People in thier 60's being forced to sell homes.

[Deleted User]

shortchanged wrote: »

Well that is basically what you are advocating, that people on IO mortgages don't pay the capital back while they are alive. That is what is bonkers.

And only works if you assume the house will go up in value

RenovationMan

shortchanged wrote: »

So why shouldn't she be forced to sell and downsize which is what I'm sure would have been explained to her on the taking out of an IO mortgage?

Why should she be? what harm is she causing the bank?

Has she defaulted on the mortgage? Is the bank losing money because of her? Is there a possibility that the bank won't get its capital back?

silvercar

abaxas wrote: »

I'd get reading again, you obviously missed a bit.

Also all loans will have this. Get reading the small print.

No, wrong again. Read the mortgage completion notification, the offer of advance and the 23 page terms and conditions.

No requirements to notify anything other than address (!), phone number & email address.

abaxas

RenovationMan wrote: »

No, what I'm saying is that this thread is about a little old lady who has a financial issue that is very easy to solve. The bank can simply allow her to go on being a good customer and pay her mortgage on time. When she dies the bank will be first in line to get their money back when the house is sold. This lady represents minimal risk to the bank.

As far as a bank is concerned, good customer is not one who borrows money and pays it back early. It's one who pays interest forever and doesn't pay off the balance. This is why credit cards are a goldmine for lenders.

Not really, death and mortgages dont really mix.

It is hard for the bank to claw back from the estate as it takes months (sometimes years) before it is all sorted.

[Deleted User]

RenovationMan wrote: »

No, what I'm saying is that this thread is about a little old lady who has a financial issue that is very easy to solve. The bank can simply allow her to go on being a good customer and pay her mortgage on time. When she dies the bank will be first in line to get their money back when the house is sold. This lady represents minimal risk to the bank.

As far as a bank is concerned, good customer is not one who borrows money and pays it back early. It's one who pays interest forever and doesn't pay off the balance. This is why credit cards are a goldmine for lenders.

As a business case, it is quite stupid of the bank to want their capital back when they're getting £6k interest a year - roughly 4.3% - rather than receive nothing back if she paid it off

Neverland

RenovationMan wrote: »

...
My viewpoint on this particular issue is that the lady seems to have a high level of equity. for one reason or another, a portion of the mortgage has not been paid off her mortgage balance (this could be because of a failing endowment, divorce, etc.). ...
We can also assume that as the lady is over 10 years into retirement that her pension covered the mortgage interest during periods of 'normal' interest rates. ..

...

Which case should the bank be pursuing, the one where they stand to lose a fortune or the one where they stand to make a safe profit?

If you actually read the OP and what the mortgage broker who started it actually said (he is long departed from the thread) it is impossible to say one way or the other whether the "little old lady" was acting in good faith or not when she took out the maortgage, whether the equity was generated through any repayments or just house price inflation over the years, whether or not there was a credible repayment plan and whether or not she made her interest payments on time

You are just using the "little old lady" schtick as a straw man for a nice long trolling session on a Friday afternoon :rotfl:

shortchanged_2

RenovationMan wrote: »

No, what I'm saying is that this thread is about a little old lady who has a financial issue that is very easy to solve. The bank can simply allow her to go on being a good customer and pay her mortgage on time. When she dies the bank will be first in line to get their money back when the house is sold. This lady represents minimal risk to the bank.

As far as a bank is concerned, good customer is not one who borrows money and pays it back early. It's one who pays interest forever and doesn't pay off the balance. This is why credit cards are a goldmine for lenders.

You're opening a can of worms Renoman. Lack of regulation is what got us in this mess in the first place. Leave too many open doors and they get abused by shrewd and/or fraudulent people.

What is wrong with the good old fashioned way of people paying up for a debt at the end of it's term?

shortchanged_2

RenovationMan wrote: »

Has she defaulted on the mortgage?

Well yes really if she can't pay up the capital owed at the end of the term.

Neverland

RenovationMan wrote: »

As far as a bank is concerned, good customer is not one who borrows money and pays it back early. It's one who pays interest forever and doesn't pay off the balance. This is why credit cards are a goldmine for lenders.

Really, really stupid analogy

APR on a credit card 15-20%

SVR on a mortgage right now 3-6%

Credit cards are a goldmine because of the interest rate spread over funding them

For lenders with even SVRs average there is no spread over the costs of a bank's funding because of their operating costs

RenovationMan

abaxas wrote: »

Not really, death and mortgages dont really mix.

It is hard for the bank to claw back from the estate as it takes months (sometimes years) before it is all sorted.

Yes, and in the meantime the estate continues to service the loan. The bank could have loaned £150k for this property 40 years ago. 40 years of interest payments followed by perhaps another 2 or 3 years of interest payments while the estate is being settled, followed by the debt being repaid.

I wonder how many times the original balance has been paid off in interest over this period? If we assume an interest rate of 6% over 43 years for a £150k loan, the bank would have received £387,000.