Halifax Interest Only mortgage letters

Railman

We are in our 50's and hold a Halifax Interest only mortgage which has 15 years left to run. We have been paying it without a problem for 4 years and it represents less then 50% of the value of our property.

Recently we have received a number of letters from Halifax asking us to show proof of our repayment plan with a threat that if we could not satisfy "their" criteria they would force us to either move to a repayment mortgage or sell the house.

We have a repayment plan in place consisting of a third of the value of the mortgage held in cash in a savings account. This would compound to half the value in 15 years. Plus the other half of the mortgage value in an overseas property which is un-mortgaged.

Because they have tightened the lending criteria, this plan no longer complies with their requirements, hence there's little point in submitting it to them.

My questions are:

Can they force us to prove our plan? It was quite acceptable to them 4 years ago and we're fairly certain there was no requirement to effectively continually re-apply for our mortgage every 4 years! We thought we had a deal and that it would stand for the duration of the mortgage. We have never agreed to any changes in the terms and conditions.

Can they force us onto a repayment plan even though there is no debt on the mortgage account.

Although we have assets which would enable us to pay a repayment mortgage, we would not be able to show sufficient earnings. Would this be a problem as it would be the Halifax forcing us onto the repayment mortgage

As an adjunct, we have decided to sell the property within the next two years and move to a smaller house from which we can retire. We will not be requiring a mortgage for the new property. The equity in the existing property combined with our cash savings will be sufficient to settle the Halifax mortgage and buy the new house. We will retain the overseas property as a winter bolt hole.

Thrugelmir

Railman wrote: »

As an adjunct, we have decided to sell the property within the next two years and move to a smaller house from which we can retire. We will not be requiring a mortgage for the new property.

Why not use your savings to meet the requirement of a repayment mortgage for the 2 year duration.

Railman

Yes we can afford to do this if required. But as we said, we cannot show sufficient income to satisfy their new lending criteria, although we're not sure that this would be a problem as they are the ones changing the mortgage not us.

My main question is whether they can force existing customers with perfect payment records onto different terms on the basis of a payment plan review which wasn't in the original mortgage terms?

I suspect that most customers payment plans compiled before the April the 6th (2012) tightening of terms, do not comply with the new conditions.

opinions4u

The original mortgage terms will have required you to maintain a repayment plan.

They're not changing things. They're verifying them.

Railman

That is very true. But the terms of an acceptable repayment plan are now very different to when we took out the mortgage. All of the elements of our existing plan (including the cash deposit) are now unacceptable.

Which terms and conditions now apply?

dunstonh

Can they force us to prove our plan?

Yes. When you bought the interest only mortgage, it would have been on the basis of you having a repayment plan. They have the right to check on it.

Can they force us onto a repayment plan even though there is no debt on the mortgage account.

No. They cannot force you to take out a repayment plan. However, they can force you to switch to repayment basis.

Although we have assets which would enable us to pay a repayment mortgage, we would not be able to show sufficient earnings. Would this be a problem as it would be the Halifax forcing us onto the repayment mortgage

No.

Railman

That's very good advise, so the worst that can happen is that they make us switch to a repayment basis (which we can afford) and they wouldn't care about us not having sufficient income to satisfy the conditions?

I still find it difficult to understand how they can retrospectively change the repayment plan requirements. Surely if it was ok 4 years ago it should be ok now?

Also would they be able to charge us fees if they force us onto a repayment basis.

opinions4u

Railman wrote: »

That's very good advise, so the worst that can happen is that they make us switch to a repayment basis (which we can afford) and they wouldn't care about us not having sufficient income to satisfy the conditions?

I still find it difficult to understand how they can retrospectively change the repayment plan requirements. Surely if it was ok 4 years ago it should be ok now?

Also would they be able to charge us fees if they force us onto a repayment basis.

You're missing the point.

The repayment plan you're claiming to have was never acceptable to them.

Railman

Actually the new conditions came in on April 6th 2012. Prior to that a different set of regulations applied. Our repayment plan complied with those regulations and the mortgage was granted. The plan is on target and should we chose to use the remaining 15yrs of the mortgage it would cover it.

My question is wether a plan that complied with the old regulations can be judged as unacceptable against the new regulations. Isn't that effectively changing the contract terms in the middle of the contract period?

That said we don't mind paying the repayment basis, just don't see why we should have to pay any fees. Would there be any? After all they are making the change, not us.

dunstonh

They have always required one. Just didnt take any notice of it during the credit boom years. A blind eye existed to it. They are now doing what they should always have done.

Railman

Hmm it sounds like from the comments here that our original repayment plan can be rejected by the Halifax. Even though it was previously accepted when the mortgage was approved 4 yrs ago. Wish I could go back in time and review some of my early business decisions and reverse them if I didn't like the outcome.

I guess we'll just have to let them switch us to a repayment basis when they get around to doing so. We will only be requiring the mortgage for one more year anyway.

Would I be right in assuming that the only change would be the payments each month (which we can easily afford) and that there should be no other changes to the mortgage. ie no fees, increased interest rates or additional penalties? We are currently on the SVR.