some lenders are pulling interest only mortgages or putting in strict rules.

I would suggest you negotiate a longer term to the mortgage to reduce the monthly payments or put the house on the market with the realisation that you are living beyond your means and its probably better to face up to that now rather than down the road when it starts getting sticky and expensive.

The board has a debt free wannabee section for people who have credit problems like yourself. There are some really good posters in there who can help you face up to your problems and aim to help you get through it. I suggest you take a look in there.

l33na

to answer you question yes halifax can do this. They are not forcing you to sell up - all they want is to make sure there investment of 389k is secure. They know this when there is an endownment in place -As you have cashed that in (and not paid towards the mtge).
I/O are not to be used to make mtges affordable. You need to have an endownment or something in place and then they cannot force you to go repayment.

jamesd

Umbertide wrote: »

we ... have always paid our mortgage

You massively failed to meet your obligations under the mortgage by:

1. presumably stopping making £500 a month payments into the repayment vehicle.
2. taking the money in the repayment vehicle and its future growth that was earmarked for Halifax and using it for yourselves.

After your massive breach of the mortgage terms Halifax seems to be trying to protect its interests by asking for repayment mortgage payments. It's natural that those should be high because that has to catch up with the years of endowment payments and investment growth that you have taken.

To change this situation you need to find some way of getting an alternative credible repayment plan in place, and persuade Halifax that you can be trusted not to just take the money from this new plan as you did from the old one. Or you need to agree with Halifax some repayment schedule that is workable. Or you need to plan to sell and move into rented or other purchased accommodation that is within your reduced budget.

Sale of the property as a repayment method is now strongly discouraged by the FSA on the grounds that it will leave the borrowers homeless, unless it is credible for there to be a downsizing situation, as there could be where a family home would be much largely than required after children leave. That may be your situation. However, individual lenders may or may not allow this option.

Halifax may choose to prefer to have you default and be forced to sell now rather than waiting for the day the mortgage becomes due and doing it then. For them that may be less bad than having an at risk mortgage on their books and increasing their provisions against bad debt for years.

michaels

Seems to be in your interest to try and spin things out until the early redemption period ends. Can you stall a lot, set up a new repayment vehicle and fund it for a month or two to show willing etc although obviously you do not want to get repossessed as you will lose on the costs and poor value realised but if you can spin it out for 3 more years obviously it will save you 11k. Shame that Halifax are already aware of your difficulties, normally they would probably bite your hand off if you wanted to come off such a beneficial rate early...

silvercar

Recently - last month - Halifax wrote to us out of the blue saying they have overcharged us on our REPAYMENT mortgage, but they were sending details of any refund "in a few weeks".

I knew this was wrong so called them to check. The woman on the line checked and said it was a mistake we were on Int only and should be paying REPAYMENT, so payments would be £2870 a month, linked to bank base rate!! This is £2300 more than we pay a month now!

Seems to be a lot of mistakes on the Halifax side rather than the endowment company informing the lender that the endowment policy is not in force.

That the recent recommendations about discouraging I/O mortgages have happened at the same time is doubly unfortunate. You are not borrowing more money, so the halifax should really be looking at the rules that were in force at the time you took out the mortgage. As you have breached these, they are within their rights to demand at the least a repayment vehicle.

Given the repayment penalties, I would start a new endowment policy over 25 years, and ask to extend the term of your mortgage on interest only to 25 years. You could also investigate whether you have any pension lump sums coming your way that could be used to pay off some of the mortgage.

dunstonh

I would start a new endowment policy over 25 years, and ask to extend the term of your mortgage on interest only to 25 years.

There are no mortgage endowments available in the UK any more. It would require a stocks and shares ISA. However, given the short timescale that would probably be bad advice to do. 15 years is the absolute minimum and if you use a sensible target growth rate you are still talking about a monthly payment of around £2000 a month for that. Its probably a tad cheaper but with greater risk and you would have to find someone willing to set it up. I certainly wouldnt touch it with a bargepole. Its an upheld complaint waiting to happen.

Chinkle

Well Halifax do seem a bit lax in only noticing this error now, however I wonder if you had been able to tell them, yes we have an endowment in place and have since the outset of the mortgage and sent them proof they would have been happy with this.

Unfortunately, you cashed in and have been living on IO, which as others have said is really being cracked down on now. I agree the best thing would be to revert to repayment basis but increase the term of the mortgage (assuming you are able to do this given your ages). This should make the repayment somewhat less, although may not be as low as you would like. If this option isn't available to you, or the payments are still too high for you to manage, then you need to take a long hard look at whether its best to sell up now rather than be forced into repossession sometime in the near future.

getmore4less

Go back to your original mortgage offer read it in detail

What does it say about repayment vehicles etc.

Look for any clauses that allow them to do this.

Thrugelmir

Umbertide wrote: »

for 389k at 1.25% over BoE base on 75%

I would call that sitting on a time bomb. Only the fall in interest rates has saved your from total disaster in the past couple of years. I assume that you are still making payments to your business creditors under the repayment plan.

A 1% hike in interest rates is going to increase your outgoing annually by £3,850. So even though £11k sounds a lot of money in the overall scheme of matters its not.

Suggest you cut your cloth accordingly, and make a fundamental change of your lifestyle. No point in keeping it up for appearances sake. Or the enormous strain and stress it must be putting on the entire family.

Greatest danger is that you are going to lose even more unless you take the decision pretty soon to sell.