Interest-only mortgage borrowers forced on to more expensive repayment plans

Emy1501

StevieJ wrote: »

Are you for real? nothing to do with morality more to do with a nice little earner for the bank backed by a ultra secure asset. Just to confirm, I am not referring to someone that has equity released up to the full value of the house, but someone who has enough equity to cover all eventualities for the bank.

Surely decision for the lender to make. If its the nicer little earner as being suggested then shouldn't be a problem for a pensioner to go and find themselves a lifetime mortgage through someone.

ukcarper

Graham_Devon wrote: »

That's ultimately up to the banks to decide, but they should...there are other options for the pensioner....and there were other options when the pensioner signed up too.

Looking at the moral hazard for a second of what you are suggesting....

Peter lives at number 1. Paul lives at number 2.

They both bought at the same time, identical houses, identical prices.

Peter bought his house on a repayment mortgage, and has struggled at times to pay his way, losing out to other experiences due to lack of disposable income due to higher mortgage payments each month. At the end of 25 years, Peter has a house to live in for the rest of his life.

Paul bought his house on an interest only mortgage. He was able to go on holidays as his payments were not as high as peters, however, peter was sacrifycing holidays to have a secure home later in life. Paul doesn't act on saving up to pay off the debt he owes.

Paul then get's told he can stay in his house, until he decides, and continue paying interest on the price of the house 25 years ago. Paul says "thankyou very much" and goes on holiday.

Peter now has a house that he too can stay in, but only because he's paid it off, paying thousands of pounds more for the same house.

Square that one up for me please carper. You gonna suggest Peter should be grateful, as the lack of forced sales keeps his house price higher than where it would have otherwise been? What use is that to Peter?

Paul is still paying interest which depending on outstanding loan could be over £100 a month a lot out of a pension, Pete owns the full value of house and is able to do what he wants with it or when he dies his family will get the full value.

ukcarper

Emy1501 wrote: »

Surely decision for the lender to make. If its the nicer little earner as being suggested then shouldn't be a problem for a pensioner to go and find themselves a lifetime mortgage through someone.

I agree it’s the lenders decision but just because some of you would like the banks to force people to sell and hopefully cause a crash doesn’t mean that it is in the banks best interest and is what they will do.

Emy1501

ukcarper wrote: »

I agree it’s the lenders decision but just because some of you would like the banks to force people to sell and hopefully cause a crash doesn’t mean that it is in the banks best interest and is what they will do.

Where I said I would like banks to force people to sell?

My point is that it's for the bank to decide what's in its best interest not a journalist or someone on an Internet forum who doesn't lend money.

Personally I see no reason for the bank not to offer a lifetime mortgage but it seems no mainstream lenders lend these and I assume there is a reason for it.

The problem with people like those in the article is their ignorance has helped IO mortgages being pretty much banned and therefore I can't see the reason in the main for people having sympathy for these people.

It's no different to those who took advantage of self cert mortgages etc.

Graham_Devon

StevieJ wrote: »

Are you for real? nothing to do with morality more to do with a nice little earner for the bank backed by a ultra secure asset. Just to confirm, I am not referring to someone that has equity released up to the full value of the house, but someone who has enough equity to cover all eventualities for the bank.

It may be a good earner....IF the bank knows how long they are going to be earning for.

For every pensoner sitting on a debt he defaulted, that's more money the banks can't lend to new entrants.

If it'd such a good earner, companies would be offering it? Why are they not?

If it's such a good earner, surely a smaller company would have done this?

It's not a good earner. Not at all.

A good earner is offering these types of schemes BASED ON THE CURRENT VALUE. Which is what happens with equity withdrawal....a percentage taken each year.

Graham_Devon

ukcarper wrote: »

Paul is still paying interest which depending on outstanding loan could be over £100 a month a lot out of a pension, Pete owns the full value of house and is able to do what he wants with it or when he dies his family will get the full value.

So say the house was 20k. It will take Paul 16.5 years to pay the same as Peter.

And the bank can't even revalue the asset!? Give over! On what planet....

ukcarper

Graham_Devon wrote: »

It may be a good earner....IF the bank knows how long they are going to be earning for.

For every pensoner sitting on a debt he defaulted, that's more money the banks can't lend to new entrants.

If it'd such a good earner, companies would be offering it? Why are they not?

If it's such a good earner, surely a smaller company would have done this?

It's not a good earner. Not at all.

Can you explain how it’s not a good earner because as far as I can see if they are getting the same or more interest on a loan that is secured on a property that has more equity than normal it is.

ukcarper

Graham_Devon wrote: »

So say the house was 20k. It will take Paul 16.5 years to pay the same as Peter.

And the bank can't even revalue the asset!? Give over! On what planet....

How do you work that out when Paul sell his house he will have paid the same as Pete plus any interest he has paid after the original term.

Actually he would have paid more than that if you have a £20k mortgage over 25 years at 5% you would pay £35,475 if you have a interest only mortgage you would pay £25,000 so you have already paid £8475 more interest at the end of 25 years.

shortchanged_2

God, whatever happened to contractual agreements?

When someone takes out an IO mortgage, a date is set for the repayment of the debt in full. It's there, in black and white.

They made the choice to have the lower payments over the years via an IO mortgage so they should accept the consequences whatever they may be when the term of the mortgage has finished.

Graham_Devon

ukcarper wrote: »

How do you work that out when Paul sell his house he will have paid the same as Pete plus any interest he has paid after the original term.

Actually he would have paid more than that if you have a £20k mortgage over 25 years at 5% you would pay £35,475 if you have a interest only mortgage you would pay £25,000 so you have already paid £8475 more interest at the end of 25 years.

I've given up the will to argue it out Carper.

If you honestly can't see issue with ths, and after all generali and thrugelmir have told you about how banks actually work...theres little I can say.

One slight issue. It's unlikely, as a pensioner, Paul will be in the house another 25 years. Banks are not landlords, and I don't know why you expect them to be. All money tied up in these houses, is money that cannot be lent to others. In so many other ways you have argued directly against this sort of proposal....so long as it doesn't effect a homeowner who may have to sell.

Contracts may aswell simply be shredded.